Angel Santodomingo Martell was expecting 2020 to be tough. He didn’t know it would be this tough.
Speaking to II, the bank executive recalled how Banco Santander Brasil, where he has served as chief financial officer since 2014, had begun to position itself more conservatively last fall.
“Back in September last year, we publicly said that we saw pockets in the economy — we thought we should stay back a bit,” he said. “We wanted to control risk. Obviously, we didn’t know about Covid-19.”
As of Tuesday afternoon, there were more than 5.4 million documented cases of Covid-19 globally, according to the World Health Organization, including over 363,000 in Brazil. The Latin American country has in recent weeks emerged as one of the latest hot spots for the contagious and potentially fatal disease, with the number of reported cases growing rapidly over the month of May.
Across Latin America, executives from sectors ranging from financial services to construction report major disruptions to their businesses and an urgent need to adapt to a world that will likely be permanently altered by the coronavirus pandemic. In Mexico, for example, construction materials company CEMEX has instituted a number of new protocols to ensure proper social distancing and hygiene among workers, including launching an app for employees to self-report any health symptoms they may be experiencing.
Back in Brazil, electricity provider ENGIE Brasil Energia has had to figure out how to literally keep the lights on as the country’s largest electricity producers. “As a company that provides an essential service, we have implemented a series of initiatives to offer the necessary protection to our employees and the continuity of our activities, in line with the recommendations of health agencies,” Eduardo Sattamini, the utility company’s CEO, said by email.
Banco Santander has similarly sought to keep money flowing through the economy in a time when businesses and individuals need it most. “We have moved from ten years ago with banks being the problem to now banks being the solution,” Martell said. “And that is an important way of looking at the bank sector as what we should be, which is a provider for the economy to be able to grow.”
Below, Martell and other top-ranking members of II’s Latin America Executive Team discuss how their companies have responded to the coronavirus pandemic — and what the world will look like afterwards.
Jose Antonio Gonzalez
CFO, CEMEX
Cement & Construction
1. How has the Covid-19 pandemic impacted your business?
The impacts began in Europe and Southeast Asia and then at a later stage arrived more in the Americas. In this way, the concept of having businesses around the world has helped ease impact, as it has not all come at the same time.
Impact has come in two forms. One is the shock to demand, and the other is the impact to supply. In developed markets, impact to supply has been minimal and disruptions have been small. The impact has come more from the demand side, with different degrees of intensity. In Western Europe we have seen a big impact coming from the demand side as the virus has hit more strongly. In central Europe — countries like the Czech Republic and Germany — we have seen less impact because the policies implemented have been more conducive to business.
In some markets around the world we have had more aggressive lockdown instructions, for example in South America or the Philippines. There we have had to temporarily close facilities, and that impacts the ability to supply. But there has been a distinction in the kind of impacts we have seen and it has come in different stages.
2. What is your company doing to innovate and adapt?
We see the Covid-19 issue with three stages. The first wave of impact is the shock of the event. The second has to do with the day after, once the shock has been absorbed and actions have been put in place. We are now in the phase of learning how to operating under these conditions, where there has been some degree of containment and some eagerness of the government and society to assume economic activity.
I think we have done a great job. We have taken all the right measures in the first stage to soften the blow. We put in place what we called rapid response teams to protect the safety and health of our people and customers and facilitate business continuity as safely as possible. We put together those rapid response teams very quickly and managed to deploy global initiatives around those two actions.
One challenge in and of itself was to put together these teams to work effectively even though most people are working from home.
We have also leveraged our CEMEX Go platform, transforming from analog to digital all of the customer journey, from when they approach us to get a quote to when they request an order to when they take delivery and when they pay.
Another thing we’ve done, which goes more along the lines of protecting the health and safety of our people, is we put together an app very quickly that employees have on their phone called Health Check. If you go into the app, you’re asked a few questions like, how are you feeling, or what is your temperature, and that has been helpful in identifying any issue and being able to take actions immediately — send people home or send people to the doctor, et cetera.
3. What will your sector look like a year from now?
Part of the goal of the rapid response teams was to develop standards we need to implement in order to be able to operate in a safe environment. We have developed and put together inventory of 50 protocols for working safely. These protocols have to do with hygiene, distancing interactions with customers, how people get to job sites, what kind of checks people have to have as they walk in or out of job sites or factories.
We will have to adapt to the challenges brought about by this environment, but I think we’ve gotten a head start with the development of these protocols. We will be adjusting; we will be working more safely. Because what we’re seeing is around 40 percent of our business is in developed markets and these markets have been pursuing very aggressive fiscal and monetary policies. We would expect in the context of recovery that a lot of resources could be directed to construction and infrastructure. With interest rates so low, there are a lot of reasons why this could happen.
4. What’s one thing investors should know about Latin America?
We have an important presence in Latin America, but the biggest one is Mexico. From a macro standpoint, we see Mexico as having very strong linkages to the U.S. So we are very pleased to see how the U.S. is putting very strong economic measures in place. Because of the strong linkages between the U.S. and Mexico, we think Mexico will benefit.
As countries in general look toward a nationalist agenda, as we see the U.S. in conflict with China, we think Mexico is well-positioned to benefit from interest from multinational companies to integrate themselves in to the supply chain from Mexico.
5. What have you been you reading or watching while staying at home?
My wife and I have been watching a lot of series on Netflix. One we finished recently is Homeland — it’s a great thriller and I love the plot twists. I also have a book my son recommended — actually a book from Latin America called “La Fiesta Del Chivo” by Mario Vargas Llosa. It translates to “The Feast of the Goat.” It’s a historical novel about the era in the Dominican Republic when they had a longstanding dictator. I was not that familiar with the story of this period so it’s been interesting to read about.
Angel Santodomingo Martell
CFO, Banco Santander Brasil
Financials: Banks
1. How has the Covid-19 pandemic impacted your business?
Given the economic situation — in general terms, the cooldown that is happening around the globe is obviously affecting us. That is the obvious argument, but I would say it has further, more profound changes. We have learned a lot from the crisis. We have learned how to do a lot of things we thought we couldn’t do in digital mode — how we could still offer and give the full product and service range that we offer clients. How we can support clients on the retail and corporate side in terms of giving what we are supposed to give, which is financial support. How the famous home office works. How we can increase productivity.
Here at Santander Brasil we have a highly engaged team — one of the highest in the sector. That engagement has meant that we as a team have acted and learned to adapt. We have confronted the crisis in a more positive and prepared way.
2. What is your company doing to innovate and adapt?
The home office is a very good example. We have had at headquarters for some weeks a ratio of 80 percent at the home office and 20 percent being present. We didn’t want to go to 100 percent home office — we thought it was important to maintain active cells in the corporate business.
But the home office has been good. We have adapted quickly and strongly. One of the parts of the business that was challenging was the call center. How can you really manage a call center in a home office? But we have been able to manage the call center in the home office, working in a natural way.
What we have been able to do is adapt every single tool that we had for our clients. First of all, the measures that we are taking here in Brazil to support clients — that was an imperative way of adapting. You can imagine hundreds of thousands of clients need to receive money, exchange payments. Adapting our systems and capacity to that was absolutely something that was immediately thought of.
A second example was in our auto business we have. The majority of car dealers have had to close physically, and what we delivered was a tool by which the dealership could deliver the car to clients, with all of the relationship between the client and car dealer being digital. We call it our online car delivery service, by which the client sees and contracts the car through the digital system, the dealer delivers the car physically, and we offer our services for financing, et cetera. And it has been a success. When these things happen, I think Santander has shown flexibility and capacity to adapt in an excellent manner.
3. What will your sector look like a year from now?
Things are going to stay — not only the digital mode. I think it will have to look more like this, and those that do not change will not be able to make their way.
It will look like a financial sector that is closer to clients. And there is no other way to grow — you need a sound financial sector that is close to the clients when these things happen.
It will look like a financial sector in which the banks which have given service and really supported clients will be the winners and the ones that will be strongly positioned looking forward. Obviously it will be more digital, obviously it will be more efficient — all of that is going to happen.
4. What’s one thing investors should know about Latin America?
The first thing is, if you watch the market movements and the currency movements, asset prices in real time are cheap. The second thing is obviously the region has a high level of risk — but if you go back in the last five, ten years, that level of risk has gone down. The cost of equity has clearly gone down. I’m speaking about the region generally — in a basket you have different countries with different specific cases.
The other thing I would say is that, in general terms, institutions work. You may have all kinds of economic tensions, social tensions, political tensions — but institutions tend to work. You have exceptions, obviously, but you tend to see this is not the Latin America of 50 years ago. It’s a huge opportunity. If you look worldwide, not only in emerging markets but wherever there is size, growth opportunity, and capacity to really develop, it is clear that Latin America is one of those places.
5. What have you been you reading or watching while staying at home?
I’ve been reading history. We’re in a crisis that’s pretty unique, but humanity tends to behave similarly throughout history. So I’ve been learning how crises have happened and how they weigh out.
The second thing I’ve been reading about is the acceleration of digital tools, going back to the telephone or the fax compared to WhatsApp today. History in general I think is a good learning process when you are in the middle of a huge crisis like the one we are having.
Eduardo Sattamini
CEO, ENGIE Brasil Energia
Electric & Other Utilities
1. How has the Covid-19 pandemic impacted your business?
The ongoing crisis triggered by the coronavirus has posed challenges to all sectors of the economy, as lockdowns have effectively deterred most businesses from functioning properly. Such a crisis is bound to have implications for the power utilities sector, such as lower power consumption; reduction in collections from power distribution companies and resulting concerns over cash flow across the entire value chain; and news on renegotiations in the free market segment from industrial and commercial customers.
ENGIE Brasil Energia understands that most of the risks are inherent to the business and, for this reason, are incorporated in our risk matrix, and therefore mitigating instruments [are] already in place.
Regarding the impact for power distribution companies, on May 18, the federal government published the Decree 10,350, establishing the terms of financial aid for the distribution companies. [This] addresses the most urgent issue, which is liquidity for the distribution companies, enabling them to continue honoring their commitments to other sectoral agents, and preserving the sustainability of the electricity sector.
In the case of the free market, we have received some requests for revising loads, although in a restricted amount in terms of volume of energy. We are analyzing each situation case-by-case, considering commercial relations, the principle of contractual good faith, and the maintenance of economic-financial equilibrium for both parties concerned.
At this point we have had good results, preserving the company’s interests and, in some cases, accommodating customers’ needs.
We are also monitoring the developments of the pandemic, evaluating their possible impacts so that we can best protect both the health and the safety of employees and communities, where we operate, as well as the company’s operations and results.
2. What is your company doing to innovate and adapt?
Reinforce communication: As part of the home-office campaign, people are being constantly encouraged to communicate. This has been paying off. We have what we are calling energy dialogues, where we talk about this with all our employees.
Psychological support: We have held several in-house seminars with psychologists, with motivators, to keep the workforce and our teams highly engaged.
Learning and development: We have also been taking some time for e-learning. There are modules we are encouraging people to take to make use of this time at home and prepare for our future challenges.
Wellbeing activities: We also implemented wellbeing activities, like physical exercise lessons via Microsoft Teams. Some people are doing functional gym workout, others are taking Pilates and occupational exercise — all done online so that people will keep their bodies healthy as well.
On the business side, we are accelerating our digital transformation. [That] started in 2016 and [has been] an enabler for the quick reaction of the company, automatizing even more our processes and products.
3. What will your sector look like a year from now?
The utilities sector will be instrumental in helping the economy to recover.
We are identifying several opportunities to develop operational and regulatory improvements that will result in greater efficiency and cost reduction, with the possibility of a positive impact on the future price of energy. By the way, the Covid-19 crisis has brought the urgency of the structural modernization of the sector’s regulatory framework [to] the Brazilian Congress — that will lead to the above effects.
We may also have opportunities for M&A or consolidations and, certainly, growing investments in renewable sources of energy generation.
Thus, we can expect the most agile companies to strive and be even more competitive in the future.
4. What’s one thing investors should know about Latin America?
It is still uncertain and premature to conclude the impacts of the pandemic in the region. We know that countries will respond according to the level of evolution of the disease and the duration of the pandemic. However, from a general perspective and considering the Brazilian scenario, investors should assess the resilience of companies during the pandemic, and how they are preparing for the future, after COVID-19, in short and medium terms.
And when we talk about resilience, we consider the liquidity profiles of companies, their financial assets, and their ability to adapt to the new normal, with the adoption of new technologies and processes.
5. What have you been you reading or watching while staying at home?
I have been working more than ever to manage all action plans we have put in place to minimize the impact of the crisis to our company, but I am taking some time to watch films with my kids. We watched “The Professor and the Madman” and “The Zookeeper’s Wife,” among others, and I am reading Ken Follet’s “The Edge of Eternity” and Thomas Piketty’s “Capital in the Twenty-First Century.”
