The components of pretax income (loss) before minority interest and discontinued operations are as follows:

Year Ended December 31,
(US$ in millions)	2004			2003			2002
United States	$	(44	)	$	(23	)	$	45
Non-United States		948			746			436
Total	$	904		$	723		$	481

The components of the income tax (expense) benefit are:

Year Ended December 31,
(US$ in millions)	2004			2003			2002
Current:
United States	$	(6	)	$	(7	)	$	13
Non-United States		(339	)		(211	)		(121	)
		(345	)		(218	)		(108	)
Deferred:
United States		23			20			1
Non-United States		33			(3	)		3
		56			17			4
Total	$	(289	)	$	(201	)	$	(104	)

Reconciliation of the income tax expense at the U.S. statutory rate to the effective rate is as follows:

Year Ended December 31,
(US$ in millions)		2004			2003			2002
Income from continuing
	operations before income
	tax and minority interests	$	904		$	723		$	481
Income tax rate			35	%		35	%		35	%
Income tax expense at the
	statutory rate		(316	)		(253	)		(168	)
Adjustments to derive
	effective rate:
Recognition of tax loss benefits on
	merger of foreign subsidiaries		60			–			–
Change in valuation allowance			(60	)		16			(33	)
Effect of tax free gain on sale
	of soy ingredients business		–			39			–
Adjustment resulting from the
	finalization of prior years'
	tax returns		–			3			20
Foreign exchange (expense)
	benefit		(22	)		(40	)		86
Earnings of subsidiaries taxed
	at different statutory rates		31			45			(16	)
Benefits from U.S. export incentive			17			16			9
Basis difference in determining
	foreign taxable income		(17	)		(23	)		–
Foreign tax benefits			17			14			–
Other			1			(18	)		(2	)
Income tax expense		$	(289	)	$	(201	)	$	(104	)

In 2003, the sale of Bunge's Brazilian soy ingredients business to Solae for a gain of $111 million did not result in taxable income and, therefore, no income tax was provisioned. However, Bunge recorded a net tax expense of $23 million relating to new tax laws in South America.

Bunge has obtained tax benefits under U.S. tax laws providing tax incentives on export sales from the use of a U.S. Foreign Sales Corporation (FSC) through 2001. Beginning in 2002, due to the repeal of the FSC-related legislation, Bunge was required to use the tax provisions of the Extraterritorial Income Act (ETI) legislation, which were substantially similar to the FSC-related legislation. The U.S. Congress has recently passed and the President has signed the American Jobs Creation Act of 2004 that ultimately repeals the ETI benefit. Under the new legislation, the ETI will be phased out with 100% of the otherwise available ETI benefit retained for 2004, 80% of the otherwise available ETI benefit retained for 2005, 60% of the otherwise available ETI benefit retained for 2006 and the ETI benefit phased out completely in 2007. The ETI benefit has been replaced with an income tax deduction intended to allocate benefits previously provided to U.S. exporters across all manufacturers when fully phased in. Although most of Bunge's U.S. operations qualify as "manufacturing," Bunge expects that this new tax legislation will be less beneficial to it than the prior one primarily due to Bunge's U.S. tax position.

In 2003, a new tax law was enacted in South America affecting exporters of certain products, including grains and oilseeds. The tax law generally provides that in certain circumstances when an export is made to a related party that is not the final purchaser of the exported products, the income tax payable by the exporter with respect to such sales must be based on the greater of the contract price of the exported products or the market price of the products at the date of shipment. The tax effect of this new tax law was reflected in income tax expense in the consolidated statements of income for the years ended December 31, 2004 and 2003.

Certain Bunge subsidiaries had undistributed earnings amounting to approximately $541 million and $519 million at December 31, 2004 and 2003. These are considered to be permanently reinvested and, accordingly, no provision for income taxes has been made. It is not practicable to determine the deferred tax liability for temporary differences related to these undistributed earnings. Deferred taxes are provided for subsidiaries having undistributed earnings not considered to be permanently invested. The primary components of the deferred tax assets and liabilities and the related valuation allowance are as follows:

December 31,
(US$ in millions)		2004			2003
Deferred income tax assets:
Net operating loss carry-forwards		$	482		$	386
Excess of tax basis over financial statement
	basis of property, plant and equipment		55			65
Accrued retirement costs (pension
	and postretirement cost) and other
	accrued employee compensation		59			43
Other accruals and reserves not currently
	deductible for tax purposes		194			161
Tax credit carry-forwards			15			12
Other			51			63
Total deferred tax assets			856			730
Less valuation allowance			(177	)		(107	)
Net deferred tax assets			679			623
Deferred tax liabilities:
Excess of financial statement basis over tax
	basis of property, plant and equipment		366			344
Undistributed earnings of affiliates			129			125
Other			86			76
Total deferred tax liabilities			581			545
Net deferred tax assets		$	98		$	78

At December 31, 2004, Bunge's gross tax loss carry-forwards totaled $1,510 million, of which $272 million have no expiration. However, applicable income tax regulations limit some of these tax losses available for offset of future taxable income to 30% of annual pretax income. The remaining tax loss carry-forwards expire at various periods beginning in 2005 through the year 2024.

Bunge continually reviews the adequacy of its valuation allowance and recognizes tax benefits only as reassessment indicates that it is more likely than not that the benefits will be realized. The majority of the valuation allowances relate to net operating loss carry-forwards in certain of its non-U.S. subsidiaries where there is an uncertainty regarding their realization and will more likely than not expire unused. In 2004, Bunge merged several European subsidiaries, which generated statutory tax losses and the recognition of $60 million of net operating loss carry-forwards. Bunge increased its valuation allowance by $60 million as it is more likely than not that the assets will not be realized. In 2003, Bunge decreased its valuation allowance by $16 million, which resulted from the utilization of net operating loss carry-forwards by its Brazilian and Argentine subsidiaries. Bunge was able to recognize these net operating carry-forwards because of increased statutory taxable income of these subsidiaries caused by effects of the real and peso appreciation and a change in South American tax law.

In 2004, 2003 and 2002, Bunge paid income taxes, net of refunds, of $210 million, $112 million and $14 million, respectively. In addition, in 2004 Bunge offset income taxes payable of $95 million against recoverable taxes receivable in certain South American jurisdictions in accordance with the applicable local tax laws.