January-June 2013

Macro and industry trends

Economic growth in South America has slowed slightly during this period, particularly due to foreign demand, although in some cases there has also been some contraction in domestic demand. In recent months, the region has been affected by the greater level of uncertainty associated with the announcements by the Fed, which has resulted in pressure on currencies in the region, declines in stock markets and moderate rises in long-term rates.

The pressure on currencies has a negative impact on the Group’s financial statements, in both year-on-year and quarterly terms. Over the last 12 months, although all the currencies in the region have lost against the euro, there has been a particularly notable effect derived from the devaluation of the Venezuelan bolivar in February this year. As usual, and in order to provide a better understanding of trends in business and earnings in the area, all figures below on percentage changes refer to constant exchange rates, unless indicated otherwise.

The financial systems of most of the countries in South America remain sound. Lending continues to grow at a fast pace, boosted by economic policies focused on encouraging domestic activity and by the structural changes observed in recent years, which support sustainable growth in a large number of these countries. Given the strength of the economies in the region, its financial systems have robust levels of profitability and moderate NPA ratios.