The Legal 500 Latin America 2013
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Defying regional economic trends, Argentina continues to isolate itself from its burgeoning regional neighbours. One aspect of this is the series of foreign exchange regulations enacted by the government, which severely restrict the ability to move capital out of the country. Originally brought in to curb the flight of capital in anticipation of a possible currency devaluation, the regulations have disincentivised new entrants to the Argentine market.
The Bolivian legal market continues to be affected by ongoing political tensions and the current administration’s public policy on natural resources, which partly explains the low level of foreign private-sector investment into the country. This core limitation has resulted in large transactions becoming rare in Bolivia’s corporate market; the mining sector does continue to see some M&A activity but in the oil and gas sector too, transactions have suffered a slump in recent years.
It is certainly clear that, while Brazil remains an attractive investment option at a global scale, it has lost a little of the allure acquired when the country was initially identified as one of the BRIC group of key emerging economies, and subsequently went on to be awarded the FIFA World Cup and the Summer Olympics. While the Brazilian economy continued to grow during 2012, its slowing from 2010’s heady 7.5% to less than half that last year did not promote a perception of economic well-being; the first quarter of 2013 saw continued poor performance with growth of just 0.6%, although annual forecasts project a better year than 2012.
Chile’s sustained growth, minimal unemployment rates and economic optimism ensured a healthy flow of big-ticket investment transactions, mergers and IPOs during the course of 2012. The propitious business environment fuelled a thriving legal market which was also accompanied by a number of significant legal developments.
Colombia has undergone far-reaching social, economic and political transformations over the course of the last decade and these processes continue. While foreign business interest in Colombia remains very healthy, the strength of economic activity forecast has not fully materialised due to a number of factors. Perhaps foremost is the limited number of new infrastructure projects actually initiated, robbing the economy of a motor that would have driven both economic and legal activity in multiple sectors. It remains to be seen if these will begin before elections scheduled for mid-2014. Mining sector activity, too, has remained limited, awaiting the establishment of an effective new regulatory and administrative body. The government has been far from idle (see the reforms, below), but has also had the extraordinary distraction of peace talks, upon the success of which, the country’s medium-to-long term growth and security depend. Despite these difficulties, the business market –and with it, legal activity– has remained relatively dynamic, with considerable transactional activity, such as Carrefour’s $2.6bn sale of its Colombian holdings to Cencosud, holding centre stage.
As one of Central America’s dominant economies, Costa Rica is frequently a point of entry for multinationals that perceive of the region as precisely that – a single bloc. This undoubtedly strengthens the hand of those legal firms with a regional footprint: principally market front-runners Arias & Muñoz and Consortium – Laclé & Gutiérrez, but also Aguilar Castillo Love, Quirós Abogados Central Law, and Nassar Abogados, as well as ACZALAW, Abogados Centroamericanos Asociados and Lexincorp. In a surprise development, in July 2013 Pacheco Coto joined this group with its announcement of the development of a regional presence as a result of absorbing ACZALAW, Abogados Centroamericanos Asociados’ offices in Guatemala, El Salvador and Nicaragua. The results of this new development remains to be seen. Nevertheless, at least one of Costa Rica’s foremost firms remains a determinedly stand-alone organisation: BLP is a dynamic start-up that has already succeeded in raising the bar in the local market. Nor does the Costa Rican market lack depth: other significant players include market stalwart Facio & Cañas, developing full-service player Batalla Abogados and the innovative yet experienced relative newcomer Sfera Legal; along with Zürcher, Odio & Raven, Gómez & Galindo Abogados, LLM Abogados, Oller Abogados, Cordero & Cordero Abogados and Gómez & Galindo Abogados.
The Dominican Republic has not been immune to the global financial downturn, and low liquidity has put a brake on foreign investment. Investors also took a wait-and-see approach in the lead up to the country’s 2012 presidential elections. Following the election of Danilo Medina of the Dominican Liberation Party, confidence has picked up somewhat, with lawyers reporting an increase in work. Real estate and tourism continue to dominate the agenda, although there is also a significant amount of infrastructure work, particularly in the energy, mining and transport sectors. For the most part, the Dominican legal market is dominated by a small handful of full-service corporate firms, particularly when it comes to major transactions. The main players in this respect are Headrick Rizik Alvarez & Fernández, Pellerano & Herrera and OMG. Dispute resolution is less profitable for some of these larger firms, and as a result there is more choice in the market, with smaller firms such as Bobadilla Abogados, Pereyra & Asociados and Castillo y Castillo enjoying dominant positions. For areas like tourism and hospitality, clients would also do well to look beyond Santo Domingo. Punta Cana is home to some of the top legal practices in this area, including Castillo y Castillo, De Marchena Kaluche & Asociados (DMK) – Central Law and Guzmán Ariza.
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With President Rafael Correa’s re-election to a third term in power, the ongoing overhaul of Ecuadorian legislation looks set to continue. One of the most notable changes recently has been the implementation of the country’s new competition law; after much consultation, the ‘Organic Law for the Regulation and Control of Market Power’ was enacted in October 2011, and implemented in May 2012. A number of firms have sought to develop competition practices to meet the demand for legal services the legislation has created; Consulegis Abogados appears to have gained an early advantage through its merger with the specialist boutique, Antitrust Consultores.
Despite its recovery from the global financial crisis, low investment activity and slow trade flow are still among the greatest challenges to El Salvador’s economic development. While Central America’s smallest country struggles to boost its economic capacity, the legal market has remained relatively active.
Guatemala remains Central America’s most significant economy and, since his election in 2011, President Otto Pérez has actively sought to enact regulatory measures to promote foreign investment, and to continue several regional projects intended to stabilise both Guatemala’s economy and its security situation.
Having successfully moved on from a long-lasting political and economic crisis, Honduras experienced further economic stabilisation and modest GDP growth during 2012. Leading lawyers attribute this positive trend to a number of investment-friendly policies that have been enacted in recent years – reforms that now appear to be coming to fruition. The 2010 public private partnership (PPP) law, boosted investment in a number of infrastructure projects, chiefly in the maritime and renewable energy sectors: several leading law firms have been involved in the largest PPP project tender to date, the construction and operation of the Puerto Cortés cargo and container terminal. However, in an escalating crisis over a security policy, Congress dismissed several judges causing renewed instability in the Honduran judicial system and fuelling some uncertainty among foreign investors. In a similar vein, corporate lawyers are witnessing considerable caution on the part of foreign investors due to the uncertain outcome of the November 2013 presidential elections.
International Firms: International Arbitration
Traditional bank lending has been in short order in recent years because mainstream lenders, especially the European banks, have retrenched from the market due to their own fiscal constraints following the global financial crisis. Borrowers have had to seek new routes to access debt including facilities provided by multilateral agencies and development banks.
The ‘Mexican moment’ shows no sign of passing: proximity to the US and rising labour costs in China have seen Mexico regain viability as a manufacturing base, foreign investment continues to grow and the country has a significant role in international trade, with exports matching the whole of the rest of Latin American put together. Capital markets activity has seen a significant boost, with the rise of FIBRAs (the Mexican equivalent of a Real Estate Investment Trust), AFORES (pension funds) and CKD issuances (a structured equity security instrument).
Nicaragua continues to see reforms in its judicial system and administrative procedures in an attempt to make the country more attractive to foreign investors. However, allegations of corruption and a lack of government transparency continue to affect confidence and hinder the implementation of policies aimed at strengthening the private sector.
With average annual GDP growth at 8.5%, according to the IMF, Panama remains a significant bright spot in an otherwise faltering global economy. In part this has been driven by the huge infrastructure project constituted by the expansion of the Panama Canal, revenues from which, in turn, underpin many smaller-scale, state-backed projects, including roads, hospitals and a new metro in Panama City. Tourism has also flourished, with several new developments in progress, while commercial and residential real estate is also a major source of investment. The country’s convenient geographical position (in regional terms) has seen it become an increasingly important hub, with many international companies establishing their Central American headquarters there. Local companies, including the domestic carrier, Copa Airlines, have flourished as a result. Law firms are among those who have also reaped the dividends. For the country’s largest full-service firms, previous mainstays such as ship registration and offshore work have been eclipsed by the growing need for cutting-edge corporate finance and real estate advice. In turn, commercial litigation and arbitration are increasingly creeping up on the agenda. The larger firms, which include Morgan & Morgan, Arias, Fábrega & Fábrega, Alemán, Cordero, Galindo & Lee and Galindo, Arias & Lopez, are all well positioned to handle this sort of work, and can offer clients an array of highly competent US and UK-trained lawyers.
Politically, the country has endured a turbulent year: following Fernando Lugo’s controversial impeachment in June 2012, and the subsequent interim administration of Federico Franco; elections in April 2013 returned the Colorado party back to power and brought Horacio Cartes to the presidency. These events reverberated at a regional level with Paraguay’s (temporary) suspension from the Mercosur trading group, during which Venezuela was admitted to the bloc. The ensuing tensions remain to be resolved and in the interim, Paraguay has signalled its increasing interest in participating in the Alliance of the Pacific. A successful businessman Cartes has made pledges on both foreign and local investment and it is anticipated he will successfully bolster the country’s emerging economy. Legislation that was shelved with the constitutional impasse is also expected to move forward swiftly, not least a Private-Public Partnership law that would boost the financing of infrastructure. A final decision is also expected regarding the construction of an aluminium smelter by Rio Tinto, a project which stalled under Lugo, and which would constitute the largest investment in the country’s history.
Peru continues to enjoy an impressive economic boom, experiencing growth in the 6-9% range for the last three years. As this might suggest, the country remains an attractive destination for international companies and foreign investment, particularly in the extractive sectors, which account for more than 60% of Peru’s total exports. However, issues with local communities are a continuing difficulty for the country and have had an impact on the continuation of a number of mining projects. Poor infrastructure is also a problem of growing relevance, although the government plans to combat this deficit with a $20.5bn investment in infrastructure between 2011 and 2016. Interest from companies in the Asia-Pacific region has also persisted, and Peru has witnessed an influx of European companies looking for alternative investment possibilities. In addition, out-bound investment is emerging as a new tendency, and while it is currently focused on the Latin American region, its scope and extent may broaden if, as forecast, growth continues.
Uruguay has maintained its trajectory of the last few years, with the country’s reputation as a secure location for investment growing steadily. Its historical dependence on Argentina has weakened as its southern neighbour becomes more volatile, and Uruguay has learnt from the financial crisis of 2002 and emerged stronger for it, exporting agricultural produce to growing economies such as China. Although Argentina remains its biggest trading partner, many Argentines now view Uruguay as an investment safe haven, particularly in real estate.
With the death of Venezuelan President Hugo Chávez in March 2013 and the victory of his appointed successor, Nicolás Maduro in April’s elections, occurring amidst rumours of electoral rigging, Venezuela remains in a state of flux. Nonetheless, many of Venezuela’s lawyers hope that the new president might usher in a more business-friendly period.
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