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The Ideal Corporate Protocol to Fight COVID-19 both for Employees and Investors

To fight COVID and its impact on corporates and the economy remains the center of attention for all IR teams, in Mexico and elsewhere. This week we highlight 1) the recent webinar with NIRI (the National Investor Relations Institute in the USA) on what IR teams are doing 2) what Wall Street Economists and other experts are expecting for Mexico in 2020 (deep recession).

Niri Webinar (Victoria Sivrais – Host and Moderator; Lynn Tyson – Executive Director & IRO for Ford Motor – Guest Speaker; Felise Kissell IRO & Corporate Affairs for Aramark – Guest Speaker).

  1. COVID-19 Press Releases are starting to address liquidity, production suspensions and store closures. Full year guidance is gravitating towards worst case scenarios.
  2. Companies are shifting communication to cost-reduction efforts (reduction in salaries, layoffs, …). (Miranda-IR observation: in the Mexican social context, be careful on the PR consequences of too much cost reduction focus, especially regarding employment).
  3. Engaging in social media, (specifically twitter), company website (COVID-19 Tab), and other forms of communicating beyond PRs.
  4. Overall, companies should not focus on releasing one good press release, but creating a culture/environment of addressing misconceptions and cultivating a positive investor view of handling business and crises. They should identify key and common questions. What are the pressure points and areas to be part of the solution? What is your flow through on the business? How flexible is the business model? How to better understand cash flow and balance sheet? What will be the first moves once this pandemic normalizes or ends.
  5. Maintain dialogue with top 50 shareholders. Large companies are hosting frequent webcasts, some with 20,000 participants. Moderated Q&A to address concerns at multiple employee levels.

How Should IR Act?

  • Thinking internally, the role of IR should be conveying a strong and compassionate company.
  • Include CEO and CFO in company statements as enforcers
  • Start planning for a multitude of different scenarios, financially and strategically. IR should be permeating the organization in order to be constantly on top of new decisions
  • Act as a trusted source for information, internally and externally

How are investors reacting, and how are they being engaged? How might the quiet period shift, considering the constantly changing environment?

  • Investors are much more eager to communicate, so the way you answer in that first instance of dialogue sets the tone for the rest of the conversation and how you’ll address concerns in the future.
  • Cater different responses to different situations, so that when something changes senior management isn’t scrambling to figure out the best response.
  • Do not go radio silent. If anything, try to report earnings figure as early as possible.
  • Have very detailed calls and catalog the information said for future calls/calls with different investors.
  • Long-term strategy needs to take a backseat in order to prioritize how a business will continue to survive.
  • Many investors are facing significant losses right now, which is why re-iterating historical trends and performance, how a company can adapt to the changing environment will help maintain positions.
  • Still prepare for a significant shift in the shareholder base.

How will earnings preparation be affected?

  • What is most important to be communicated? Before earnings release, it’s best to identify the most common questions asked so that they are addressed in the report and earnings call.
  • Every company should be prepared for a virtual conference call, and to even include video of the senior management
  • What provides the most liquidity? What affects liquidity the most? How will this be preserved? Questions to be addressed. (Lynn from Ford said this will be a priority when preparing Q1 2020 earnings report. Liquidity will be prioritized over many other financial figures to be articulated in the report and earnings call)
  • If a company is part of a conference that is now cancelled, they should still make their own webcasts, contact the analysts, and have something to put on the website. Current and new investors, specifically the targets, will use that webcasts as a reference.
  • Understanding new investment decisions, by figuring out which areas of the business can benefit the most in the short-term.

What should be the frequency of communication?

  • The more the better. Beware of having a one-sided conversation. Better to address concerns as they come in, unless it’s very pressing to the business and widely discussed in the news.


How are you bulking up communication with investors and stakeholders? Who’s doing a good job on the IR website and social media pages?

  • On the website side, aggregate PR releases that are Covid related. Centralizing all related information is useful for analysts
  • Demonstrate the social media infrastructure to launch new products and communicate market strategies to customers
  • Additional talking points should include financial strategy by senior management.
  • Granger has a great website and also includes ESG efforts. Dupont and general dynamics have great micro sites around Covid. Great CEO video from McDonalds about keeping employees safe.

Second, we look at how Mexico is expected to fare in 2020.

COVID-19 arrived relatively late to Mexico, with the milestone of 100 cases reached on March 18, compared to March 4 in the USA and March 2 in Spain. Just as elsewhere, now that the virus is well established, (993 reported cases, 20 deaths as of March 29th), its spreading fast, (doubling every three to four days or so). As in many places, the government has responded late, with the President initially dismissing the relevance of the virus to Mexico, then slowly encouraging various social distancing measures, finally closing down non-essential federal government activities on March 25. On Saturday March 28 the government moved to formally ask everyone to stay at home if possible, for a month (without mandating such measures).

Source: Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU) & Health Ministry of Mexico.


What distinguishes Mexico from most developed countries is that the country has 1) little fiscal flexibility, nor the credibility, to offset the economic impact with greater public spending.  This is further complicated by its dependence on jittery external capital markets to fund increased public-sector debt 2) a huge informal economy and limited private savings means most people do not have the luxury to stop working 3) a health system that is already in a precarious condition, with difficulty supporting widespread testing and follow-ups of those affected, even assuming the government wanted to do that. Today, it is still difficult to get a test in Mexico, so actual cases are probably multiple times those reported. In its favor, 4) Mexico’s population is young (only 7% over 65), and relatively rural, so perhaps mortality rates will not be high as in Europe (With Mexico so far running at a low reported rate of 1.8%).


Wall Street economists have been crunching their numbers, and the economic outlook for Mexico is nothing short of alarming. Credit Suisse was the first (March 17) to downgrade growth expectations and was then looking at a GDP decline of 4% for 2020. Since then, the situation has deteriorated. JP Morgan (on March 26) forecast a 7% decline in 2020 GDP, with a whopping 35.5% decline in 2Q20. Meanwhile S&P downgraded Mexico’s sovereign debt to BBB from BBB+. All agree Mexico will be hit by a perfect storm of lower trade, lower tourism, much lower domestic consumption caused by social distancing measures, and weaker oil prices.


Mexico was in a delicate economic position before the COVID-19 crisis, with the economy in mild recession in 2019, and highly leveraged Pemex facing debt downgrades due to production declines and weak oil prices. To his credit, the President, pre COVID-19, had followed prudent fiscal policies (aiming for a primary fiscal surplus of 0.7% of GDP in 2020). Nonetheless, his government undermined investor confidence with some selective anti-market measures, such as cancelling investment projects (energy farmouts, dispute over gas pipeline contracts, the new airport) and yet proceeding with other projects of dubious benefit (a new refinery, the Mayan train project) and at a large cost.


There is no sign yet that the COVID-19 is changing the government’s thinking on promoting private investment – following a much-questioned local referendum, the government effectively cancelled the Constellation Brands USD1.7bn project in Mexicali on March 23rd.  Given the fall in oil prices and recession, going forward it’s going to be immeasurably more difficult to stick to both prudent long-term fiscal policies and fund social programs. (An increase in 2020’s fiscal deficit is both inevitable and appropriate). One of the two will have to give, and long-term fiscal discipline seems more likely than not to be sacrificed. Concerns on the credit worthiness of Pemex and the government itself are only likely to grow.



Title: No le haga mucho caso a los pronósticos económicos

Author: Enrique Quintana

Date: 30/03/2020                Source: El Financiero

Link: https://www.elfinanciero.com.mx/opinion/enrique-quintana/no-le-haga-mucho-caso-a-los-pronosticos-economicos

  • Forecasts range from 2 percent reductions in GDP to the JPMorgan-predicted disaster of a 7 percent drop
  • In response to Peso depreciation:
    • There was a global risk aversion that led to the sale of assets in pesos and therefore to a depreciation of the currency. It is unsure if there will be new waves of risk aversion in the coming months that could further depreciation
    • There is also uncertainty if countries’ rescue plans will help mitigate risk aversion


Title: Mexico struggles to keep economy alive as coronavirus measures bite

Author: Jude Webber

Date: 30/03/2020                Source: Financial Times

Link: https://www.ft.com/content/4879b109-6c93-455c-ac23-3a00f2f454ba

  • P Morgan is calling for a 7% decline in GDP this year
  • Economist Luis de la Calle is estimating for 1.7 million jobs lost, including 700,000 in the informal sector, where workers receive no social benefits
  • Santiago Levy, economist, argued that government should halt infrastructure projects and extend state-guaranteed loans


Title: Mexico: Economic and Policy Update

Date: 26/03/2020                Source: JP Morgan

  • JP revises 2020 growth to -7%
  • Social isolation, sudden stops in key economic sectors and a blow to health systems suggest downside risks are still in place
  • The output gap will lurk at a staggering 9-10%, which implies a big disinflationary impulse to core inflation


Title: Impact del Covid-19 en la economía: la inacción es más peligrosa que la sobrereacción, tanto para la salud pública como para la economía

Author: Javier Amador, David Cervantes Arenillas, Arnulfo Rodríguez, Saidé Aranzazu Salazar, Carlos Serrano

Date: 26/03/2020                Source: BBVA

Link: https://www.bbvaresearch.com/publicaciones/mexico-impacto-del-covid-19-en-la-economia-inaccion-es-mas-peligrosa-que-sobrerreaccion/

  • It is necessary to allocate fiscal resources to carry out as many tests as possible, including people without symptoms
    • Drastic measures of isolation of people are urgent and absolutely necessary
  • Economic measures are required as never before to limit the economic consequences of the pandemic on people, starting with the most disadvantaged; fiscal objectives should be put in the background


Title: Ricard B. Salinas on Covid -19

Author: Ricardo B. Salinas

Date: 25/03/2020                Source: Grupo Salinas

  • “The way things are going it seems that we will not die from the coronavirus, but that we will starve to death.”
  • Argues that observing relevant statistics, such as the low mortality rate of Covid-19 and other causes of deaths being more prevalent such as heart disease, smoking and obesity does not justify a complete isolation, slowdown in the workforce and halting the economy