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Editorial

Legal 500 Doing Business in Peru

Contributed by Payet, Rey, Cauvi, Pérez Abogados

Doing Business in Peru

INTRODUCTION

The prominent investment climate has improved dramatically in Peru since the 1990s. This positive wave remains thus far allowing the macroeconomic indicators and the forecasts for the subsequent years to be auspicious, despite the end of the commodities boom and the corruption scandal bound to the Brazilian construction giant, Odebrecht, which have endangered the bases of the Peruvian economy during the last years.  

Peru has the sixth major GDP of the region ($ 214 MM) and it would reach similar levels during the following years. The Peruvian government ponders that the economy will maintain its solid macroeconomic foundations, which would allow mitigating eventual internal or external shocks.

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Peru is the fifth-largest economy in Latin America and -somewhat contradictorily, given its political scenario- among the most stable, the result of a decade of sustained growth averaging at 5.9%, low public debt, an abundance of natural resources and a modernizing economy.

The services sector, particularly finance and telecoms, accounts for 60% of GDP, while ores and minerals, including copper, silver and natural gas, account for 50% of exports. Peru is the world’s second-largest producer of copper.

Against this backdrop of optimism is a country ravaged by corruption. Emerging in 2016, Brazil's Lavo Jato scandal has enmeshed much of the continent and has had a truly profound impact in Peru, where approximately $30m in bribes were paid by construction company Odebrecht in exchange for public works contracts. Four of Peru's former presidents have been implicated, including Alan García, whose suicide in the face of imminent arrest shocked the nation earlier this year.

While Lavo Jato exposed the lawmakers, 2018 exposed the law keepers when a separate scandal -involving alleged payments in exchange for influencing court cases- was uncovered at the highest echelons of the judiciary and with direct links to members of Congress.

It resulted in a nine-month state of emergency and creation of a Justice Reform Commission. At the tail-end of 2018, the country went to the polls in a historic referendum, voting in favour of fundamental reform of both the judiciary and the political system. It was a significant victory for incumbent president Martín Vizcarra, who has made anti-corruption the bulwark of his agenda since stepping into the role after his predecessor -Pedro Pablo Kuscynski- resigned in the face of imminent impeachment in March 2018. Vizcarra's efforts have earned him the epithet ‘the people’s champion’.

Meanwhile, Peru boasts a sophisticated and competitive legal market frustrated by the country’s constitutional woes. Infrastructure and project finance work, so ripe for international investment, has been the obvious casualty of Lava Jato, with officials too wary of awarding contracts, although a surge in concession amendments and disputes has created legal work, albeit of lesser calibre.

Lawyers report an uptick in corporate lending and acquisition finance, with the agriculture and real estate sectors particularly busy, while a rise in commodity prices has led to a rejuvenated mining sector, producing some of the country’s deals of the year. They include: Pan American Silver Corp’s $1.3bn acquisition of all the outstanding shares in Tahoe Resources; Japanese Mitsubishi Corporation’s 21.9% stake increase in Anglo American Quellaveco, which owns the Quellaveco copper project, for $600m; and the $900m financing granted to Macrobre for its Mina Justa copper mine.

Significant legislative reform to tackle tax avoidance was passed in late 2018 and analysts anticipate a considerable increase in related legal work and an estimated $1.8bn rise in fiscal revenue. In another key development -and after two decades of debate- Congress finally approved merger control legislation in May 2019 to facilitate the country’s goal of full accession to the OECD.

Given the above-mentioned corruption scandals, white collar crime and compliance are -unsurprisingly- growing areas of legal practice, with full-service law firms in particular seeking to up-scale in these areas, once the domain of niche practices. The examples of Odebrecht and -closer to home- local construction group Graña y Montero, remains fresh in the mind of the business community; avoiding compliance and corruption issues, with their associated reputational risks, has risen swiftly in the list of priorities preoccupying corporates and financial institutions.

Top-end legal services are dominated by a handful of domestic giants and a smattering of international players. Homegrown 'national champion' Rodrigo, Elías & Medrano – Abogados eclipses nearest rivals with the most tier one rankings in our publication this year, closely followed by Miranda & Amado.

Other leading full-service players include Payet, Rey, Cauvi, Pérez Abogados, nationwide-firm Muñiz, Olaya, Meléndez, Castro, Ono & Herrera Abogados (the largest firm in Peru by number of lawyers), the rapidly-expanding Hernández & Cía. Abogados, Estudio Echecopar member firm of Baker McKenzie International, Philippi Prietocarrizosa Ferrero DU & Uria, Garrigues and CMS Grau – the latter four all strong standalone operations of international firms.

The other foreign-headquartered firms present are insurance authority Kennedys, DLA Piper Perú and Dentons Peru, while Spanish giant Cuatrecasas finally announced its launch in Lima in 2019 following an extensive reconnaissance exercise. Indeed, the arrival of the latter has already disrupted the market, most notably with its recruitment of Aldo Reggiardo from Payet, Rey, Cauvi, Pérez Abogados and, most recently in July 2019, of key corporate practitioner Oscar Trelles from Estudio Echecopar member firm of Baker McKenzie International.

Hernández & Cía. Abogados recorded an incredible 48% income growth in 2018, bucking market trend, the result of an aggressive lateral hiring policy during the previous three years that has seen the firm grow to approximately 80 lawyers. Rubio Leguía Normand is also in growth mode, it's efforts to reinforce its partnership (following the 2014 departures that created the core of Garrigues' Lima-based team) finally beginning to bear fruit. The firm has recruited five partners from rival firms during 2018/2019 alone, including Jeanette Aliaga , who moved from the banking and finance team at Philippi Prietocarrizosa Ferrero DU & Uria, Diego Grisolle, former head of energy and projects at García Sayán Abogados and Franco Soria, former real estate partner at CMS Grau.

Indeed, the year was marked by numerous headline partner moves. In addition to the above-mentioned hires by Cuatrecasas and Rubio Leguía Normand, the most significant included: the August 2019 departure of Luis Vinatea (former firm managing partner) and Jorge Toyama (labour practice co-head) from Miranda & Amado to found labour boutique Vinatea & Toyama; the exit of projects lawyers Juan José Cárdenas and María Luisa Peña (and their team), from Rebaza, Alcázar & De Las Casas to EY Legal; and the departure of the former head of Payet, Rey, Cauvi, Pérez Abogados’ tax practice, Ivan Chu to co-found specialist tax boutique Damma Legal Advisors with Walther Belaunde (ex-Santiváñez) and José Chiarella (formerly at Garrigues). Elsewhere, energy and regulatory star María Teresa Quiñones left Rodrigo, Elías & Medrano – Abogados to open her own boutique, Quiñones Alayza Abogados; while Rodrigo, Elías & Medrano – Abogados, in turn, hired the life sciences team, including partner Maritza Reátegui, from Muñiz, Olaya, Meléndez, Castro, Ono & Herrera Abogados. Payet, Rey, Cauvi, Pérez Abogados was boosted by the hire of arbitration expert Mario Reggiardo from top competition and arbitration boutique Bullard Falla Ezcurra Abogados.

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