INDEBTEDNESS

  At the end of the fiscal year, the consolidated gross indebtedness was R$ 7.1 billion. This represents an increase of 71.3% over the previous period, mainly as a result of the consolidation of liabilities from the merged Co-Steel, the payment for the increased participation in Açominas and the devaluation of the Brazilian real against the US dollar. On the other hand, total assets grew 48.9% to R$ 14.6 billion.

   Short term debt was R$ 3.7 billion, representing 52.4% of the total. It consisted of R$ 518.5 million in Brazilian reais, R$ 1.6 billion in foreign currency contracted by the companies in Brazil and R$ 1.6 billion from operations contracted abroad.

   Long term debt, equal to 47.6% of the total, reached R$ 3.4 billion, of which R$ 1 billion in Brazilian reais, R$ 897.9 million in foreign currency contracted by the companies in Brazil and R$ 1.5 billion from operations abroad.

   A number of swaps were performed in the last two years by the Gerdau Group, with the objective of providing protection against volatility of the Brazilian currency against the US dollar. Debts in dollars were exchanged for reais indexed at an average of 70% of CDI. At December 31, 2002, of a total of R$ 2.5 billion in debts contracted in foreign currency by the companies in Brazil, R$ 2 billion was protected against such variations.

   EBITDA represented 5.9 times net financial expenses, not including monetary and exchange variations. Net indebtedness was equal to 2.7 times EBITDA for the last 12 months.

   At the end of the year, cash and equivalents showed a balance of R$ 1.4 billion, compared to R$ 1 billion for the previous year, representing a growth of 41.5%. Of this total, 65.6%, or R$ 931.5 million, was indexed to the US dollar.