* Overseas goldmine has burnished corporate Spain, Portugal
* Has offset impact of steep recessions at home
* Latin American economies slowing amid expropriation risk
* But region still hold potential for profit, fundraising
LONDON, July 30 (Reuters) - A slowdown in Latin America's
once booming economies could take a heavy toll on profits for
Spanish and Portuguese companies whose two-decade investment
spree abroad has provided a lifeline during a deepening crisis
at home.
The region accounts for almost 15 percent of Portuguese
companies' revenues, and the equivalent figure for Spain is 33
percent, the highest in Europe, according to Morgan Stanley.
For the likes of utility EDP or oil explorer GALP
of Portugal, and Telefonica and lender BBVA
in Spain, Latin America generates over half of group
sales.
But life could be about to get tougher.
"Maybe Latin America is no longer as attractive as it used
to be, If...Spain and Portugal were stable, things would be ok,
But that's not the case," says Jaime Ramos Martin, a fund
manager at Standard Life Investments.
Iberian companies began their love affair with Latin America
in the early 1990s, embarking on an acquisition binge that,
according to Thomson Reuters data, saw over 130 billion euros
flow across the Atlantic.
Dubbed the 'Reconquista' in a nod to Spain's 16th
colonisations, the investments have yielded rich returns,
providing companies with a slice of the fast growth and surging
consumer demand in powerhouses such as Brazil and Mexico.
Those profits have offset shrinking revenues at home.
But Latin American economies are now slowing too, hit by
China's waning appetite for commodities, the stop-start U.S.
recovery and, ironically, the crisis rippling out of Europe.
Dominant Brazil may expand less than 2 percent this year,
say economists polled by Reuters, from a recent 5 percent
average. Peru and Chile, once growing at China-like rates of 7-9
percent, are likely to chug along at around 4 percent.
STORMY WATERS
That is very bad news at a time when Spain and Portugal are
mired in recession, with record unemployment, collapsing housing
markets and falling consumer spending. Portugal is already on
life support via a bailout, while Spain may soon need a full
rescue too to go with an existing aid package for its banks.
"I don't think Latin America can save Spain and Portugal,"
said Diego Iscaro, economist at IHS Global Insight.
Exposure to these emerging economies might help, but
"that is assuming that activity in Latin American countries
remains strong, which is still far from clear given the
deceleration already evident in ...Argentina and Brazil."
As in the 16th century, the path to Latin American riches
has been littered with pitfalls.
Iberian investors have endured currency collapses,
recessions and asset expropriations, most recently for Spain the
grab of oil firm Repsol's subsidiary YPF in Argentina and
similar moves in Bolivia against power company Red Electrica.
Yet the real danger is not outright expropriation but a
growth and consumption drop that will erode sales and earnings.
Telefonica is a good example.
Desperate to pare its 57-billion euro debt mountain, the
telecoms operator cut dividends for the first time since the
Spanish Civil War. Its net profits, meanwhile, fell by a third.
Latin America provides half of Telefonica's revenues, led by
Brazil. The mobile phone market there has more than doubled in
the past five years but is now losing steam.
In the latest quarter, Telefonica Brasil added
new subscribers at half the rate of last year. Its profits fell
as the struggling economy generated a surge in non-payments.
For Spain's top lender Banco Santander, Brazil provides a
quarter of group profits, but earnings there sank 17 percent in
the first half due to a spike in bad loans.
NOT ALL BAD
Some investors who for years have favoured shares in
companies with emerging markets exposure are now bracing for the
pinch as growth in the developing world slows.
But others see opportunities in a wary market that has, for
instance, driven Telefonica's stock down 32 percent this year.
"Companies like Portugal Telecom, Galp and Banco Santander
all have over half of their assets... in Latin America. We
believe the current share prices give too little credit for the
earnings prospects in their overseas operations," said Rob
Radelaar, senior portfolio manager at ING Investment Management.
For Standard Life's Ramos Martin, shares such as Telefonica,
where slowing Latin revenues are compounding the collapse in
local business, are no longer a good buy. But he still holds
many Iberian stocks including Portuguese oil exploration firm
GALP which has huge concessions in Brazil.
For others like Spanish media firm Prisa, Latin
America is also still rewarding.
CEO Fernando Abril-Martorell says the region contributes 27
percent to company revenues, up from 23 percent in early 2011.
"Diversification is really compensating for the weak
environment domestically," he told an analyst conference call.
And assets acquired over the years are proving a useful
source of cash. Santander's sale of its Colombian operations for
$1.225 billion will net it an estimated capital gain of 615
million euros.
Ricardo Martinez, president of the Equipo Economico
investment consultancy in Madrid, said companies can also raise
funds on Latin American markets.
Santander did that in Brazil via an $8 billion IPO in 2009
and is now considering floating its Mexican business.
"Mexico or Brazil are markets where they can find the
liquidity they need for investment," Martinez said.
(Additional reporting by Clare Kane in Madrid; Editing by John
Stonestreet)