Latin AmericaLatin America

Maximo PachecoMaximo Pacheco

2

Brazil’s Competitiveness is Based On . . .Brazil’s Competitiveness is Based On . . .

People

Natural Resources Technology

3

Latin America is a Growing UFS MarketLatin America is a Growing UFS Market

1,000

1,500

2,000

2,500

3,000

3,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Latin America Capacity Latin America Demand

2.4% per year

3.6% per year

3.4% per year

(000 mty)

Source: RISI Latin America Pulp & Paper, Bracelpa (Brazilian Pulp and Paper Association)

Excluding Mexico

4

Transforming IP BrazilTransforming IP Brazil

FromDiversified4 businesses420 K ton4 paper machines

ToFocused1 business1 MM tons7 paper machines

5

All IPB Mills in the 1st Cost QuartileAll IPB Mills in the 1st Cost Quartile

Based on Jaakko Poyry 2005 CostTrac at 2nd quarter, 2006, prices and exchange rates

0

200

400

600

800

1,000

1,200

1,400

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000Cumulative Capacity (000 Metric Tonnes)

Manu

factu

ring

Costs

$/Me

tric T

onne

Cash + Delivery

Mogi Guacu

Luiz Antonio Tres Lagoas

Global Cost Curve Delivered to Buenos AiresUncoated Freesheet – Sheets (20#)

Global Cost Curve Delivered to Buenos AiresGlobal Cost Curve Delivered to Buenos AiresUncoated Uncoated FreesheetFreesheet –– Sheets (20#)Sheets (20#)

6

Base Case3Q06

Annualized

DivestitureNon CoreBusiness

Assets

New 1stQuartile Mills

Volume/Mix F/X Synergieswith LuizAntonio

Tres LagoasStart up

Inflation Year 2009 @Current Price

/ Cost

IP Brazil is Becoming Even More ProfitableIP Brazil is Becoming Even More ProfitableROCE

* Component symbols used for illustrative purposes only, proportions not indicative of actual EBIT impact

Sales $700MM $1.0BROCE 9% 11%

7

IP Moving ForwardIP Moving Forward

Integrate Luiz Antonio

Start Três Lagoas paper mill construction

Realize synergies

Selectively seek for new opportunities

2007 Priorities2007 Priorities2007 Priorities

A Stronger, More Valuable IPA Stronger, More Valuable IP