Net financial income (expense) represents the net effect of interest income, interest expense, foreign exchange gain and loss, net of any income or expense from foreign currency hedging transactions, and gain or loss on net monetary position arising from the effect of inflation on the net balance of monetary assets and liabilities. For 2000, there was net financial expense of R$188.3 million compared to net financial expense of R$303.4 million in 1999. For 1998, there was net financial income of R$68.7 million.

The net financial expense in 2000 was primarily due to net exchange and monetary variation losses of R$159.7 million. Net interest expense declined to R$28.7 million from an income in 1999 and 1998 due to more efficient leverage. In 1999 net financial expense was mainly due to the 48% devaluation of the Brazilian real in relation to the U.S. dollar. The devaluation in 1999 resulted in a R$383.3 million increase in net exchange and monetary variation losses, mainly from dollar-denominated long-term debt. This was partially offset by R$79.8 million in net interest income in 1999.

For 1998, the comparable foreign exchange loss was R$50.5 million. Interest income from cash and short-term investments was R$119.3 million.