Fitch Affirms Alcoa Aluminio's IDRs at 'BBB'

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed the following ratings for Alcoa
Aluminio S.A. (Aluminio):

--Local currency Issuer Default Rating (IDR):'BBB';

--Foreign currency IDR: 'BBB';

--National scale rating: 'AAA(bra)';

--Series 1996-1 secured export notes (SENs) due Dec. 2008: 'BBB'.

The Rating Outlook is Stable.

Aluminio's ratings reflect the company's position as a leading
integrated aluminum producer in Latin America and the support of its
parent, Alcoa Inc. (Alcoa). Alcoa's commitment to its largest
operating subsidiary in Latin America is demonstrated by the strategic
importance of the region, its ownership of 100% of Aluminio's equity,
and the increasing financial support it provides to Aluminio in the
form of direct loans and loan guarantees.

In the past, Aluminio has maintained a relatively low--levered
capital structure. In 2007, Aluminio's total adjusted debt increased
30% to US$729 million, including about US$334 million of off balance
sheet debt pertaining to hydroelectric projects for which the company
has provided a guarantee. Aluminio's leverage ratio, as measured by
total adjusted debt to operating EBITDA, increased to 1.6 times (x) in
2007, compared with 1.4x in 2006. In 2007, the company generated
operating EBITDA of US$465 million, or about 15% more than in 2006.

In 2008, Fitch expects Aluminio's leverage ratio to increase
considerably to close to 3.5x as the company plans to take on about
US$1.0 billion of additional debt to fund its share of the Juruti
bauxite and the Alumar alumina refinery expansion projects. The
refinery is being expanded to reach 3.5 million tons of capacity in
2009 from 1.4 million tons currently. The additional output will be
primarily for export. The development of the Juruti mine will provide
the raw material, approximately 2.6 million tons of bauxite, for the
alumina expansion project.

In April 2008, Aluminio obtained a BRL650 million loan
(approximately US$370 million) from Brazil's National Bank for
Economic and Social Development - BNDES, which was guaranteed by
Alcoa. Later in 2008, Aluminio plans to receive another BRL500 million
loan (approximately US$280 million) from BNDES which is also expected
to be guaranteed by Alcoa. In addition to inter-company loans provided
by subsidiaries of Alcoa, nearly 70% of Aluminio's estimated 2008
total adjusted debt obligations of US$1.7 billion will be guaranteed
or provided by Alcoa, such that the credit quality of Aluminio is
closely linked to that of its parent. Fitch maintains a 'BBB+' IDR for
Alcoa. Absent the ownership structure and direct and indirect parent
company support, Aluminio's stand-alone rating would be somewhat lower
than the current rating category given the higher levels of expected
leverage.

Alcoa operates in more than 40 countries, including Brazil, Chile,
Peru, Argentina, and Colombia in the Latin American region. Aluminio,
located in Brazil, is the largest of Alcoa's Latin American
subsidiaries. The Latin American region represented nearly 10% of
Alcoa's consolidated after tax profits, about 90% of which were
generated from Brazil. The region is also important to Alcoa's future
growth. Recent proposed investments in the region demonstrate Alcoa's
commitment to developing its strongest financially performing
subsidiaries and providing operational and technical expertise.

Aluminio, located in Brazil, is one of the largest privately
owned, integrated aluminum producers in Latin America. The company
produces alumina, primary aluminum and related industrial chemicals,
as well as fabricated aluminum products. In 2007, Aluminio's total
sales volume was 375,238 tons. The company exported 152,157 tons of
aluminum ingot, used 91,614 tons in downstream applications and sold
131,557 tons in the domestic market. Alcoa Inc, based in the United
States and one the world's leading producers of aluminum and alumina,
holds 100% of the voting stock of Aluminio.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Anita Saha, CFA, +1-212-908-0858, New York
Joe Bormann, CFA, +1-312-368-3349, Chicago
Ricardo Carvalho, +55-21-4503-2600, Rio de Janeiro
Media Relations:
Christopher Kimble, +1-212-908-0226, New York

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