Instability in Brazil puts the large Spanish listed companies on alert

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Companies such as Banco Santander, Iberdrola or Telefónica receive a large part of their income from the country in which 40,000 million are at stake in investments

Clara Alba

The assault on power in Brazil has set off alarm bells about large Spanish companies with interests in the region. Investors know that political instability is one of the great risks that can harm the price of companies such as Banco Santander, Telefónica or Iberdrola, with a strong exposure of their business in the Rio de Janeiro country.

This same Monday, while the increases were around 1% in the main European stock markets, the Ibex-35 closed the session practically flat at 8,694 points, after spending a good part of the day in red weighed down precisely by those values ​​with a strong presence in the first Latin American power.

Although Wall Street’s bullish opening helped to calm things down, investors are well aware that the indicator is the most exposed in all of Europe to a country that is already the second destination for Spanish exports to Latin America – with 2,360 million euros. in sales, only behind Mexico– and the fourth in investments, with some 40,000 million euros, according to data from CESCE.

“We must be attentive to the social conflict after the attack on Congress that questions the leadership of Lula da Silva just a week after his inauguration”, indicate the analysts of Renta 4 Banco. “Although it has no signs of going further, it could generate volatility in the values ​​most exposed to the country,” they add.

At this point, Banco Santander was one of the most affected in its price with a fall of 0.89%. Between January and September, the region contributed more than 2,020 million to its benefit (in Spain the figure was 1,104 million) and already represents 28% of its profits.

Within the financial sector, Mapfre also closely follows developments. Brazil is the second regional area that contributes the most to the Group’s profit, with 93 million euros, 86% more than the same period of the previous year. Its price, however, withstood the stress with a rise of 0.66% at closing.

Telefónica is another of the large listed companies with interests in the region through its Vivo commercial brand. The firm maintains leadership in the mobile market with a share of 38% and 42% in contract. His business represents 20% of the income of Telefónica, which closed the day with losses, although limited.

Investors are also cautious about energy companies like Naturgy and Iberdrola. The first has a great weight in the country with its distribution networks, although the sector’s income is regulated, so Iberdrola -through its subsidiary Neoenergía, the largest electricity company in the country- would be more exposed to a possible worsening of the political situation.

In total, Iberdrola allocates 17% of its investments to the country, where it has 15.9 million customers and was one of the great drivers of its profit between January and September. Its titles gave up 0.6% at the close.

Worse was the session for other listed values, even if it was outside the Ibex-35. The automotive component company Gestamp, which has several production plants in Brazil, was among the most bearish values ​​on the Continuous Market with a decrease of -3.2% at the close. For its part, Cie Automotive, which also has a presence in the country, dismissed the session flat.

Other companies that will closely follow events in the region in the coming days are Repsol, Dia, ACS or Aena, which recently, and still under Bolsonaro’s mandate, took over the management of 11 airports in the country, in a public auction valued at around 470 million euros, to which an additional outlay of 312 million would have to be added, as stated in the concession specifications. Their titles lost 0.2% yesterday.

In the rest of the market, the biggest increases were for Solaria (+4.36%), IAG (+3.38%), Meliá (+2.00%), Fluidra (+1.97%), ACS (+ 1.79%) and Rovi (+1.78%). Likewise, a barrel of Brent quality oil, a reference for the Old Continent, stood at a price of 79.63 dollars, with a rise of 1.36%, while Texas stood at 74.80 dollars, with an increase of 1.41%.

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