As filed with the Securities and Exchange Commission on April 29, 201013, 2012

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:ended December 31, 20092011

Commission file number 333-132289001-15102

EMBRAER-EMPRESA BRASILEIRA DE AERONÁUTICAEMBRAER S.A.

(Exact name of Registrant as specified in its charter)

EMBRAER – Brazilian Aviation Company Inc.

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of Incorporation)incorporation)

Avenida Brigadeiro Faria Lima, 2170

12227-901 São José dos Campos, São Paulo, Brazil

(Address of principal executive offices)

André Gaia

Head of Investor Relations

(55) 12 3927 4404

investor.relations@embraer.com

(Name, Telephone, E-mail and/or facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of each class:class

US$500,000,000 6.375% Guaranteed Notes due 2017 of Embraer Overseas Ltd.

Guaranteed by Embraer- Empresa Brasileira de AeronáuticaEmbraer S.A.

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2009:2011:

740,465,044 common shares, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x    Accelerated Filer  ¨    Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  x¨    International Financial Reporting Standards as issued by the International Accounting Standards Board  ¨x    Other  ¨

Indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ¨    Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

TABLE OF CONTENTS

i

ii

INTRODUCTION

In this annual report, “Embraer,” “we,” “us” or “our” refer to Embraer-Empresa Brasileira de AeronáuticaEmbraer S.A., formerly known as Rio Han Empreendimentos e Participações S.A. (as successor in interest to Embraer-Empresa Brasileira de Aeronáutica S.A., or former Embraer, as predecessor company, as a result of the merger of former Embraer with and into Embraer pursuant to the corporate reorganization described below), and its consolidated subsidiaries (unless the context otherwise requires). All references herein to the “real,” “reais” or “R$” are to the Brazilianreal, the official currency of Brazil. All references to “US$,” “dollars” or “U.S. dollars” are to United States dollars.

On March 31, 2006, our shareholders approved a reorganization of our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. For further information on our corporate reorganization, see “Item 4A. Information on the Company—History and Development of the Company—Corporate Reorganization.”

Presentation of Financial and Other Data

Financial Data

Our audited consolidated financial statements at December 31, 20082011 and 20092010 and for each of the years ended December 31, 2007, 20082011, 2010, and 2009 are included in this annual report.

Our financial statements as of and for the years ended December 31, 2005 and 2006 have not been included in this annual report.

Our consolidated financial statements have been prepared in accordance with accounting principles generally acceptedInternational Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our financial statements for the year ended December 31, 2010 are our first annual financial statements that comply with IFRS as issued by the IASB. As permitted by the applicable rules, when making the transition from U.S. GAAP to IFRS, we did not include in this annual report our financial statements as of and for the United Statesyears ended December 31, 2008 and 2007, as they were prepared in accordance with U.S. GAAP and not IFRS.

After analyzing our operations and businesses with regard to the applicability of America,International Accounting Standards, or U.S. GAAP. Because we export more than 90%IAS, 21 – “The Effects of our production and operateChanges in an industry that usesForeign Exchange Rates,” particularly in relation to the U.S. dollar as its currency of reference, our management believes that the U.S. dollar isfactors involved in determining our functional currency, management concluded that our functional currency is the U.S. dollar. This conclusion was based on an analysis of the following factors, as set forth in IAS 21: (1) the currency that mainly influences the sale prices of our goods and services, (2) the most appropriatecurrency of the countries whose competitive forces mainly determine the sale prices of our goods and services, (3) the currency that mainly influences prices of raw materials and other costs involved in providing our goods and services, (4) the currency in which to presentthe funds for financial operations are principally obtained, and (5) the currency in which revenue from operations is usually received. Items included in the financial statements of each of our subsidiaries are measured using the currency of the primary economic environment in which such subsidiary operates. Our audited consolidated financial statements. As a result, amounts for all periodsstatements included elsewhere in this annual report are presented have been remeasured intoin U.S. dollars, in accordance with the methodology set forth in Statement of Financial Accounting Standards guidance on foreign currency translations.which is our presentation currency. Our financial statements and financial data presented herein and prepared in accordance with U.S. GAAPIFRS do not reflect the effects of inflation.

Pursuant to the accounting standard guidance on foreign currency translations as it applies to us, non-monetary assets and liabilities, including inventories, property, plant and equipment, accumulated depreciation and shareholders’ equity, are remeasured at historical rates of exchange, while monetary assets and liabilities denominated in currencies other than U.S. dollars are remeasured at period-end rates. Export sales invoiced in currencies other than the U.S. dollar are remeasured at the respective exchange rate on the date of sale. Cost of sales and services, depreciation and other expenses relating to assets remeasured at historical exchange rates are calculated based on the U.S. dollar values of such assets and other non-U.S. dollar statement of income accounts are remeasured at the rate prevailing on the date of the charge or credit to income. Translation gains and losses are recorded under foreign exchange (gain) loss, net in our statement of income.

In our 2007, 20082011, 2010 and 2009 financial statements, gains or losses resulting from the remeasurement of the financial statementsmonetary items and from foreign currency transactions have been reported in the consolidated statement of income as single line items.

In our Form 20-F/A filed with the U.S. Securities and Exchange Commission, or SEC, on November 26, 2007, we restated our financial statements for the years ended December 31, 2004, 2005 and 2006.

For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with theComissão de Valores Mobiliários (Brazilian securities commission), or CVM, and determining dividend payments and other distributions and tax liabilities in Brazil, we have prepared, and will continue to be required to

prepare, financial statements in accordance with Law No. 6,404 of December 15, 1976, as amended, or Brazilian Corporate Law. Effective 2008, significant changes were introduced to the accounting aspects of the Brazilian Corporate Law by Law 11,638 of December 28, 2007. In addition, in 2008 certain changes to the accounting principles, were introduced in 2008 andas well as other changes to the accounting practices adopted in Brazil, or Brazilian GAAP, were introduced by theComitê de Pronunciamentos Contábeis (Brazilian Accounting Standards Setting Board) will, and have become effective in 2010. These changes to the accounting aspects of the Brazilian Corporate Law and Brazilian GAAP impacted our parent company financial statements as of and for the years ended December 31, 2011, 2010 and 2009 and the basis of our distribution of minimum mandatory dividends. Other than that, such changes had no effect toon our consolidated financial statements prepared in accordance with U.S. GAAPIFRS that are included elsewhere in this annual report. Our parent company financial statements as of and for the years ended December 31, 2007, 20082011, 2010 and 2009 which are prepared in accordance with the Brazilian Corporate Law, which are not included in this annual report, are not adjusted to account for the effects of inflation.

As a result of the reconciliation of amounts to the functional currency and other adjustments related to the differences in accounting principles between U.S. GAAP and Brazilian GAAP, the amounts of net income and shareholders’ equity as reported in our audited consolidated financial statements presented herein differ from those includedprepared in our statutory accounting records.accordance with IFRS.

As a result of the listing of our common shares on theNovo Mercado segment of the BM&FBOVESPA S.A.-S.A.—Bolsa de Valores, Mercadorias e Futuros de São Paulo, or São Paulo Stock Exchange, since January 2009 we are required to either translate into English our quarterly and annual financial statements, including cash flow statements, prepared in accordance with the Brazilian Corporate Law, or prepare such quarterly financial statements in accordance with, or reconciled to, U.S. GAAP or International Financial Reporting Standards, or IFRS.statements.

Other Data and Backlog

In this annual report:

We calculate the value of our backlog by considering all firm orders that have not yet been delivered. A firm order is a firm commitment from a customer, represented by a signed contract and customarily accompanied by

a down payment, for which we have reserved a place on one of our production lines. Every time we refer to our backlog in this annual report, we only make reference only to firm orders and not to options. When we refer in this annual report to the number or value of commercial aircraft, we exclude two EMB 145s delivered to Satena Airline, a state-owned Colombian airline, in 2004. These aircraft have been included in our defense data. In July 2005, we started toWe also include the number of aircraft sold by theour defense and security segment to state-owned airlines such as TAME and Satena, in our commercial aircraft backlog.

Special Note Regarding Forward-Looking Statements

This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, principally in Items 3 through 5 and Item 11 of this annual report. We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

The words “believe,” “may,” “will,” “forecast,” “estimate,” “plan,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. As a result of various factors such as those risks described in “Item 3D. Key Information—Risk Factors,” undue reliance should not be placed on these forward-looking statements.

PART I

Not applicable.

Not applicable.

The following table presents our selected financial and other data at and for each of the periods indicated. Selected financial data as of December 31, 2011 and 2010 and for each of the years ended December 31, 2007, 20082011, 2010 and 2009 have been derived from our audited U.S. GAAPconsolidated IFRS financial statements andwhich are included elsewhere in this annual report. TheYou should read this selected financial data presented for all other periods have been derived fromin conjunction with our audited U.S. GAAPconsolidated financial statements notand related notes thereto included herein.elsewhere in this annual report.

		At and for the year ended December 31,
		2009		2008		2007		2006		2005
		(in US$)
Earnings per Share
ADS – diluted(3)		1.36		2.16		2.64		2.10		2.54
Dividends per Share
Common share(1)(2)(3)		0.18164		0.32837		0.17361		0.21242		0.26080
Preferred share(1)(2)(3)		—		—		—		—		0.28688
ADS(1)(2)(3)		0.72656		1.31348		0.69443		0.84968		1.14752

		Year ended December 31,
		2011				2010				2009
		(in US$)
Earnings per Share – Diluted
Net income attributable to owners of Embraer			111.6				330.2				465.2
Weighted average number of shares (in thousands) – diluted			723,667				723,665				723,665
Dilution – issuance of stock options (in thousands)			1,180				354				—
Weighted average number of shares (in thousands)			724,847				724,019				723,665
Diluted earnings per share			0.1540				0.4562				0.6428

consequence, short-term repurchase transactions and bank certificates of deposits with high liquidity are now classified as cash equivalents, thereby causing us to reclassify those transactions as of December 31, 2007 and 2008 in order to provide for a same-basis comparison with transactions existing on December 31, 2009. See Note 3(d) to our audited consolidated financial statements.

(5)	Excludes non-recourse and recourse debt. Includes current portion of long-term debt.

(6)	Excludes non-recourse and recourse debt.

		Year ended December 31,
		2011				2010				2009
		(in US$ millions)
Other Consolidated Financial Data
Net cash generated by operating activities			480.2				873.8				3.6
Net cash used in investing activities			(602.0	)			(288.3	)			(378.0	)
Net cash generated by (used in) financing activities			96.4				(802.2	)			(23.9	)
Depreciation and amortization			238.8				219.2				229.3

Exchange Rates

Prior to March 4, 2005, there were two principal legal foreign exchange markets in Brazil:

Most trade and financial foreign exchange transactions were carried out on the commercial rate exchange market. These included the purchase or sale of shares or payment of dividends or interest with respect to shares. Foreign currencies could only be purchased only in the commercial exchange market through a Brazilian bank authorized to buy and sell currency in these markets. In both markets, rates were freely negotiated.

Resolution No. 3,265 by theConselho Monetário Nacional (National Monetary Council), or CMN, dated March 4, 2005, consolidated the foreign exchange markets into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out through institutions authorized to operate in

the consolidated market and are subject to registration with the electronic registration system of the Central Bank of Brazil, or Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

Since 1999, the Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably. At April 23, 2010, the selling exchange rate for U.S. dollars was R$1.7624 per US$1.00. In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian federal government will continue to let thereal float freely or will intervene in the exchange rate market through a currency band system or otherwise. Thereal may depreciate or appreciate against the U.S. dollar substantially in the future. See “Item 3D. —RiskKey Information—Risk Factors—Risks Relating to Brazil.”

The following table sets forth the selling exchange rate, expressed inreais per U.S. dollar, for the periods indicated.indicated:

		Exchange Rate of Reais to US$1.00
		Low				High				Average(2)				Period-end
Month/period ended
November 30, 2011			1.7270				1.8937				1.7905				1.8109
December 31, 2011			1.7830				1.8758				1.8369				1.8758
January 31, 2012			1.7389				1.8683				1.7897				1.7391
February 29, 2012			1.7024				1.7376				1.7179				1.7012
March 31, 2012			1.7152				1.8334				1.8221				1.8221
April 2012 (through April 10, 2012)			1.8314				1.8317				1.7755				1.8317

Source: Central Bank.

We will pay any cash dividends and make any other cash distributions with respect to the common shares inreais. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of American Depositary Shares, or ADSs, upon the conversion into U.S. dollars by the depositary of our ADS program of such distributions for payment to holders of ADSs. Fluctuations in the exchange rate between thereal and the U.S. dollar may also affect the U.S. dollar equivalent of thereal price of our common shares on the São Paulo Stock Exchange.

Not applicable.

Not applicable.

Risks Relating to Embraer

A downturn in commercial aviation may reduce our sales and revenue, and, consequently, our profitability, in any given year.

We expect that a substantial portion of our sales in the near future will be derived from sales of commercial aircraft, particularly the EMBRAER 170/190 jet family. Historically, the market for commercial aircraft has been cyclical due to a variety of factors that are both external and internal to the air travel industry, including general economic conditions.

The commercial airline industry has been negatively impacted by a number of factors since 2001. First, the U.S. and world economies experienced an economic downturn that beganfactors. For example, in 2001 and was characterized by rapid declines in securities markets, a decline in productivity and an increase in unemployment. Second, the terrorist attacks of September 11, 2001 caused an immediate decline in airline travel and a high level of financial uncertainty among the worldwide commercial airline industry.

In addition, airline travel decreased significantly in 2003 as a result of both the commencement of military action by the United States and other countries in Iraq and the concerns over outbreaks of severe acute respiratory syndrome (SARS) in Asia and Canada. In response to these events, beginning in the fourth quarter of 2001, many airlines, including our largest customers at the time, reduced their flight schedules for the long-term and announced significant lay offs, and a number of airlines filed for bankruptcy protection. As a result, we agreed to modify, between 2001 and 2004, certain delivery schedules to adjust to the changes in our customers’ businesses and reduced scheduled commercial aircraft, executive jet and government transportation aircraft deliveries. In 2004, we reduced scheduled deliveries from 160 to 145 aircraft following US Airways’ second Chapter 11 filing in September 2004. In 2003 andMoreover, in 2004 we also re-evaluated our risk exposure related to aircraft valuations and customer credit risk, which resulted in charges to income of US$40.616.0 million. In 2011, AMR Corporation, or AMR, the parent company of American Airlines, which currently operates a fleet of 216 ERJ 145 family aircraft through its wholly-owned subsidiary, American Eagle, filed for a Chapter 11 bankruptcy. As a result of the expected fleet adjustments that will take place at AMR, we have provisioned a total of US$317.5 million to account for expected expenses related to obligations from financial guarantees and US$16.0 million, respectively.residual value guarantees for these 216 aircraft. See “Item 5E. Operating and Financial Review and Prospects—Off-Balance Sheet Arrangements.”

Although the U.S. and world economies showed some signs of recovery starting in 2004, many airlines continued to face increased competition, escalating insurance costs, increased security costs, credit downgrades, liquidity concerns and bankruptcy, and later sharply higher fuel costs. For example, on January 5, 2010, Mesa Air Group, Inc., or Mesa, one of our important customers, filed for Chapter 11 protection from creditors. From 2000 to

2003, we have delivered 36 ERJ 145 aircraft to Mesa. As a result of our aircraft sales to Mesa and based on our risk assessment of this airline’s Chapter 11 filing, on December 31, 2009 we recorded a US$103.0 million charge against income, of which US$74.4 million are represented by collateral in the form of cash deposited in escrow, in recognition of estimated losses that we classify as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa.

In the second half of 2007, the economies of the U.S. and many other countries began to experience downturns which were characterized by, among other factors, instability in securities’ value and capital markets, instability of currencies, a widespread reduction in demand, sharp reductions in the availability of credit and inflationary pressure.

By the second half of 2008, the additional effects of the severe economic downturns in our markets included significant reductions in air travel and contractions in corporate and personal spending which, as a result, have negatively impacted our product lines. Additional impacts of such downturns on the air transport industry have included a decrease in orders of executive jets and a decrease in the volume of financing available to our customers for aircraft purchases, particularly in the commercial and executive aviation segments (see “Item 4B. Information on theThe Company—Business Overview—Aircraft Financing Arrangements”). A continued downturn in general economic conditions could result in further reductions in air travel and decreased orders from our customers for our aircraft. Our customers could also defer or cancel their purchases of our aircraft. We cannot, at this time, predict the magnitude or duration of the impact that the above events will have on the air transport industry as a whole and on our business in particular.

In February 2009, we had to lay off approximately 20% of our labor force as part of our efforts to reposition Embraer in view of the current global economic crisis.downturn. The cost of these layoffs was approximately US$60.461.3 million. In addition, we also experienced some cancellations of 60 aircraft orders by several of our customers including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010 (for more information on aircraft cancellations, see “Item 3D. —Our aircraft sales are subject to cancellation provisions that may reduce our cash flows”).

We cannot guarantee that material cancellations will not occur in the future or that our other businesses will not be affected. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our revenue and backlog.

We depend on key customers and key suppliers, the loss of any of which could harm our business.

Commercial aircraft. As of MarchDecember 31, 2010, all of our firm orders in backlog for the ERJ 145 regional jet family were attributable to a Chinese company, the HNA Group. The aircraft will be assembled by our joint venture Harbin Embraer Aircraft Industry Company Ltd., formed with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., subsidiaries of China Aviation Industry Corp., or AVIC. In addition, as of March 31, 2010, approximately 52.4%2011, 41% of our firm orders in backlog for the EMBRAER 170/190 jet aircraftfamily were forfrom Flybe, in the HNA Group from China andU.K., JetBlue Airways fromand Air Lease, in the U.S. Furthermore, as of March 31, 2010, approximately 68.4% of our firm orders in backlog for the EMBRAER 195 jet aircraft were for, and Azul, the newa Brazilian airline founded by David Neeleman.in 2008. We believe that we will continue to depend on a number of key customers, and the loss of any one of which could reduce our sales and reduce our market share. Fewer sales could reduce our profitability.

Increasingly, due to the current global economic crisis,slowdown, the commercial airline industry is seeking to reduce costs and increase efficiency, and is experiencing a consolidation process through mergers and acquisitions and alliances through code-sharing arrangements. Although it is expected that such consolidations and alliances may result in the creation of more stable and competitive airlines, they may also have the effect of reducing the number of existing and potential customers and, possibly, the number of purchases of our aircraft.

Defense aircraft. TheForça Aérea Brasileira, or Brazilian Air Force, is our largest customer of defense aircraft products. SalesRevenue arising from sales to the Brazilian federal government accounted for approximately 28%25.0% of our defense salesand security revenue for the year ended December 31, 2009.2011. A decrease in defense spending by the Brazilian federal government due to defense spending cuts, general budgetary constraints or other factors that are out of our control could decrease our defense sales.and security revenue. We cannot assure you that the Brazilian federal government will continue to purchase aircraft or services from us in the future at the same rate or at all.

Key suppliers. Our risk-sharing partners develop and manufacture significant portions of our aircraft, including the engines, hydraulic components, avionics, interior and parts of the fuselage and tail. Once risk-sharing partners have been selected and program development and aircraft production have begun, it is difficult to substitute these partners. In some cases, the aircraft are designed specifically to accommodate a particular component, such as the engines,engine, which cannot be substituted by another manufacturer without significant delays and expenses.expense. This dependence makes us susceptible to the risks of performance, product quality and financial condition of these risk-sharing partners.

We cannot assure you that we will not experience significant delays in obtaining key equipment in our manufacturing process in the future. A large number of the equipment employed by the aircraft industry is subject to export control regulations and, as such, deliveries are dependent on suppliers having secured the applicable export licenses. In 2007, deliveries of equipment for one of our defense products were temporarily suspended due to export control requirements. Although we work closely with, and monitor the production process of, our risk-sharing partners and major suppliers, the failure of our risk-sharing partners and other major suppliers to meet our performance specifications, quality standards or delivery schedules or to comply with regulatory requirements (including export control requirements) could affect our ability to deliver new aircraft to customers in a timely manner.

Our aircraft sales are subject to cancellation provisions that may reduce our cash flows.flow.

A portion of our aircraft firm orders is subject to significant contingencies, both before and after delivery. Prior to delivery, some of our purchase contracts may be terminated, or all or a portion of a particular firm order may be canceled, for different reasons, including:

Our customers may also reschedule deliveries or cancel orders, particularly during an economic downturn. During 2009,In 2011 we experienced some cancellationshad an unusually high liquidated damages revenue, of approximately US$67.1 million, compared to US$30.4 million in 2010, which were recognized in other operating (expenses) income, net, due to the termination of certain aircraft orders by our customers, including the HNA Group, a Chinese airline, which reduced its firm orders for the ERJ 145 regional aircraft from 50 to 25, of which 18 had been delivered by March 31, 2010. In addition, for a variety of reasons, in 2009 we experienced another 35 cancellations in our commercial aircraft orders, which may have an impact on our results of operations starting in 2011 assuming our backlog remains at current levels until then. This compares to no cancellations in 2008 and 30 cancellations in 2007.sales contracts. Although these cancellations occurred primarily in our commercialexecutive aviation business, we cannot guarantee that in the future we will not experience material cancellations in our other aircraft segments. Material cancellations, delays or decreases in the number of aircraft delivered in any year in the future would likely reduce our sales and revenue, and, consequently, our profitability, for that year. A substantial number of cancellations or extensions of delivery schedules could reduce our sales and revenue for a given year, which in turn would reduce our cash flow and backlog.

CertainSome of our aircraft sales may be subject to financial and residual value guarantees and trade-in options that may require us to make significant cash disbursements in the future.

We have in the past guaranteed, and may in the future guarantee, the financial performance of a portion of the financing for, and the residual value of, some of our aircraft that have already been delivered. Financial guarantees are provided to financing parties to support a portion of the payment obligations of purchasers of our aircraft under their financing arrangements to mitigate default-related losses. These guarantees are collateralized by the financed aircraft.

Residual value guarantees typically ensure that, inat the 15^th year afteras of the aircraft delivery date, the relevant aircraft will have a residual market value equal to a percentage of the original sale price. More recently, residual value guarantees have been issued to ensure a residual market value for the 10^th year following delivery of the aircraft. Most of our residual value guarantees are subject to a limitation (a

“cap” “cap”) and, therefore, on average, our residual value guarantee exposure is limited to 18%17% of the original sale price. In the event of an exercise by a purchaser of its residual value guarantee, we will bear the difference, if any, between the guaranteed residual value and the market value of the aircraft at the time of exercise.

Assuming all customers who are supported by off-balance sheet financial guarantees defaulted on their aircraft financing arrangements, and also assuming we were required to pay the full aggregate amount of outstanding financial and residual value guarantees and were unable to remarket any of the aircraft to offset our obligations, our maximum exposure under these guarantees (less provisions and liabilities) would have been US$1,600.2682.8 million as of December 31, 2009.2011. As a result, we would be obligated to make substantial payments that may not be recoverable through proceeds from aircraft sales or leases, particularly if in the future we are not able to remarket any of the aircraft to offset our obligations or financing defaults occur with respect to a significant portion of our aircraft. The value of the underlying aircraft is more likely to decrease and third parties are more likely to default during economic downturns. For further discussion of these off-balance sheet arrangements, see Note 3540 to our audited consolidated financial statements.

In addition, in connection with the signingexecution of purchase agreements for new aircraft, we may provide trade-in options to our customers. These options provide a customercustomers with the right to trade in existing Embraer aircraft upon the purchase and acceptance of a new aircraft. In 2008,From the 18 trade-in options we were required to accept fourhad in 2010, in 2011 we accepted five aircraft for trade-in and by April 2009another 12 trade-in options were cancelled. Also, in 2011, we were required to accept eight additional commercialaccepted two aircraft that were subjectfor trade-in pursuant to trade-in options. Currently,aircraft options signed in 2011. As a result, we are currently subject to trade-in options relating to fiveone aircraft, including two options entered into in 2010 as a result of trade-ins tied to contractual obligations with customers and to their taking delivery of certain new sales.aircraft. In addition, other aircraft may become subject to trade-in due to new sales agreements. The trade-in price is determined in the manner discussed under “Item 5A. Operating and Financial Review and Prospects—Operating Results—Critical Accounting Estimates—Guarantees and Trade-In Rights” for commercial and executive aircraft. We may be required to accept trade-ins at prices that are above the market price of the aircraft, which would result in financial loss for us when we remarket the aircraft.

We continuously re-evaluate our risk for therelated to financial guarantees and trade-in obligations based on a number of factors, including the estimated future market value of our aircraft based on third-party appraisals, includingbased on information developed fromon similar aircraft remarketing in the secondary market, and the credit rating forof the customers. In this regard, based on our risk assessment of Mesa’s Chapter 11 filing, on December 31,in 2009 we recorded a US$103.0 million charge against income, of whichreserved US$74.4 million are represented byof collateral in the form of cash deposited in escrow, in recognition of estimated losses that at the time we classifyhad classified as probable with respect to financial guarantees extended by us in connection with sales of our aircraft to Mesa. As a result of the AMR Chapter 11 filing in 2011, and related exposure from financial guarantees and residual value guarantee obligations, we made a total net provision of US$360.7 million related to these obligations. Of this amount, US$107.4 million is accounted for under financial (expenses) income, net, and, therefore, does not impact our operating margin. The remaining US$253.3 million is accounted for under other operating income (expenses), net, and, therefore, impacted our operating margin for the year.

Considering the potential impacts to the regional aircraft secondary market and aircraft values that may come as a result of an increase in aircraft availability due to the AMR restructuring process, we also revised existing provisions, which also relate to our financial guarantee and residual value guarantee obligations, and the net effect of such revisions was negative US$43.2 million. It should be noted that, among other things (such as residual value guarantee related provisions), these revisions include an additional provision related to the Mesa Air Group

bankruptcy process that occurred in 2010. This additional provision was as a result of the latest market developments in the 50-seat segment and the expectation that the Mesa aircraft will be remarketed in the coming months. It is important to note that with this additional provision for the Mesa Air Group obligations, we have now provisioned for the maximum potential expenses related to such obligations and, therefore, no additional provisions are expected for these guarantees. For further information, see Note 40 to our audited consolidated financial statements.

Any future decrease in the market value of the aircraft covered by trade-in rights or financial guarantees would decrease our ability to recouprecover the amounts payable to satisfy our obligations and cause us to incur additional charges to income. If we are required to pay amounts related to such guarantees, we may not have sufficient cash or other financial resources available to do so and may need to seek financing to fund these payments. We cannot assure you that the then-prevailing market conditions would allow us to resell or lease the underlying aircraft at its anticipated fair value or in a timely manner. Consequently, honoring our financial guarantee or trade-in obligations could require us to make significant cash disbursements in a given year, which, in turn, would reduce our cash flow in that year.

Any decrease in Brazilian federal government-sponsored customer financing, or increase in government-sponsored financing that benefits our competitors, may decrease the cost-competitiveness of our aircraft.

Historically, when purchasing our aircraft, our customers have benefited from export financing incentives provided by Brazilian government-sponsored export programs. The most important of these government programs iswas a system of interest rate adjustments called thePrograma de Financiamento às Exportações (the Export Financing Program), or ProEx program.ProEx.

As a result of past disputes between the Canadian and Brazilian governments at the World Trade Organization, or WTO, regarding the granting of export subsidies relating to sales of aircraft, the Brazilian federal government ultimately amended the ProEx, program so that any ProEx payments would not decrease the effective interest rate below the interest rate permitted by the WTO, and the Canadian government has also made changes to theirits financing arrangements for sales of aircraft by Bombardier, Inc., or Bombardier, a Canadian aircraft manufacturer.

Although the ProEx program is currently in compliance with WTO rules, other export financing programs available to our customers may be subject to challenge in the future. If, in the future, ProEx program or another similar Brazilian export financing program is not available, or if the terms of the ProEx are substantially changed such that our customers’ export financing costs become higher than those offered by other export credit agencies, or ECAs, that support our competitors exports, our competitiveness in the future, or if its terms are substantially reduced, our customers’ financing costs could be higher and our cost-competitiveness in the regionalcommercial jet market could decrease.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

In July 2007, Brazil and the Organization for Economic Co-operation and Development, or OECD, countries entered into an agreement known as the Aircraft Sector Understanding to establish a “level-playing field” for official export financing support of aircraft.for aircraft exports. Export Credit Agencies, or ECAs, from signatory countries are required to offer the same basic financial terms and conditions when financing sales of competing aircraft.aircraft that compete with those produced by the jet manufacturers of their respective countries. The effect of the agreement is to encourage aircraft purchasers to focus on the price and quality of aircraft products offered by aircraft manufacturers rather than on the financial packages offered by their respective governments. As a result of the above agreement, financing support by the Brazilian federal government to the potential purchasers of our aircraft will contain similar terms and conditions offered to such purchasers by The Boeing Company, or Boeing, Airbus S.A.S., or Airbus, and Bombardier or any other competitor from a signatory country to such purchasers.the Aircraft Sector Understanding of the OECD. By the end of 2007, theBanco Nacional de Desenvolvimento Econômico e Social (Brazilian Social and Economic Development Bank), or BNDES, started to offer financing to our customers under terms and conditions required by the agreement.OECD’s Aircraft Sector Understanding. To the extent we do not continue to maintain the pricing advantage and quality of our aircraft, our future sales may be negatively affected. In addition, aircraft manufacturers from countries which are not signatories to the agreement may be able to offer financing packages which will negatively affect the cost competitiveness of our products.

Any future government subsidies supporting any of our major competitors may cause the cost-competitiveness of our aircraft to suffer and our sales to decline.

Budgetary constraints of theThe Brazilian federal government couldmay reduce funds available to our customers under government-sponsored financing programs.

From 19962004 through 2009,2011, approximately 28%18.0% of the total value of our export deliveries was subject to financing support by the BNDES and the Export Guarantee Fund (Fundo de Garantia à Exportação). As, or FGE, a government agency,special fund linked to the Ministry of Finance and managed by the BNDES relies on funds allocated by the Brazilian national budget.to foster exports. We cannot ensure that the Brazilian federal government will continue to provide sufficient funding in the national budget for the financing of our aircraft or that other sources of funding will be available to our customers. The loss or significant reduction of funds available to customers, without an adequate substitute, could lead to fewer deliveries and result in lower profitability for us.

We may face a number of challenges resulting from the development of new products and the possible pursuit of strategic growth opportunities.

As we continue to develop new products, we may need to reallocate existing resources and coordinate with new suppliers and risk-sharing partners. From time to time, there is significant competition within the aviation industry for skilled personnel in general and engineers in particular. To the extent such competition reoccurs, we may be unable to recruit and retain the necessary number of highly skilled engineers and other personnel we require. Failure to coordinate our resources in a timely manner or to attract and retain skilled personnel could slow down our development efforts and cause delays in production and deliveries of our aircraft, which would delay recognition of revenue.

We may pursue strategic growth opportunities, including joint ventures, acquisitions or other transactions, to expand our business or enhance our products and technology. We may face a number of challenges, including difficulties in identifying appropriate candidates, assimilating their operations and personnel and maintaining internal standards and controls, as well as the diversion of our management’s focus from our ongoing business. We cannot assure you that we will be able to meet these challenges or that our business will not face disruptions.

We may have to refund cash contributions in connection with the production or development of the EMBRAER 170/190 jet family the Phenom 100/300 jet family and the Legacy 450/500 jet family if certain milestones for each of these aircraft are not reached.

We have arrangements with our risk-sharing partners, pursuant to which they have contributed to us, in cash, a total of US$534.0652.4 million through 2009.December 31, 2011. Cash contributions do not have to be returnedrefunded by us to the risk-sharing partners if we fulfill certain milestones agreed with our risk-sharing partners. An amount of US$466.3650.5 million

of these cash contributions had become nonrefundable through 2009.2011. If we cancel the production of the Phenoms 100/300 family or any aircraft in the EMBRAER 170/190 family, or if we cancel the development of the Legacy 450/500 family, because we are unable to obtain certification or for other nonmarket related reasons, we may be obligated to refund US$67.71.9 million of the total cash contributions already received. The Legacy 500 executive jet is expected to enter into service between 2012 andin late 2013, and the Legacy 450 is expected to enter service one year after the Legacy 500.

If we require additional financing and we are unable to obtain it,meet certain milestones agreed with our risk-sharing partners, we willmay be required to refund cash contributions for which we have not be able to continue to develop and market our Legacy 450/500 aircraft family.established provisions.

We face significant international competition, which may adversely affect our market share.

The worldwide commercial aircraft manufacturing industry is highly competitive. We are one of the leading manufacturers of commercial aircraft (i.e., regional and mid-capacity aircraft) in the world, along with Boeing, Airbus and Bombardier, all of which are large international companies. Certain of these competitors may have greater financial, marketing and other resources than we have. Although we have attained a significant share of the market for our commercial aircraft products, we cannot assure you that we will be able to maintain this market share. Our ability to maintain this market share and remain competitive in the commercial aircraft manufacturing market over the long termlong-term requires continued technological and performance enhancement to our products. Our primary competitor in the regional and mid-capacity jet markets is Bombardier Inc., a Canadian company, which has significant technological capabilities and financial and marketing resources and, in some instances, benefits from government-sponsored exportproduct development subsidies. These companies also may have significant technological capabilities and greater financial and marketing resources.resources than us. Additionally, Chinese, Russian and Japanese companies are developing mid-capacity jets and already have firm orders in backlog.

As a relatively new entrant to the business jet market, we

We also face significant competition from companies with longer operating histories and established reputations in this industry. Also, some of our competitors in the business jet market may reach the market with their product before we do, allowing them to establish a customer base and making our efforts to gain greater market share more difficult. Recently, some of the most traditional manufacturers have been engaging in aggressive sales and marketing strategies, such as lowering sales prices, offering additional service packages and targeting advertisement to specific consumers. In addition, we have also been facing significant competition from sales of slightly used or almost new pre-owned aircraft. We cannot assure you that we will continue to increase our market share in the business jet market segment as we have been able to do in the past, or that we will not experience a reduction in our current market share in this segment.

We may have to make significant payments as a result of unfavorable outcomes of pending challenges to various taxes and payroll charges.

We have challenged the constitutionality of certain Brazilian taxes and payroll charges, as well as modifications and increases in the rates and basis of calculation of such taxes and charges. Interest on the total amount of these unpaid taxes and payroll charges accrues monthly based on the Selic rate, the principal lending rate of the Central Bank, and we make an accrual as part of the interest income (expenses),financial expenses, net item in our statements of income.

As of December 31, 2009,2011, there was a US$414.7386.5 million provision recorded as a liability (taxes and payroll charges) on our balance sheet in connection with litigation contingencies that we classify as representing probable losses to us. We are awaiting a final decision in these proceedings. We cannot assure you that we will prevail in these proceedings or that we will not have to pay significant amounts, including interest, to the Brazilian federal government in the future as payment for these liabilities. For an additional discussion of these liabilities, see Note 17 to our audited consolidated financial statements.

Risks Relating to the Commercial Airline Industry

Scope clause restrictions in airline pilot contracts may limit demand for regional and mid-capacity jets in the U.S. market.

A key limiting factor in demand for regional and mid-capacity jets is the existence of scope clauses contained in airline pilot contracts. These scope clauses are union-negotiated restrictions on the number and/or size of regional and mid-capacity jets that a particular carrier may operate. Current scope clause restrictions, which are more prevalent in the United States, include restrictions on the number of seats, weight of aircraft and number of 50-7060-90 seat commercial aircraft in an airline’s fleet.fleet operated by regional carriers. As a result, our opportunities for near-term growth in the U.S. regional jet market in the 30-60 and 60-90 seat categories may be limited. The continuation or further tightening of

scope clauses could also lead some of our customers who have purchased options to acquire our regional and mid-capacity jets not to exercise those options. We cannot assure you that current restrictions will be lessened, or will not be expanded, including by amending these scope clauses to cover larger-sized commercial aircraft. Furthermore, although scope clauses are less prevalent outside the United States, we cannot assure you that scope clauses will not become more prevalent or restrictive, or that some other form of restriction will not take effect, in Europe or in other markets.

We are subject to stringent certification requirements and regulation, which may prevent or delay our obtaining certification in a timely manner.

Our civil aviation products are subject to regulation in Brazil and in each jurisdiction where our customers are located. The aviation authoritiesauthority in Brazil andknown as theAgência Nacional de Aviação Civil - ANAC (National Civil Aviation Agency), or Brazilian Aviation Authority, as well as in other countries in which our customers are located, including theAgência Nacional de Aviação Civil, or Brazilian aviation authority,most notably the U.S. Federal Aviation Authority,Administration, or the FAA, and the European Aviation Safety Agency, or the EASA, must certify our aircraftcivil aviation products before we can deliver them.them to our customers in those regions. We cannot assure you that we will be able to obtain certification of our aircraft on a timely basis or at all. We also believe that environmental requirements, such as reduction of greenhouse gas emissions, are becoming one of the main drivers of airline fleet decisions and will influence future aircraft developments. If we fail to obtain a required certification from an aviation authority for any of our aircraft, that aviation authority can prohibit the use of that aircraft within its jurisdiction until certification has been obtained. In addition, complying with the requirements of the certification and other regulatory authorities can be both expensive and time-consuming.

Changes in government regulations and certification procedures could also delay our start of production as well as entry into the market withof a new product. Weproduct into a new market. Despite our continuous efforts to strictly observe and comply with all certifications and other regulatory requirements, we cannot predict how future laws or changes in the interpretation, administration or enforcement of laws will affect us. We may be required to spend significantly more money to comply with these laws or to respond to these changes.

Any catastrophic events involving our aircraft could adversely affect our reputation and future sales of our aircraft, as well as the market price of the common shares and the ADSs.

We believe that our reputation and the safety record of our aircraft are important selling points for our products. We design our aircraft with backup systems for major functions and appropriate safety margins for structural components. However, the safe operation of our aircraft depends to a significant degree on a number of factors largely outside our control, including our customers’ proper maintenance and repair of our aircraft and pilot skill. The occurrence of one or more catastrophic events involving one of our aircraft could adversely affect our reputation and future sales, as well as the market price of our common shares and the ADSs.

Risks Relating to Brazil

Brazilian political and economic conditions have a direct impact on our business and the trading price of our common shares and ADSs.

The Brazilian federal government has frequently intervened in the Brazilian economy and occasionally has made drastic changes in policy and regulations. The Brazilian federal government’s actions to control inflation and affect other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition, results of operations and the trading price of the common shares and the ADSs may be adversely affected by changes in policy or regulations at the federal, state or municipal level involving or affecting factors such as:

Uncertainty over whether the Brazilian federal government will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian companies.

Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy. In particular, political crises have affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil. In addition, 2010 iswas an election year in Brazil and a new president, along with state governors and congressmen, will bemembers of congress, were elected. Although the transition of power in the last decade has been less disruptive to the overall Brazilian economic scenario than in prior periods, we cannot ensure that a new administration would not implement new government policies that would not be disruptive to Brazil’s relative economic stability that has prevailed in recent years.

These and other future developments in the Brazilian economy and governmental policies may adversely affect us and our business and results of operations and may adversely affect the trading price of our common shares and ADSs.

Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of theour common shares and ADSs.

Brazil experienced extremely high rates of inflation during the decade of the 1980s and in the past.early part of the 1990s. Since 1994, Brazil’s inflation has been under control. More recently, Brazil’s annual rate of inflation was 3.8% in 2006, 7.7% in4.5%, 5.9%, 4.3%, 5.9%, and 6.5%, from 2007 and 9.8% in 2008through 2011, respectively, as measured by theÍndice Geral Índice Nacional de Preços ao Mercado (General MarketConsumidor Amplo (National Consumer Price Index), or IGP-MIPCA. Although Brazil experienced deflation of 1.7% in 2009, as measured by the IGP-M, inflation rates in Brazil were onare under control to a certain extent, there continues to be some inflationary pressure as a result of the risestrong expansion of the Brazilian economy in early 2010. Inflation, and certain government actions taken to combat inflation,recent years. Among the effects of such inflationary pressure, labor costs have risen in the past had significant negative effects oncouple of years. More recently, the Brazilian economy. Actionsgovernment has taken certain fiscal actions in order to combatkeep inflation coupled with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets.under control.

Future Brazilian federal government actions, including interest rate decreases, intervention in the foreign exchange market and actions to adjust or fix the value of thereal may trigger increases in inflation. If Brazil experiences high inflation again in the future, our operating expenses and borrowing costs may increase, our operating and net margins may decrease and, if investor confidence decreases, the price of our common shares and ADSs may fall.

Exchange rate instability may adversely affect our financial condition and results of operations and the market price of theour common shares and ADSs.

Although most of our net salesrevenue and debt areis U.S. dollar-denominated, the relationship of thereal to the value of the U.S. dollar, and the rate of depreciation of thereal relative to the prevailing rate of inflation, may adversely affect us.

As a result of inflationary pressures, among other factors, the Brazilian currency has devalued periodically during the last four decades. Throughout this period, the Brazilian federal government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, devaluation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies.

For example, in 2002, thereal to U.S. dollar exchange rate increased by 52.3% due in part to political uncertainty surrounding the Brazilian presidential elections and the global economic slowdown. Although the R$ to US$ exchange rate decreased by 18.2%, 8.1%, 11.8%, 8.7%, and 17.2% in 2003, 2004, 2005, 2006, and 2007,

respectively, in 2008 it increasedappreciated by 31.9%, mainly as a result of the global economic crisis. In 2009 and 2010, thereal to U.S. dollar exchange rate decreased 25.5% and 4.3%, respectively, mainly as the effects of the global economic crisis on the Brazilian economy appeared to be less severe than in other parts of the world. In 2011, such rate increased another 12.6%, a trend that persisted in the first months of 2012. No assurance can be given that thereal will not appreciate or depreciate significantly against the U.S. dollar in the future.

Historically, depreciations in thereal relative to the U.S. dollar have also created additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary government policies to curb aggregate demand. On the other hand, appreciation of thereal against the U.S. dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth. Depreciations generally curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciations of thereal relative to the U.S. dollar would also reduce the U.S. dollar value of distributions and dividends on our ADSs and may also reduce the market value of our common shares and ADSs.

Appreciation of thereal against the U.S. dollar may also have an adverse impact on the competitiveness of our products, as approximately 13%25% of our production inputs, including labortotal costs are incurred and denominated inreais. Therefore, appreciations of thereal against the U.S. dollar or other currencies increases the costs of our products when measured in U.S dollars, and may result in a decrease in our margins.

In addition, because taxes on income are largely determined and paid inreaisbased on our Brazilian tax books, the income tax expense (benefit) line item of our income statement, which has the U.S. dollar as our functional currency, is significantly impacted by appreciations of thereal relative to the U.S. dollar to the extent we must record deferred taxes resulting from exchange rate fluctuations on the reported basis of our nonmonetary assets (principally property, plant and equipment and intangible assets).

Economic developments and investor perceptions of risk in other countries, including both in developed or emerging market economies, may adversely affect the trading price of Brazilian securities, including our common shares and ADSs.

The market value of securities of Brazilian issuers is affected in varying degrees by economic and market conditions in other countries, including in developed countries, such as the United States, and in emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Brazil, the reaction of investors to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. For example, the 2008 global economic crisis has had an impact on many economies and capital markets around the world. SuchThis crisis was evidenced by instability in the value of securities and capital markets, stock and credit market volatility, instability of most currencies, unavailability of credit, higher interest rates, a widespread reduction in demand, a general economic slowdown and other factors that could adversely affect our financial condition and diminish investors’ interest in securities of Brazilian issuers, including ours. Future crises in other countries could adversely affect the trading price of our common shares and ADSs, diminish investor interest in securities of Brazilian issuers, including our common shares and ADSs, and make it more difficult for us to access the capital markets and finance our operations on acceptable terms or at all.

Risks Relating to ourOur Common Shares and ADSs

If holders of our ADSs exchange the ADSs for common shares, they risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.

The Brazilian custodian for the common shares has obtained an electronic certificate of registration from the Central Bank permitting it to remit foreign currency abroad for payments of dividends and other distributions relating to the common shares or upon the disposition of the common shares. If holders of ADSs decide to exchange their ADSs for the underlying common shares, they will be entitled to continue to rely on the custodian’s electronic certificate of registration for five business days from the date of exchange. Thereafter, such holders of ADSs may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, the common shares unless they obtain their own electronic certificate of registration or register their investment in the common shares pursuant to Resolution No. 2,689, which entitles certain foreign investors to buy and sell securities on the São Paulo Stock Exchange. Holders who do not qualify under Resolution No. 2,689 will generally be subject to less favorable tax treatment on gains with respect to the common shares. If holders of ADSs attempt to obtain their own electronic certificate of registration, they may incur expenses or suffer delays in the application process, which could delay their ability to receive dividends or distributions relating to the common shares or delay the return of their capital in a timely manner. In addition, we cannot assure you that the custodian’s electronic certificate of registration or any certificate of foreign capital registration obtained by a holder of ADSs will not be affected by future legislative or other regulatory changes, or that additional restrictions applicable to such holder, to the disposition of the underlying common shares or to the repatriation of the proceeds from such disposition, will not be imposed in the future.

The Brazilian federal government has veto power over change of control, change of name, trademark or corporate purpose and over the creation or alteration of our defense and security programs, and its interests could conflict with the interests of the holders of our common shares or ADSs.

The Brazilian federal government holds one share of a special class of our common stock called a “golden share,” which carries veto power over change of control, change of our name, trademark or corporate purpose and over the creation or alteration of our defense and security programs (whether or not the Brazilian federal government participates in such programs). TheMoreover, the Brazilian federal government may have an interest in vetoing transactions that may be in the interestsinterest of the holders of our common shares or ADSs. For example, in 2010, we changed our corporate name to Embraer S.A. and altered our bylaws to allow us to enter the defense and security market segments, which actions required the approval of the Brazilian federal government. We cannot assure you that we will be able to obtain approvals from the Brazilian federal government in the future to effect important corporate changes, such as those carried out in 2010, or other important corporate changes that may be required in the future.

Our bylaws contain provisions that could discourage our acquisition or prevent or delay transactions that you may favor.

Our bylaws contain provisions that have the effect of avoiding the concentration of our common shares in the hands of a small group of investors so as to promote the dispersed ownership of such shares. These provisions require any shareholder or group of shareholders that acquires or becomes the holder of (1) 35% or more of the total shares issued by us or (2) other rights over shares issued by us that represent more than 35% of our capital, to makesubmit to the Brazilian federal government a request for making a public tender offer to purchase all of our shares on the terms specified in our bylaws, or to sell all of such shareholders’ shares that exceed the 35% limit, in either case, as required by the Brazilian government.bylaws. If the request is approved, such shareholder or group of shareholders must commence the public tender offer to purchase all of our shares within 60 days of the date of approval. If the request is refused, such shareholder or group of shareholders must sell all of such number of commonshareholder’s shares that exceed the 35% limit within 30 days, so that the holding of such shareholder or group of shareholders is less thanfalls below 35% of our capital stock. These provisions may have anti-takeover effects and may discourage, delay or prevent a merger or acquisition, including transactions in which our shareholders might otherwise receive a premium for their common shares and ADSs. These provisions can only be altered or overridden with the approval of our Board of Directors and our shareholders in a shareholders’ meeting convened for this purpose and, with the consent of the Brazilian federal government, as holder of the golden share.

The absence of a single, controlling shareholder or group of controlling shareholders may render us susceptible to shareholder disputes or other unanticipated developments.

The absence of a single, controlling shareholder or group of controlling shareholders may create difficulties for our shareholders to approve certain transactions, because, among other things, the minimum quorum required by law for the approval of certain matters may not be reached. We and our shareholders may not be afforded the same protections provided by the Brazilian Corporate Law against abusive measures taken by other shareholders and, as a result, may not be compensated for any losses incurred. Any sudden and unexpected changes in our management team, changes in our corporate policies or strategic direction, takeover attempts or any disputes among shareholders regarding their respective rights may adversely affect our business and results of operations.

Our bylaws contain provisions that limit the voting rights of certain shareholders including non-Brazilian shareholders.

Our bylaws contain provisions that limit the rightrights of a shareholder or group of shareholders, including brokers acting on behalf of one or more holders of ADSs, to exercise voting rights in respect of more than 5% of the outstanding shares of our capital stock at any general meeting of shareholders. See “Item 10B. Additional Information—Memorandum and Articles of Association—Description of Capital Stock—Voting Rights of Shares—Limitations on the Voting Rights of Certain Holders of Common Shares.”

Our bylaws also contain provisions that limit the right of non-Brazilian shareholders to exercise voting rights in respect of more than two-thirds of the voting rights that may be exercised by Brazilian shareholders present at any general meeting of shareholders. This limitation will effectively prevent our takeover by non-Brazilian shareholders and limit the ability of non-Brazilian shareholders to effect control over us. See “ Item“Item 10B. Additional Information—Memorandum and Articles of Association—Description of Capital Stock—Voting Rights of Shares—Limitations on the Voting Rights of Non-Brazilian Shareholders.”

Holders of ADSs may not be able to exercise their voting rights.

Holder of ADSs may only exercise their voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement governing our ADS.ADSs. Under the deposit agreement, ADS holders must vote the common shares underlying their ADSs by giving voting instructions to the depositary. Upon receipt of the voting instructions from the ADS holder, the depositary will vote the underlying common shares in accordance with these instructions. Otherwise, ADS holders will not be able to exercise their right to vote unless they surrender the ADS for cancellation in exchange for the common shares. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 30 days in advance of the meeting, the second call must be published at least 15 days in advance of the meeting, and the third call, if necessary, must be published at least eight days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender the ADS in exchange for the underlying common shares to allow them to vote with respect to any specific matter. In addition, the depositary has no obligation to notify ADS holders of an upcoming vote or distribute voting cards and related materials to ADS holders, unless we specifically instruct the depositary to do so. If we ask the depositary to seek voting instructions from ADS holders, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver a proxy cardcards to such holders. We cannot ensure that ADS holders will receive the proxy cardcards in time to allow them to instruct the depositary to vote the shares underlying their ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for an untimely solicitation of voting instructions. As a result, holders of ADSs may not be able to fully exercise their voting rights.

The relative volatilityilliquidity and illiquidityvolatility of the Brazilian securities markets may substantially limit the ability of holders of our common shares or the ADSs to sell the common shares underlying ADSs at the price and time they desire.

Investing in securities, such as the common shares or the ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investing in securities of issuers from more developed countries.

The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and other jurisdictions, and are not as highly regulated or supervised as some of these other markets. The relatively small market capitalization and illiquidity of the Brazilian equity markets may substantially limit the ability of holders of our common shares or ADSs to sell the common shares or the ADSs at the price and time desired.

There is also significantly greater concentration in the Brazilian securities markets than in major securities markets in the United States. See “Item 9C. The Offer and Listing—Markets—Trading on the São Paulo Stock Exchange.”

The sale of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of the common shares and the ADSs; holders of our common shares and/or ADSs may not be able to sell their securities at or above the price they paid for them.

Sales of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of our common shares and ADSs. As a consequence of sales by existing shareholders, the market price of the common shares and, by extension, the ADSs may decrease significantly. As a result, the holders of the ADSs and/or common shares may not be able to sell their securities at or above the price they paid for them.

Holders of our ADSs might be unable to exercise preemptive rights with respect to the common shares.

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other securities relating to these preemptive rights, and we

cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

Judgments of Brazilian courts with respect to our common shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other thanreais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other thanreais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the ADSs.

Overview

Embraer-Empresa Brasileira de AeronáuticaEmbraer S.A. is a joint stock company duly incorporated under the laws of Brazil with an indefinite term of duration. Originally formed in 1969 by the Brazilian federal government, we were privatized in 1994. In connection with our privatization, we were transformed into a publicly-held corporation and we operate underare subject to the provisions of the Brazilian Corporate Law. As a result of the merger of former Embraer with and into Embraer approved on March 31, 2006, we succeeded to all rights and obligations of former Embraer. See “Item 4A. —Corporate Reorganization” for more information on the merger. Our principal executive offices are located at Avenida Brigadeiro Faria Lima, 2170, 12227-901 São José dos Campos, São Paulo State, Brazil. Our telephone number is 55-12-3927-4404. Our agent for service of process in the United States is National Registered Agents, Inc., with offices at 875 Avenue of the Americas, Suite 501, New York, New York 10001.

We have grown from a government-controlled company established to develop and produce aircraft for the Brazilian Air Force into a publicly-held company that produces aircraft for commercial and executive aviation executive jet and for defense and security purposes.

As part of our evolution, we have obtained, developed and enhanced our engineering and technological capabilities through our own development of products for the Brazilian Air Force and through joint product development with foreign companies on specific projects. We have applied these capabilities that we gained from our defense business to develop our commercial aviation business.

Our first regional aircraft was the Bandeirante, a 19-passenger twin-engine non-pressurized turboprop aircraft initially designed to service the transport needs of the Brazilian Air Force. This aircraft was certified in 1973. The Bandeirante was followed by the development of the EMB 120 Brasília, which was certified in 1985 and is a high performance, pressurized turboprop commercial aircraft seating up to 30 passengers that was designed to serve the longer routes and higher passenger traffic of the growing regional aircraft market. Drawing upon the design of the EMB 120 Brasília and the jet technology acquired in our development of the AM-X, a jet strike bomber for the Brazilian Air Force, we developed the ERJ 145 regional jet family, our first jet product for commercial use. This family is comprised ofcomprises three aircraft, which seat up to 37, 44 and 50 passengers. The first member of the ERJ 145 family, the ERJ 145, was certified in 1996. We have expanded our jet product line with the development of the EMBRAER 170/190 jet family, which has the capacity to seat between 70 and 118 passengers and was designed to serve the aircraft market’s trend towards larger, higher volume and longer range jets. The first member of this family, the EMBRAER 170, was certified in February 2004 and its derivatives, the EMBRAER 175, and the EMBRAER 190, were certified in December 2004 and August 2005, respectively. The certification of the EMBRAER 195 was granted in June 2006. We are also marketing and selling the Legacy 450, Legacy 500 and Legacy 600, a line of executive jets in the mid-light, mid-size and super midsize categories, and the Phenom 100, Phenom 300 and Lineage 1000, which are products in the entry-level, light and ultra-large categories, respectively. In addition, in 2009 we presented the new Legacy 650, a large executive jet that will be positioned in our executive jet portfolio between the Legacy 600 and the Lineage 1000. ForIn the defense and security market, we also offer a line of intelligence, surveillance and reconnaissance aircraft based on the ERJ 145 regional jet platform.

Corporate Reorganization

On March 31, 2006,November 19, 2010, our shareholders approved a reorganization ofchange to our corporate structure. The purpose of the reorganization was to, among other things, create a basis for the sustainability, growth and continuity of our businesses and activities by simplifying our capital structure and thereby improving our access to capital markets and increasing financing resources for the development of new products and expansion programs. As a result of the reorganization and merger, formername from Embraer ceased to exist and:

Strategic AllianceAlliances and Growth Opportunities

We intend to review strategic growth opportunities, which may include joint ventures and acquisitions, and other strategic transactions, as well as enhance our existing relationships with significant world players in the aerospace and defense and security industries, including any members of the groups or companies below.

Strategic Alliance with the Alliances

European Aerospace and Defense Group

On November 5, 1999, a group consisting of (1) Aerospatiale Matra, currently known as European Aeronautic, Defense and Space Company N.V., or EADS, (2) Dassault Aviation, (3) Thomson-CSF, currently referred to by its trade name Thales^TM, and (4) Société Nationale d’Étude et de Construction de Moteurs d’Aviation, or Safran, all of which we refer to collectively as the European Aerospace and Defense Group, purchased 20% of our outstanding common stock from our existing common shareholders at that time. Most of the common stock purchased by the European Aerospace and Defense Group was owned by our former controlling shareholders.

Because the members of the European Aerospace and Defense Group were, at the time, considered by our former controlling shareholders to be strategic partners of Embraer, they were granted the right, as a group, to appoint two members to our Board of Directors. However, as a result of the termination of the shareholders’ agreement among our former controlling shareholders as part of our 2006 corporate reorganization, the European Aerospace and Defense Group no longer has the right to appoint members to our Board of Directors, other than pursuant to the general right provided for in the Brazilian Corporate Law. In addition, under Brazilian law the European Aerospace and Defense Group is no longer recognized as a group for voting purposes nor considered to be a strategic shareholder of Embraer. As of March 31, 2010, each of Dassault Aviation and Safran, individually, held shares representing 0.9% and 1.1% of our total capital stock, respectively. Thales^TM sold all of its shares in October 2006, and EADS sold all of its shares in a secondary offering in February 2007.

Our alliance with the European Aerospace and Defense Group allowed us to develop several business opportunities. For example, our alliance with the European Aerospace and Defense Group led us, together with EADS, to acquire a 65% interest in OGMA-Indústria Aeronáutica de Portugal S.A., or OGMA, and also resulted in the integration by us of the Thales^TM mission systems and electronic equipment in some of our EMB 145 AEW&C aircraft, as well as in commercial transactions for the purchase by us of certain equipment and services from the members of the European Aerospace and Defense Group in the ordinary course of our business.

We intend to review strategic growth opportunities, which may include joint venturesAEL Sistemas

In April 2011, we and acquisitions, and other strategic transactions, as well as enhance our existing relationship with significant world players in the aerospace industry, including anyAEL Sistemas, a subsidiary of the membersIsraeli company Elbit Systems Ltd., announced the execution of a strategic agreement with the purpose of evaluating joint exploration prospects for unmanned aerial systems (UAS), including the potential creation of a company to explore this segment with a majority participation of our defense and security business unit.

AVIC

In April 2011, we entered into a framework agreement with AVIC for the implementation of a Legacy 600/650 production line in China, taking advantage of the European Aerospaceinfrastructure, financial resources and Defense Group.workforce of Harbin Embraer Aircraft Industry Company Ltd., or HEAI, our joint venture company with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., both subsidiaries of AVIC. This industrial cooperation program will focus on the production of the Legacy 600/650 family in China and aims to serve the growing demand of the Chinese executive aviation market.

Boeing

In April 2012, we entered into a cooperation agreement with Boeing, in which we agreed to pursue several areas of cooperation, including commercial aircraft features that enhance safety and efficiency, research and technology and sustainable aviation biofuels.

Joint Ventures and Acquisitions

In July 2008, we acquired for US$20.0 million a 40% interest owned by Liebherr Aerospace SAS, or Liebherr, in ELEB–Equipamentos Ltda., or ELEB, a 60%/40% joint venture that we formed with Liebherr in 1999. ELEB is an aerospace system and component manufacturer and its main products include landing gear systems, hydraulics and electro-mechanical sub-assemblies, such as actuators, valves, accumulators and pylons.HEAI

In December 2002, we formed HEAI, a joint venture company with Harbin Aircraft Industry (Group) Co., Ltd. and Hafei Aviation Industry Co., Ltd., both subsidiaries of AVIC, to provide for the assembly,manufacture, sale and after-sale support of the ERJ 145 regional jet family in China.family. We own 51% of the equity of HEAI. We have granted HEAI a license for the above-mentionedexclusive rights to produce, sell and provide support for the ERJ 145 regional jet family in the Chinese markets, and we contributed US$12.4 million in cash, tooling and inventory to the joint venture. Our joint venture company, namedpartners have contributed the land use rights in Harbin, China, and contributed US$10.8 million in cash and facilities to the joint venture. The roll-out of the first ERJ 145 manufactured by the joint venture occurred in December 2003, and the joint venture entered into its first sales contract for six aircraft with China Southern Airlines in February 2004. In October 2007, the 1,000^th jet of the ERJ 145 family was delivered by Harbin Embraer Aircraft Industry CompanyCo. Ltd.

AIRHOLDINGS

In March 2005, a consortium formed by us and EADS acquired 65% of OGMA’s shares through a newly created holding company, named AIRHOLDING, SGPS, S.A., or AIRHOLDING. At that time we held 99% of the equity in the referred holding company and EADS held the remaining 1%. Further, in March 2006, EADS exercised its option to increase its interest and currently holdsto 30% of the equity in the referred holding company. We acquired 100% of EADS stake in OGMA pursuant to an agreement signed on January 27, 2012. With this new agreement, Embraer acquires control over AIRHOLDING’s 65% stake in OGMA, while the Portuguese government holds the remaining 35% through theEmpresa Portuguesa de Defesa–EMPORDEF(Portuguese Defense Company). OGMA is a major representative of the aviation industry in Europe, offering services that include the maintenance, repair and overhaul of civil and military aircraft, engines and parts, assembly of structural components and engineering support.

CAE

In October 2006, we entered into an agreement with the Canadian company CAE Inc., or CAE, to form a global training joint venture, which will provide comprehensive pilot and ground crew training to customers of the Phenom 100 entry-level jet and Phenom 300 light jet aircraft. This training program has already started to be offered at CAE SimuFlite in Dallas, Texas, following the commencement of operation of the Phenom 100 in 2008, and has expanded to Burgess Hill in the U.K. in 2009. This joint venture is expected to provide entitlement training and post-entitlement training for pilots, maintenance technicians and dispatch personnel.

Liebherr Aerospace

In July 2008, we acquired for US$20.0 million a 40% interest owned by Liebherr Aerospace SAS, or Liebherr, in ELEB–Equipamentos Ltda., or ELEB, a 60%/40% joint venture that we formed with Liebherr in 1999. ELEB is an aerospace system and component manufacturer and its main products include landing gear systems, hydraulics and electro-mechanical sub-assemblies, such as actuators, valves, accumulators and pylons.

OrbiSat

In May 2011, we executed a US$25.7 million contract to purchase a 90% stake in the capital stock of the radar business of OrbiSat da Amazônia S.A., or OrbiSat, a Brazilian company that created a radar business in 2002 to develop state-of-the-art technology for air, sea and land remote sensing and aerial surveillance. This is the first acquisition made by our recently created defense and security business unit.

Atech

In April 2011, we announced the acquisition for US$23.3 million of 50% of the capital stock of Atech Negócios em Tecnologias S.A., or Atech, with the purpose of increasing our capacity for developing products and services in the area of Command, Control, Communications, Computer and Intelligence, or C4I, systems and improving our capabilities of providing integrated systems for the defense and security, command and control, air defense and air traffic control markets.

AEL & Harpia

In April 2011, Embraer Defense and Security and AEL Sistemas, a subsidiary of the Israeli company Elbit Systems Ltd., announced the execution of a strategic agreement envisaging the evaluation of joint exploration of unmanned aerial systems, including the potential creation of a company with majority participation of Embraer’s defense and security department to work in the segment.

In September 2011, Embraer’s defense and security department and AEL Sistemas formalized this partnership and created a new company, Harpia Sistemas S.A., to focus on unmanned aerial systems market. We hold 51% of Harpia’s capital, and AEL holds the remaining 49%. Harpia’s activities will involve marketing, development, systems integration, manufacture, sales, and after-sale support for unmanned aerial systems, as well as simulators and the modernization of avionics systems. The company aims to provide broader solutions for complex systems, with a view to increasing the market share of Brazilian made products in the national defense and security market. As a part of this partnership, and for the purpose of participating in the process of transferring technology to Brazil, we acquired 25% of AEL’s capital for R$5.0 million.

Telebras

In November 2011,Embraer and Telecomunicações Brasileiras S.A., or Telebras, announced the signature of a memorandum of understanding for the purpose of forming a company, of which Embraer will hold a 51% stake and Telebras 49%, to work with the Brazilian federal government in order to meet the needs of Brazil’s plan for satellite development, including the National Broadband Program and strategic defense and governmental communications.

Capital Expenditures: ResearchExpenditures (Property, Plant and DevelopmentEquipment and Development)

We include our investments in both development and property, plant and equipment as part of our capital expenditures.

As part of our transition to IFRS, in 2010 we have started to capitalize our expenditures related to product development projects as non-current intangible assets on our investments bothbalance sheet when it is probable that the relevant projects will generate future benefits, taking into account their commercial and technological feasibility and availability of technological and financial resources and only if their cost can be reliably measured. We amortize such assets in researchthe form of charges to cost of sales and services on our income statement, based on the total estimated number of aircraft to be delivered for each new product development and inproject. We also capitalize expenditures related to property, plant and equipment.

Capital expenditures relating solelyequipment as non-current assets on our balance sheet and depreciate such assets in the form of charges to researchcost of sales and development, which includes the development of products for the commercial airlineservices on our income statement. For information on how we amortize our intangible assets and executive aviation segments were US$259.7 million in 2007, US$197.0 million in 2008depreciate our property, plant and US$144.0 million in 2009, net of cash contributions provided by risk-sharing partners. Research and development expenses as a percentage of net sales were 5.0% in 2007, 3.1% in 2008 and 2.6% in 2009. In 2007, 2008 and 2009, we recorded US$23.7 million, US$134.8 million and US$102.2 million, respectively, as deductions to our research and development expenses in connection with payments previously received by us from our risk-sharing partners, given that our EMBRAER 170/190 aircraft family and Phenom 100 received their certifications and we fulfilled other contractual milestones under our risk-sharing arrangements. Seeequipment, see “Item 5C.5A. Operating and Financial Review and Prospects—ResearchOperating Results—Principal Operating Data and Development.Components of Our Statement of Income—Cost of Sales and Services.”

In 2007, thereal exchange rate increased by 17.2% against the U.S. dollar, which, together with increased research andMost of our development investments in connectionexpenditures are associated with the testing stagesdevelopment of new products either for the Lineage 1000commercial or executive aviation segments. Development expenditures totaled US$207.1 million in 2011, US$162.2 million in 2010 and Phenom 100 following their first flightsUS$204.0 million in the second half2009, inclusive of 2007, impacted our research and development expenses in that year. Our research and development expenses for 2008 decreased mainly because of US$134.8 million receivedcash contributions from risk-sharing partnerspartners. The increase in connection withdevelopment expenditures in 2011 relative to 2010 is mainly a result of executive aviation. The decrease in development expenditures in 2010 relative to 2009 was mainly a result of fewer aircraft certifications in 2010, while additional development expenditures were required in 2009 in preparation of the certification of the Phenom 100300 in that year.

We also receive funds from risk-sharing partners to fund our cash costs for our commercial and executive aircraft development programs. Cash contributions provided by risk-sharing partners totaled US$85.8 million in 2011, US$99.4 million in 2010 and US$102.2 million in 2009. The decrease in cash contributions from risk-sharing partners in 2011 relative to 2010 is explained mainly by the contribution schedule agreed with our risk sharing partners. The reduction in cash contributions from risk-sharing partners in 2010 relative to 2009 is mainly a result of fewer such contributions in 2010 due to the certification of the Phenom 300 and the fulfillment of other contractual milestones under our risk-sharing arrangements. In 2009, our researcharrangements in 2009. This reduction in cash contributions from risk-sharing partners was partially offset by contributions to the Legacy 450/500 program in 2010. See “Item 5C. Operating and development expenses decreased by US$53.0 million because our expenses in this area remained focused on making continued improvements to our existing aircraftFinancial Review and aircraft components, including making follow-up investments on our Embraer Entrepreneurial Excellence Program, or P3E. In addition, our research and development expenses decreased in 2009 as a result of the certification of the Phenom 100 in 2008, the platform of which served as a basis for the platform of the Phenom 300, thereby reducing our need for additional product development expenses for the Phenom aircraft family in 2009.Prospects—Research.”

Our main ongoing project is the development of the Legacy 450/500 executive jets. An estimated US$750750.0 million is expected to be invested overall in fixed assets, researchproperty, plant and equipment and development for the Legacy 450/500 programs, which were launched by us in April 2008. The Legacy 500 executive jet is expected to enter into service between 2012 andin late 2013 and the Legacy 450 is expected to enter service one year after the Legacy 500.

Our total disbursements in capital expenditures related to property, plant and equipment were US$162.2 million in 2011, US$73.5 million in 2010 and US$97.1 million in 2009. These investments are related mainly to (1) construction of new facilities and (2) improvements and modifications to our plants and production facilities for the production of new aircraft models.

In 2010,2012, we expect to invest approximately US$300650.0 million in capital expenditures for research, andproduct development and property, plant and equipment. Of this amount, approximately US$160450.0 million is expected towill be invested in our research and product development activities. This US$160 million amount isactivities, exclusive of contributions fromof risk-sharing partners, but includes estimated costs of approximatelyand US$100200 million will be invested in property, plant and equipment. The US$200 million capital expenditures to be disbursed in connection with property, plant and equipment are primarily related to (1) improvements to our existing facilities, (2) the developmentconstruction of our new products,the Melbourne, Florida plant, which was started in May 2008, and approximately US$60 million related to(3) the developmentconstruction of technology.two plants in Evora, Portugal, which was started in July 2008.

We expect to invest in Brazil approximately 70%77% of our budgeted US$300650.0 million capital expenditures for 2012 in Brazil, most of total capital expenditure, which includes our investments bothwill be invested in research and development andactivities. The remaining 23% of our capital expenditures will be invested abroad, mainly on property, plant and equipment.equipment at our new industrial facilities in the cities of Melbourne, Florida and Evora, Portugal. We do not expect to receive relevant amounts of cash contributions from the risk-sharing partners in 2012.

Our capital expenditures are generally financed by funds provided by operations, borrowings under our credit arrangements, cash contributions from risk-sharing partners, advance payments from customers and, to a lesser extent, capital increases to meet these needs. See “Item 5B. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview” and “Item 5C. Operating and Financial Review and Prospects—Research and Development.”Research”.

We do not incur research andfew development expensesexpenditures for defense and security programs, as those are primarily funded by the Brazilian federal government and other government customers. Most of our research andcustomers under long-term development expenses are associated with particular programs either in the commercial or executive aviation segments.

For a discussion of our capital expenditures relating to property, plant and equipment, see “Item 4D. —Property, Plant and Equipment.”contracts.

We are one of the leading manufacturers of commercial aircraft (i.e., regional and mid-capacity jets) in the world, based on 2009 net2011 revenue arising from sales of commercial aircraft, withand have a global customer base. Our focus is achieving customer satisfaction with a range of products and services addressing the commercial airline, executive jet and defense markets and aviation services.security markets. Our commercial aviation business, including aviation-related services, accounted for 61.6%64.0% of our net salesrevenue in 2009.2011. We are the leading supplier of defense aircraft forto the Brazilian Air Force, based on number of aircraft sold, and we have sold aircraft to militaryarmed forces in Europe, Asia and Latin America. Our defense and security business, including aviation related services, accounted for 9.1%14.7% of our net salesrevenue in 2009.2011. We have developed a line of executive jets based on one of our regional jet platforms and launched new executive jets in the entry-level, light, ultra-large and mid-light/mid-size categories: the Phenom 100/300 family, the Lineage 1000 and the Legacy 450/500 family, respectively. Our executive jet business, including aviation related services, accounted for 16.4%19.2% of our net salesrevenue in 2009.2011. Providing high quality customer support is a key element of our customer focus and is critical to our ability to maintain long-term relationships with them.customer relationships. Our aviation services

business accounted for 10.8%11.3% of our net salesrevenue in 2009.2011. Other related businesses accounted for 2.1% of our net salesrevenue in 2009.2011. For the year ended December 31, 2009,2011, we generated net salesrevenue of US$5,466.35,803.0 million, of which more than 89.2%approximately 90% was U.S. dollar-denominated. On MarchAt December 31, 2010,2011, we had a total firm order backlog of US$16.015.4 billion, which includes 243included 249 firm orders for commercial aircraft.

Our Strengths

We believe that our primary strengths are:

Leading Commercial Aircraft Manufacturer with a Global Customer Base. We are a leading manufacturer of 30-120 seat jets, based on the number of aircraft sold, with a strong global customer base. We have sold our regional and mid-capacity jets to more than 70 customers inon the five continents of the world. Our customers include some of the largest and most significant regional and low-cost airlines and commercial carriers in the world.

Aircraft Design; Cost and Operating Efficiency. We conceive, develop and manufacture aircraft to provide our customers with reduced operating, maintenance and training costs due to the similarity and efficiency in design and the commonality of parts within a jet family. These similarities enable us to significantly reduce our design, development and production costs and pass these savings along to our customers in our sales price. These similarities also reduce the development time of our aircraft.

Strategic Risk-Sharing Partners. With respect to our commercial and executive aircraft, we developed strategic relationships with key risk-sharing partners. These risk-sharing partners develop and manufacture

significant portions of the systems and components of our aircraft and contribute their own funds to research and develop these systems and components, thereby reducing our development expenses. These risk-sharing partners also fund a portion of our development expenses through direct contributions of cash or materials. We believe that these strategic relationships enable us to lower our development expenses and risks, improve our operating efficiency, enhance the quality of our products and reduce the number of our suppliers, thereby providing us with flexibility of our production process.

Benefits of Funded Development of Defense Products. Historically, research and development expensesexpenditures related to defense aircraft have been funded in large part by certain of our customers, which in this business segment includes the governments of different countries. These customers have had an important role in our engineering and industrial development. In addition, we use well-proven platforms developed for the commercial aviation segment as a solution for certain defense products. We also sell to other military forces the proven defense products developed for the air forces of certain countries.

Flexibility of Production to Meet Market Demands. We believe the flexibility of our production processes and our operating structure, including our risk-sharing partnerships, allow us to increase or decrease our production in response to market demand.

Experienced and Highly Skilled Workforce. Our employees are experienced and highly skilled. As of MarchDecember 31, 2010, approximately 23.5%2011, engineers comprised 25.1% of our workforce was comprised of engineers.workforce. Due to the high level of knowledge and skill of our employees, and our continuous training programs, we are able to efficiently pursue new programs and provide our customers with differentiated technical expertise and guidance.