Aracruz lost $2.5B on forex options when the real crashed in 2008

Aracruz Celulose was a Brazilian manufacturer of bleached eucalyptus pulp, one of the world's largest pulp producers. Founded in 1972, it was a publicly traded company with shares listed in São Paulo, New York, and Madrid.

In 2008, Aracruz had accumulated a massive foreign exchange derivatives position, primarily through complex FX options. The company had sold options that effectively bet the Brazilian real would continue to strengthen against the US dollar — a bet that had been profitable during the years of real appreciation.

When the global financial crisis hit in September 2008, the Brazilian real collapsed, losing approximately 40% of its value against the dollar in a matter of weeks. Aracruz's FX options positions incurred catastrophic losses, totaling approximately $2.52 billion (BRL 4.62 billion). The loss exceeded the company's market capitalization.

The derivatives disaster forced Aracruz into a merger with Votorantim Celulose e Papel (VCP) in 2009, forming Fibria Celulose. The company never recovered as an independent entity. The case was one of several Brazilian corporate derivatives disasters in 2008, alongside Sadia's $1.09 billion FX loss.