Eurozone crisis spreading to Brazil

Brazil is facing economic challenges as the eurozone crisis threatens Spain and Portugal, two countries with which the Latin American giant has close links, warned Exclusive Analysis.

If Spain defaults on its debt companies with assets in Brazil might sell them off to raise capital. Spanish bank Santander, for example, is also the fifth largest bank in Brazil. It is likely to loose market share as a result of writedowns against European sovereign debt. The bank holds $69bn of PIIGS (Portugal, Ireland, Italy, Greece, Spain) debt.

Santander functions as a separate entity in Brazil, which accounts for 28% of the Group’s profits. Exclusive Analysis believes that if Spain defaults on its debt Santander would “suspend its expansion strategy and increase the transfer of resources to its headquarters [in Spain]”.

Besides the banking sector the crisis also threatens the market share for Brazil’s car manufacturers and telecoms companies.

Commented Exclusive Analysis: “Telefónica’s Vivo is likely to lose market share to its main competitor Oi and Fiat will lose to Toyota and Honda amongst others.”

Economic decline in Europe threatens to hit Brazil even more by slowing down China’s economy, the largest importer of Brazilian goods

Economic decline in Europe threatens to hit Brazil even more by slowing down China’s economy, the largest importer of Brazilian goods.

Commodity prices are falling sharply and these are one of Brazil’s key exports, leading to a sharp fall in the country’s export revenues, said Exclusive Analysis.

On the upside, there are opportunities as well. Brazilion banks, for example, might take the opportunity to invest in Angola as Portuguese banks withdraw.