March 23, 2023

Brazil, the eighth destination of Spanish investment abroad -according to the data handled by ICEX- has put the Ibex 35 media on notice for capitalization, after the violent assault of thousands of followers of former president Jair Bolsonaro on Sunday at the headquarters of the three powers in Brasilia, the Executive, the Legislative and the Judiciary. The attack, which has recorded the one that occurred exactly two years ago in Washington by followers of Donald Trump, has triggered uncertainty in the country, where Spanish companies in the financial, energy or telecommunications sectors have significant investments.

The fear of an attempted coup d’état has been a constant throughout the electoral campaign, in a country where social fracture and polarization have been noticeable in the years of the government of the far-right Bolsonaro, marked by controversies such as his denial in relation to Covid (which has made the country the second with the most deaths caused by the virus, only behind the US, according to figures from Johns Hopkins University), and by decisions that have prevented companies, households and investors have sufficient visibility into the future and have led to a devaluation of the real close to 40%.

Their withdrawals called for a military intervention to overthrow the current president, Luiz Inácio Lula da Silva, who in the second round of the general elections won 50.9% of the vote, compared to 49.1% for Bolsonaro. Now, the fear is that the control by the extreme right of both the National Congress and the main states of the country after the appointment with the polls, could torpedo Lula’s attempts to implement his main political and economic reforms. .

For now, the arrest of more than 1,200 people and the dismantling of the Bolsonaro camps by order of the Supreme Court allowed the Bovespa, the country’s main stock market index, to close the session on Monday slightly upwards, giving an idea that companies are ruling out that the attacks will go to more. Despite the obvious concern, it is the message that has also permeated among the large Spanish companies with interests in the South American country.

Brazil is the strategic commitment of Spanish companies such as Banco Santander, BBVA or Mapfre. So much so that Brazil is the first market for the entity chaired by Ana Botín. In the third quarter, Santander Brazil contributed a net profit of 2,027 million euros to the group, despite having fallen 1.5%, ahead of the 1,104 million euros in Spain and the 1,138 million euros in the United Kingdom. United. In addition, Brazil generates high profitability for the bank, since its ROTE is 20%, while for the third quarter, the group closed with a ratio of 12.92%. The entity has not made any official statement.

Concern and caution in companies

Financial sources indicate that they see what happened “with concern and with great attention as it is an important area for Spanish companies. You have to be very cautious”, they assert, and confirm that they will be attentive to what happens in the country. Brazil is also important for BBVA. The bank is present in the country with Neon, a neobank in which it invested 263 million euros at the beginning of 2022, which helped raise the entity’s stake to 29.7%. The neobank has 15 million accounts.

For Mapfre, Brazil is its second market, but the one that registered the highest growth in the number of premiums, with 23% up to September. In fact, the region is the second with the highest contribution to net profit, only behind Spain- In the third quarter, the Brazilian division of the insurer contributed a net figure of 93.1 million euros, while premiums stood at 3,682 million euros. The insurer has not wanted to make political assessments.

Telefónica, which has its most prominent subsidiary outside Spain in Brazil (Vivo, which contributes around 19% to the group’s results); Iberdrola, for which its subsidiary Neoenergía -the largest Brazilian electric company- represents around 15% of its income or Red Eléctrica, which has slightly less than 4% income from the country, are also among the companies in the selective index due to the crisis brazilian politics.

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