Winger Varela has agreed to join Italian side Palermo on loan, once his current loan deal with the Baggies from Porto has been cancelled.
Alternatively, fellow winger Blanco is expected to join Argentinian side San Lorenzo on loan. The Argentinian joined for an undisclosed fee from Ukrainian side Metalist Kharkiv in the summer and signed a two-year deal but has not started in the Premier League this season.
On the other hand, Varela has made nine appearances during his loan spell, scoring once, but his time at the club has been blighted by injury and severely hampered his chances of making any impact in England.
Former manager Alan Irvine signed both players, but new boss Tony Pulis appears to be moving quickly to see them out the door as he looks to revamp his squad during the January transfer window.
He has already seen a bid for Wigan winger Callum McManaman rejected but is expected to make a second bid, while he is credited with an interest in Manchester United midfielder Darren Fletcher.