Brazil Announces C Bond Swap.

BRASILIA, Brazil -- The Federative Republic of Brazil ("Brazil") announced today a global bond offering (the "Global Bond Offering") with the following components:

--Invitation. Holders of Brazil's C Bonds (as defined below) are invited to submit offers to exchange such bonds for an equal par amount of 8% Amortizing Global Bonds (the "Global Bonds") (this transaction, as contemplated by the Prospectus Supplement dated July 18, 2005 (the "Prospectus Supplement") to the Prospectus dated January 5, 2005 (the "Prospectus") attached thereto and the related letters of transmittal is referred to as the "Invitation"). Unlike the C Bonds, the Global Bonds will not be callable. The Global Bonds will have an extended maturity compared to the C Bonds, with the amount of this maturity extension determined by a Modified Dutch Auction as described below.

--Cash Offering. In addition, Brazil may offer Global Bonds in an underwritten offering for cash.

Brazil's outstanding bonds (C Bonds, referred to as the "Old Bonds") that may be offered in exchange for Global Bonds pursuant to the Invitation, their original principal amount outstanding and their Common Code and ISIN numbers are as follows:

Original Principal
                          Amount Outstanding  Common Code     ISIN
                                 (1)
8% USD Front-Loaded       ------------------  ----------  ------------
 Interest Reduction with
 Capitalization Series L
 Bonds due 2014
 ("C Bonds")              U.S.$5,310,671,000
        Bearer                                 004999347  XS0049993479
        Registered                             004999355  XS0049993552

(1) The original principal amount of any series of Old Bonds means the
    amount of such bonds at the time of their issuance, without regard
    to any amortization of principal or capitalization of interest.

The Global Bonds will bear interest at the rate of 8% per annum from the settlement date, unless Brazil, in its sole and absolute discretion, decides to change the global bond coupon at any time prior to 4:30 P.M., New York City time, on the day before the expiration date, which unless extended or earlier terminated by Brazil shall be at 4:30 P.M., New York City time, on July 21, 2005. Brazil will pay interest semi-annually in arrears on the 15th day of the month of the maturity date and on the 15th day of the month that is six months from the month of the maturity date. The first coupon payment will be either October 15, 2005 or January 15, 2006. The maturity date of the Global Bonds will be determined through a modified Dutch auction process described below. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

The Global Bonds will contain provisions regarding acceleration and future modifications to their terms that differ from those applicable to much of Brazil's outstanding public external indebtedness. Under these provisions, Brazil may, among other things, amend the payment provisions of the Global Bonds of a series and certain other terms with the consent of the holders of 75% of the aggregate principal amount of the outstanding Global Bonds of that series.

Brazil reserves the right, in its sole discretion, not to issue 0any Global Bonds pursuant to the Invitation or the Cash Offering.

INVITATION PROCEDURES

General

The exchange of the Old Bonds pursuant to the Invitation will be made for Global Bonds pursuant to a modified Dutch auction process.

Any Old Bonds offered in exchange must be a minimum of U.S.$1,000 original principal amount or an integral multiple of that amount. Each U.S.$1,000 original principal amount of Old Bonds accepted by Brazil will be exchanged for Global Bonds having a principal amount equal to:

U.S.$1,000 x Scaling Factor

where the "Scaling Factor" is a factor of 1.05549 that accounts for interest payable on the Old Bonds that has been capitalized as principal, as well as any principal that has been paid pursuant to the terms of the Old Bonds.

Each exchanging holder of Old Bonds will also receive an amount in cash in U.S. dollars equal to the accrued but unpaid interest on the original principal amount of its Old Bonds accepted for exchange from (and including) April 15, 2005, the last interest payment date for the Old Bonds, to (but not including) the settlement date. In addition, because Brazil will issue Global Bonds only in integral multiples of U.S.$1,000, the aggregate principal amount of Global Bonds that will be issued to any exchanging holder of Old Bonds, if not an integral multiple of U.S.$1,000, will be rounded downward to the nearest integral multiple of U.S.$1,000, and such holder will receive an amount in cash in U.S. dollars in respect of such rounding equal to the decrease in aggregate principal amount of the Global Bonds that such holder will receive as a result of such rounding multiplied by the global bond issue price. In the event that there is no cash offering, the global bond issue price to be used in rounding will be determined by Brazil, after consultation with the dealer managers, based on the trading price shortly following announcement.

Procedures for Submitting Exchange Offers

A holder of Old Bonds participating in the Invitation may submit either:

--a "competitive offer", which specifies the longest extension of the global bond maturity date (which is referred to herein as the "extension period") that a holder of Old Bonds would accept as the extension period for the Global Bonds.

--a "noncompetitive offer", which does not specify any such extension period.

A holder of Old Bonds electing to submit a competitive offer will be required to specify an extension period in one-quarter-of-a-year increments.

The extension period represents the amount of time by which the maturity of the Global Bonds will exceed the maturity of the Old Bonds.

If a holder of Old Bonds submits a competitive offer and Brazil accepts such competitive offer, a holder of Old Bonds will be entitled to the benefit of the clearing extension period, even if that holder specified a longer extension period in such holder's competitive offer. If, however, a holder of Old Bonds specifies an extension period that is shorter than the clearing extension period selected by Brazil for the Global Bonds, that holder will not be entitled to participate in the exchange of the Old Bonds for the Global Bonds. Alternatively, if a holder of Old Bonds submits a non-competitive offer and Brazil accepts that holder's non-competitive offer, that holder will be entitled to the benefit of the clearing extension period which will be equal to or shorter than the maximum extension period announced by Brazil.

Holders of Old Bonds may submit a non-competitive offer that does not designate an extension period by either (i) including their non-competitive offer in their bond instructions, or (ii) delivering an electronic letter of transmittal to the settlement agent by electronic transmission through the settlement agent's website at https://www.corporateactionprocessing.com. Alternatively, holders of Old Bonds may submit one or more competitive offers by delivering, or arranging to have delivered, an electronic letter of transmittal to the settlement agent by electronic transmission through the settlement agent's website at https://www.corporateactionprocessing.com. In the case of either a competitive or non-competitive offer, only a direct participant in Euroclear or Clearstream, Luxembourg who has delivered bond instructions to Euroclear or Clearstream, Luxembourg in accordance with the deadlines specified by Euroclear or Clearstream, Luxembourg may submit an electronic letter of transmittal.

You must include a reference code (as described below) in your electronic letter of transmittal. Any electronic letter of transmittal that for any reason cannot be promptly and unmistakably reconciled with a bond instruction will be deemed invalid by Brazil. In order to facilitate reconciliation of bond instructions to electronic letters of transmittal, we strongly encourage direct participants to submit one electronic letter of transmittal per bond instruction.

Alternatively, a holder desiring to submit an exchange offer may request one of the joint dealer managers for the Invitation to submit an exchange offer on its behalf, although the joint dealer managers will be under no obligation to act on the holder's behalf and may impose additional conditions before doing so.

Announcement of Any Change in the Global Bond Coupon

The coupon of the Global Bonds will be 8%. However, before 4:30 P.M., New York City time, on July 20, 2005, Brazil, in its sole and absolute discretion, may decide to change the Global Bond coupon because of market conditions. If such a change is made by Brazil, it will be announced by Brazil by press release issued to the news services before 4:30 P.M., New York City time, on July 20, 2005.

Announcement of the Maximum Extension Period

At or around 9:00 A.M., New York City time, on July 21, 2005, or as soon as practicable thereafter, Brazil will determine, in its sole and absolute discretion, and announce by press release issued to the news services the maximum extension period for the Global Bonds.

Announcement of the Terms of the Global Bonds

At or around 11:00 A.M., New York City time, on July 22, 2005, Brazil will announce by press release issued to the news services:

--the clearing extension period and the resulting global bond maturity date pursuant to the results of the modified Dutch auction and the principal amortization schedule and first interest payment date for the Global Bonds;

--the aggregate original principal amount of Old Bonds accepted in exchange for Global Bonds;

--the aggregate principal amount of Global Bonds to be issued pursuant to the Invitation;

--information concerning any applicable proration; and

--the aggregate principal amount of Global Bonds to be issued pursuant to the Cash Offering;

by press release issued to the news services and to the d'Wort for publication therein.

Once Brazil has announced by press release issued to the news services the acceptance of any exchange offers in accordance with the terms of the Invitation, Brazil's acceptance will be irrevocable. Exchange offers, as so accepted, will constitute binding obligations of the submitting holders of Old Bonds and Brazil to settle the exchange, in the manner described in the Prospectus Supplement.

Brazil reserves the right not to accept any exchange offers in its sole and absolute discretion.

Proration

If the aggregate principal amount of Global Bonds to be issued in exchange for Old Bonds pursuant to the Invitation (if all Old Bonds offered at the clearing level were accepted) exceeds the aggregate principal amount of Global Bonds that Brazil decides to issue, Brazil may, in its sole and absolute discretion, reduce the aggregate principal amount of Global Bonds to be issued pursuant to competitive offers specifying an extension period equal to the clearing extension period. Only those bidding at the clearing extension period will be subject to proration. Those submitting non-competitive bids or bids that are longer than the clearing extension period will not be subject to proration.

CASH OFFERING

Pursuant to the Cash Offering, Brazil will, in its sole and absolute discretion, determine whether to issue and offer to sell additional Global Bonds for cash to the joint book runners.

Brazil reserves the right in its sole and absolute discretion not to issue any Global Bonds pursuant to the Cash Offering. If Brazil and the joint book runners determine that, pursuant to the Cash Offering, Brazil will issue and sell Global Bonds to the joint book runners for resale, Brazil and the joint book runners will determine by negotiation the aggregate principal amount of Global Bonds to be so issued and sold.

The initial public offering price per U.S.$100 principal amount of Global Bonds to be issued and sold will be equal to the global bond issue price for the Global Bonds.

Under the current schedule, settlement for the Global Bond Offering will occur on August 1, 2005.

The Global Bond Offering is not being made hereby, but is instead being made pursuant to the Invitation set forth in the Prospectus Supplement to the Prospectus attached thereto and the related letter of transmittal, and if Global Bonds are sold pursuant to the Cash Offering, a subsequent prospectus supplement to be issued on or after the date on which the results of the Invitation are announced. Global Bond Offering materials may be obtained from The Bank of New York, as the settlement agent, 101 Barclay Street, New York, New York 10286, United States; The Bank of New York (Luxembourg) S.A., as the Luxembourg exchange agent, Aerogolf Center, 1-A Hoehenhof L-1736, Senningerberg, Luxembourg, D.F. King & Co., Inc., as the information agent, 48 Wall Street, 22nd Floor, New York, New York 10005, United States, and 2 London Wall Buildings, 2nd Floor, London Wall, London EC2M 5PP, England, or the joint dealer managers. Holders may contact the joint dealer managers and joint book runners for answers to questions concerning the terms of the Global Bond Offering.

The settlement agent and information agent for the Global Bond
                             Offering are:

    Bank of New York                    D.F. King & Co., Inc.
   101 Barclay Street                48 Wall Street, 22nd Floor
New York, New York 10286              New York, New York 10005
     United States                         United States
1-866-587-4513 (Toll free)             Banks and Brokers call:
    1-212-815-3189                     1-212-269-5550 (Collect)
                                           All others call:
                                     1-800-290-6431 (Toll free)

                                   2 London Wall Buildings, 2nd Floor
                                 London Wall, London EC2M 5PP, England
                                     Telephone: +(44) 20 7920 9700

       The joint dealer managers and joint book runners for the
                       Global Bond Offering are:

 Credit Suisse First Boston                       JPMorgan
    Eleven Madison Avenue                     270 Park Avenue
New York, New York 10010-3629               New York, New York 10017
       United States                            United States
 Inside the U.S.: Toll Free              Inside the U.S.: Toll Free
      1-800-820-1653                           1-877-217-2484
Outside the U.S.: Call Collect          Outside the U.S.: Call Collect
      1-212-538-0652                           1-212-834-7306

This communication shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities referenced in this communication in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The distribution of materials relating to the Global Bond Offering, and the transactions contemplated by the Global Bond Offering, may be restricted by law in certain jurisdictions. If materials relating to the Global Bond Offering come into your possession, you are required by Brazil to inform yourself of and to observe all of these restrictions. The materials relating to the Global Bond Offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires the Global Bond Offering to be made by a licensed broker or dealer and any joint dealer manager or any affiliate of a joint dealer manager is a licensed broker or dealer in that jurisdiction, the Global Bond Offering shall be deemed to be made by such joint dealer manager or affiliate on behalf of Brazil in that jurisdiction.

Italy: The invitation has not been registered with the CONSOB, as the invitation is directed to no more than 200 investors in Italy. No global bonds may be publicly offered, sold or delivered pursuant to the invitation, nor any public offer in respect of old bonds made, nor may any prospectus or any other offering or publicity material relating to the invitation or the global bonds be distributed, in the Republic of Italy by Brazil or the joint dealer managers or any other person on their behalf, except in compliance with Italian law and regulations. The global bonds may not be offered, sold or delivered pursuant to the cash offering (including in the secondary market) except to institutional investors (investitori professionali) as (i) indicated in Article 25, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended from time to time, and (ii) defined in article 31, second paragraph, of CONSOB regulation No. 11522 of July 1, 1998, as amended from time to time, other than individuals.

Portugal: The Global Bond Offering has not been and will not be registered with the Portuguese Securities Exchange Commission ("Comissao do Mercado dos Valores Mobiliarios") and therefore the Global Bond Offering is not directed to Portuguese resident investors and the Global Bonds may not be offered or sold to the public in Portugal or under circumstances which are deemed to be a public offer under the Portuguese Securities Code ("Codigo dos Valores Mobiliarios") and other securities legislation and regulation applicable in Portugal. In addition, this document, the Prospectus, the Prospectus Supplement and all other offering materials are only being publicly distributed in the above noted jurisdictions where lawful and may not be publicly distributed in Portugal, nor may any publicity or marketing activities related to the Global Bond Offering be conducted in Portugal. The Global Bond Offering is not addressed to holders of Old Bonds resident and/or located in Portugal, and no tenders from holders of Old Bonds resident and/or located in Portugal will be accepted, except if those holders are all institutional investors ("investidores institucionais"), within the meaning of article 30 of the Portuguese Securities Code or are, in aggregate, 200 or fewer (if some or all are non institutional investors), in which case the Global Bonds may be offered and tendered through a private placement ("oferta particular"), in accordance with the relevant provisions of the Portuguese Securities Code.

United Kingdom: Stabilisation/FSA.