represent some of the main markets for CSN exports. Those, and similar, measures could provoke an imbalance in the international steel market, which could adversely affect CSN's exports. Potential Costs of Environmental Compliance; Mining Regulation New environmental standards imposed on CSN may require capital expenditures that do not increase productivity. CSN's steel-making facilities are subject to a broad range of laws, regulations and permit requirements in Brazil relating to the protection of human health and the environment. Dependence on Water Source Large amounts of water are required in the production of steel. CSN's principal source of water is the Paraíba do Sul river, which runs through the city of Volta Redonda. Much of the water is recirculated, and some, after processing, is returned to the Paraíba do Sul river. A law passed in 1997 permits the Brazilian government to charge for water usage from water courses. Brazilian government policies in the energy sector may have an adverse impact on the cost or supply of electricity for CSN aluminum-related and ferroalloy operations. Tax and Social Security Reforms May Affect the Brazilian Economy, and May Impose a Higher Tax Burden on CSN. The Brazilian Federal Congress has recently amended the Brazilian Constitution to modify certain aspects of the social security and tax system. Moreover, the Brazilian Federal Congress is currently reviewing additional bills which would introduce further changes to Brazil's tax and social security laws. Such reforms may affect Brazilian economic conditions generally, and may impose a higher tax burden on CSN. If CSN is not able to pass the cost of such potential higher tax and social security burdens to customers, their profit margins may be adversely affected. Mining Concessions CSN mining operations are governed by the Brazilian Constitution and the Mining Code and are subject to the laws, rules and regulations promulgated pursuant to the Constitution and the Code. Under the Brazilian Constitution, all mineral resources belong to Brazil. CSN mining activities at the Casa de Pedra mine are based on holding of a Manifesto de Mina, which gives them full ownership over the mineral deposits existing within their property limits. CSN mining activities at the Bocaina mine are based on a concession which gives them the right to mine for as long as ore reserves exist. Fluctuation of the Real Exchange Controls Fluctuation in the exchange rate of the real can adversely affect CSN earnings. Historically, emerging markets, including