Some European banks have retrenched behind national borders, abandoning outside investment plans and whole lines of business like trade finance in Asia. Others have refocused their strategy outward: Firms like Madrid’s Banco Santander now earn just a small portion of their profits in Spain and instead have focused their time and energy on places like Brazil and Mexico, where the company now makes most of its money.
The investment banking arm of Portugal’s Banif recently relocated one of its corporate finance executives from Lisbon to Sao Paulo to better scout opportunities and serve the bank’s growing client base in Brazil.
Business consultant Pedro Neves said that after four years at a small firm in Lisbon, he decided he needed to leave Portugal to advance.
“I came for a holiday and did some interviews and had two proposals from two companies” before his vacation was over, said Neves, 27. He now works for KPMG in Rio de Janeiro, where his university studies in sports marketing will help the company as the 2016 Olympics approach. “It is an opportunity to be in a market where new things will happen, outside Europe.”
Even seemingly durable trends can, of course, reverse. Early in Europe’s crisis, problems in the banking sector intensified when U.S. money market funds pulled out, a move that deprived European banks of what had been a stable source of short-term funding. After recent decisions by the European Central Bank lowered the risks of a larger currency union crack up, that money has begun to trickle back. Large liabilities owed by the central banks of weaker nations like Spain to that of Germany are also starting to decrease, a sign that money has stopped flowing out of those troubled countries.
But there’s also little question that the tide of capital and people leaving the euro zone shows a certain dysfunction in the currency union — a design flaw that has created an unnerving degree of instability in the global economy.
In setting up the currency region, the euro’s designers felt that the vast differences among the member nations would smooth out over time — that Greece and Portugal would eventually be competitive with, say, Germany or the Netherlands. Investment capital, economic theory predicted, would move from the more developed nations of the currency zone to the less developed ones — taking advantage of lower labor costs and the fact that less-developed areas generally offer greater returns on investment than more-established areas. In addition, workers were expected to move from places of high unemployment and lower wages to countries where jobs were available and wages were rising.
Not enough of either has happened within the euro zone. The fact that labor is leaving the region may help in the short run: Each Portuguese or Greek citizen who emigrates means one less person competing for the available jobs; émigrés may also send money back home in the form of remittances, an important source of foreign income for some nations.
But the long-run effect may be less helpful if educated young adults like Lambuca take their skills, ambition and earning potential somewhere else. Recent immigrants to Brazil say they have arrived with a range of intentions — from short-term assignments to help their current employer to open-ended hopes of remaining in Brazil permanently.
Patricia Cardoso said she loved her first job out of college, working on a Lisbon-based reality television show. But she also outgrew it quickly and realized the next steps would be difficult in an economy where there was little turnover among senior employees and little chance for new workers to advance.
“It was always the same thing: Start here and you can have an internship for six months. So I decided one night I was leaving the country. That I will never get a job here.”
She is now working as a director’s assistant on television projects and feature films, sharing an apartment near Ipanema Beach.
“I have no plans to go back,” said Cardoso, 25. “I love this place. The beach, the sun, the people are friendly, language is not an issue, and the opportunities are here.”