What strategies do companies apply to survive without income?

Most companies these days face the obligation to pay the salaries of their schools in a context in which many, due to the continuation of the coronavirus health emergency, are without activity or with reduced sales.

According to Gabriel Raed, partner of the Castillo y Asociados study, the situation within companies is very different, depending on the category and level of activity.

The sectors with work at this juncture are those related to health, from prepaid and private clinic plans to pharmacies, drugstores and suppliers of medical supplies and equipment.

Some items related directly or indirectly to agricultural and food production (from the countryside and the industry to its suppliers of machinery and supplies) maintain a certain acceptable level, as well as the commercial chain of these products.

Similarly, industries such as software and services whose management can be sustained through the work scheme home office, like contact centers.

But there is a huge variety of companies that the emergency forced them to close or minimize their activity.

This is the case of hotels, gastronomy, tourism, shopping malls, industry and clothing stores, bookstores and electronics not linked to health technology, metal mechanics not linked to food production and the automotive and trade and service chain automotive, among others.

Diverse paths

In this regard, Raed warns that, at this time, there are alternatives that companies are trying as the fall in consumption reduced activity to a level well below the break-even point, whose output can last up to six months.

“The most common thing that everyone is doing is renegotiating the rental contracts for the premises, especially in the business area,” he says.

Another renegotiation that merchants are facing is with their suppliers. “Right now, most bookstores are in dialogue with publishers, because they are committed to paying for material that has not been sold, since when the quarantine began, many teachers had not come to request their books and texts,” he added. Bárbara Lallana, representative of the item on the board of the Córdoba Chamber of Commerce.

Labor conflicts

The specialist from Castillo y Asociados highlighted that strategies are also being sought from the labor side, such as reducing hours of work, since it is not clear when activity will normalize, or negotiating a crisis agreement with the union. “For this, labor advisers enter programs such as crisis prevention procedures (PPC),” he stressed.

In this regard, the Minister of Labor of the Province, Omar Sereno, assures that as of the entry into force of the decree of necessity and urgency 329/20, which stops the layoffs for 60 days from today, Wednesday April 1, “no longer it is necessary to enter the PPC “.

As detailed by the official, until the end of last year, in the labor portfolio there were 300 companies that were in PPC, but in many cases, at this time of the year, that condition is already fallen or is about to be without effect.

From the beginning of the year and until the period of isolation began, 12 PPC were started. Meanwhile, with the health emergency underway, only one request for PPC was submitted.

“Businesses are going to have to figure out how they pay wages as isolation spreads, and a lot of deliberation is going to be needed there. It is desirable that the measures be taken with the consensus of workers and unions,” Sereno said.

Other alternatives

In any case, it all depends on the size of the “back” of each company.

“Some have their reserves in the safe deposit boxes of the banks; the problem is that they cannot access until the entities do not open, “added Raed.

Another of the most sought-after channels is credit at a subsidized rate that the Government has been offering through the banking system, including Banco de Córdoba (Bancor).

In the latter case, the credit has a 24 percent rate, with a six-month grace period and a one-year term; in the case of private banks that offer it, some previously apply a rating.

“There are many SMEs that do not qualify, and yet they work. Others are outside the banking system because the Federal Administration of Public Income (Afip) seized their accounts; 30 percent of the sector is in this condition ”, explains Humberto Spaccesi, president of the Córdoba Delegation of the Assembly of Small and Medium Entrepreneurs (Apyme).

The founder of the Argentine Chamber of Micro, Small and Medium-sized Enterprises (MPM), Enrique Umbert, also insists on this: “There is a huge part of SMEs that are unbanked, but are within the payment chain; this can generate a very negative scenario in the next 60 days ”.

Force majeure cases

For his part, the lawyer Rodrigo Escribano warns that companies can go to the “institute” if they are affected by a situation of “force majeure”, which not only enables them to work problems, but also for other situations.

“With the banks they can refinance the debt payment plans taken previously and even access special credit lines. Also with the national or provincial treasury,” he stressed.

According to the head of the Escribano y Asociados study, a comprehensive solution may be the bankruptcy process, which in the framework of a judicial process can renegotiate and restructure its liabilities.

In this regard, the bankruptcy and bankruptcy lawyer Vicente Aznar warned that, despite the restricted judicial activity, in the days of quarantine he has received inquiries both from companies to initiate preventive bankruptcies and from individuals who are guarantors of companies for bankruptcy requests .

“My advice is to wait to see the true depth of the crisis and then make a decision. What the Government cannot rescue with its measures will be rescued by the law through a contest,” said the head of the study Vicente Aznar, Villada y Associates.