Latin glamour and sophistication arrived in New York City in mid-May when some 300 IROs, CFOs, IR advisors and others attended the second Investor Relations Magazine Latin America Awards at Central Park’s magical Tavern on the Green restaurant. They were there to celebrate much more than the prizes. The fiesta was a chance to venerate the flourishing of IR in the region. Not just the award-winners but all the attendees involved in Latin American IR could congratulate themselves on progress achieved in the discipline over just a few years.
The event was originally scheduled for November 2001, but because of 9/11 it was postponed until May. The investment community survey to identify the winners was carried out by research firm Erdos & Morgan, which interviewed 256 fund managers and analysts identified by Thomson Financial and the Bank of New York. The long interval between the original fieldwork and publication of the results risked the survey losing its relevancy, especially because so much has changed in Latin America since last September. Thus Erdos & Morgan undertook a second round of interviews in the spring to validate the results. Interestingly, the new answers replicated the original ones almost exactly.
The changes happening now in Latin America, however slowly, are making it an appetizing place for investors looking to invest for the long term. They now prefer Latin America over Asia.
Governments and stock exchanges in countries like Mexico, Brazil and Chile are introducing measures to improve their companies’ corporate governance practices and to ensure they become more transparent. The companies themselves now see that the old ‘no comment’ response simply won’t work any longer. If they want to attract shareholders and add value to their businesses, they need to be more communicative and adopt the style of their Yankee neighbor. After all, most Latin companies look to the US for new investors, especially the larger ones which often have ADRs listed in the US and are introducing measures to comply with Reg FD.
Beyond that, state-owned companies are continuing to go public and, although the number of family-controlled companies is still an issue in Latin America, some of these are also offering more of their stock to the public. All such developments are increasing the incentives for international investors to buy Latin stocks.
Mexican distinction
The manitos are deemed the best in the region, with Brazil ranked second. Among the Aztecs, Cemex was the clear winner this night in New York. The cement firm took the grand prix for best overall investor relations for the second year; and it won the award for the best investor relations officers, namely Maher Al-Haffar, José Antonio González, Beate Melten, Eduardo Meouchi and Abraham Rodríguez. Cemex’s other three prizes were for best communications with the retail market, best debt IR, and best IR by a Mexican company.
As one of the investment professionals interviewed for the awards said: ‘From the chairman down they understand what US investors need from a company. They give a timely overview of their operations and detailed responses to specific questions.’
Talking about the IR team specifically, another respondent commented, ‘Their attitude is very forthright and open overall. They give the impression of giving the investors what they need. We don’t want someone who’ll put a positive spin on things regardless of the reality.’
Unsurprisingly, perhaps, a spokesman for Cemex is happy to confirm such praise: ‘We provide information in a transparent and consistent way,’ he says. ‘We have always been there, in the good and the bad times, and this is what has been recognized, not only with the awards, which are very flattering, but especially with the base of investors we have achieved.’ He points out that this success is not only attributable to the IR team but also to the CEO and the CFO.
Headquartered in Mexico, Cemex has subsidiaries in 30 different countries; and two thirds of the company’s shares are listed in the US in ADR form. The company boasts that few other companies have IR programs genuinely aimed at retail investors in Latin America. Cemex certainly does; and its target is to increase its private shareholder base in Latin America and the US, as well as in Canada and Europe.
For this company, the IR task is not just to add value for the company and shareholders, but to take on an educational role with investors, on behalf of both the company itself and Mexico. That should suit everyone, benefiting the country as a whole, creating a better image for other Mexican corporations in addition to Cemex, and attracting foreign capital.
Eduardo Trigueros Gaisman, the director of issuers and information at the Mexican bourse, couldn’t agree more: ‘Companies in this country have always been focused on international institutional investors. Now they need to modify their shareholder bases and have more Mexican retail investors.’ To do that, he advises, ‘It isn’t enough just to send out press releases. Companies must have a structured IR program. The IR job doesn’t just consist of answering questions over the phone; they need to have a medium to long-term strategy to position the business in the market and among the investors they want to have.’
Family weakness
Another Mexican weakness is the relatively small number of companies listed on the stock market. According to Trigueros, the total of 170 is low for an economy the size of Mexico. ‘It’s a necessary cultural change,’ he says. ‘We need to get rid of the concept of family ownership. Families don’t acknowledge that you gain much by becoming public. They are used to living off the company’s payroll instead of dividends.’
The airport company Asur is the example to follow here. The formerly state-owned firm went public just 18 months ago yet it was nominated for four prizes at the Investor Relations Magazine Awards and walked away with two: for best IR for an IPO and for best corporate governance.
Adolfo Castro, Asur’s CFO, says, ‘I don’t know any Latin American company that is totally public apart from us.’ Around 74 percent of Asur’s shares are listed on the New York Stock Exchange, 15 percent are in the hands of another company, ITA, and the remainder is controlled by the federal government. ‘So I don’t have any family behind me telling me what I should do,’ boasts Castro.
He believes Asur won the best corporate governance prize because the company’s board of directors is genuinely independent: ‘They are not brothers or cousins of the owner of the company. They are professionals with the sole obligation of providing good advice.’
Don’t cry for me…
The severe financial and economic crisis that Argentina is suffering leaves IROs’ hands tied; there’s little they can do to prevent capital flight from their own companies. However, the country is at least now expecting the arrival of new funds from the IMF to help pre-finance exports, to start reform of the financial system and to arrest the decline of the economy through a credit injection.
Daniel Rennis, IR director at oil company Pérez Companc, is just one of the many Argentinean IROs facing such challenges: ‘In the current environment we have to explain what’s happening in a very transparent way and try to retain the interest of investors, who for now are just waiting to see what happens.’ The Buenos Aires-based company won the award for best IR by an Argentinean company. Fund managers and analysts said they appreciated the fact that the company ‘presents realistic information.’
And this may be the lesson Latin companies are finally learning, after the many crises facing the continent in recent history. It’s not just in buoyant times but in difficult times, too, that companies need to be open and transparent with their investors if they are to gain their trust and confidence. Latin America is at last keeping time with the rhythm of US and European IROs; but it’s also adding a bit of sabor latino.
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