The COVID Coexistence: Macro and Micro Effects 

April, 2020 - Daniel Hirsch

The prosperous and globalized world as we know it has been suddenly slammed.

Henry Kissinger, in his article published in WSJ on April 4, states that the historic challenge for the current leaders will be to manage the crisis while building a new future. If they fail, the world would be set on fire. He also says that nations rely on their institutions to foresee and deal with calamities, to arrest their impact and to restore stability. When the pandemic ends, the institutions of several nations will perceive to have failed. The world will not be the same after the virus.

It will not be the same regarding Macro (Nations) and it will not be the same regarding Micro (companies).

In connection to Macro, the pandemic is causing major economic consequences worldwide. In fact, all projections made some weeks ago by various multilateral financial entities are under almost permanent review in terms of the development of the health emergency that already exists all over the world.

The Organization for Economic Cooperation and Development (OECD), that groups together the main countries of the world, anticipated at the beginning of March, an associated “cost” in terms of decrease of actual world GDP of between 0.5% and 1.5%, depending on the scenario (short or long term crisis) but still pointing out a moderate growth for this current year.

The Institute of International Finance (IIF) already projected in its report of March 23 a drop of actual world GDP of 1.5% for 2020, with higher decreases for USA and the Eurozone (of 2.8% and 4.7%, respectively). At regional level, the Institute anticipated drops of 2.7% a year for Latin America, and specifically, 1.8% for Brazil (pointing out, in addition, the uncertainty on the severity of the pandemic in emerging markets, and the existence there of large urban centers and limited testing,which implies additional downside risks).

In Argentina, in the last Market Expectations Survey (REM- BCRA), that shows information derived from the survey conducted between March 26 and 31, an actual GDP decrease of 4.3% for 2020 is expected (far from the average estimation corresponding to the survey of the previous month, that indicated a drop of only 1.2% per year). Different private sources, on the other hand, have informed their own growth projections for this year in similar terms (that is to say, decreases of 4/7% per year).

Anyway, it must be noted that such estimations may be affected by the events happening in the next few weeks in connection to the local development of the pandemic and the characteristics of the strategy to lift the Social, Preventive and Mandatory Isolation.

Regarding Micro, the minute by minute tension is relentless.

In a report of the Fundación Observatorio Pyme[1] of April 7, conclusions -based on a survey of 960 companies- are compelling: only 10% of MiPymes (micro, small and medium enterprises) are fully active, 36% are partially operational, and 54% of the segment are “not operational”. Among the non operational ones, we have the ones dedicated to Construction (74%), Manufacturing (65%) and Commerce (65%). What is the daily cost of this inactivity...? US$ 115 million...!

Facing this incredible shutdown, only 16% of the micro, small and medium enterprises can pay salaries and fixed expenses in April. 24% of them cannot afford them. The Government, Banks and shareholders’ money should intervene. 6% of the micro, small and medium enterprises are directly thinking in closing down; going out of business (35,000 companies with more than 190,000 employees).

And, if part of the companies that cannot cover their expenditures in April do not find a relief in borrowing or increasing capital contributions, there will be more than 415,000 additional unemployed workers.

This storm we are going through can become a tornado. Can we do something in this period of quasi-isolation to preserve the most precious resource, people...?


Plan A:

  • Evaluating all possible scenarios (economic, financial, operational).
  • Re-designing budgets.
  • Analyzing every expense.
  • Reformulating critical items of the projected fund flow.
  • Ensuring liquidity with available resources.
  • Activating other funding sources (contributions of shareholders, banks, capital market).

Or activating the Enhanced Plan A:

  • Reevaluating the company´s Business Plan.
  • Paying attention to the profitability of each product. Discontinuing the ones that are losing money.
  • Disinvesting in non strategic fixed assets.
  • Selling or renting non operative assets.
  • Increasing the Capital (through a new partner).
  • Deactivating lines or services that are not core to the business.
  • Deferring non critical investments.
  • Investing in new online processes and technologies.
  • Accelerating the digital transformation.

The crisis caused by the pandemic does not give a break. We have seen many of them. They pass. This too shall pass.

We have to take action...!



[1] Source: Fundación Observatorio PyME, published on April 7, 2020 based on an online survey of 960 micro, small and medium enterprises.


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