Legal Market Overview
Following several tumultuous years – politically and economically – 2018 was a year of significant change in Brazil. The divisive October 2018 election saw Jair Bolsonaro of the Social Liberal Party defeating opponent Fernando Haddad of the Workers’ Party to become president of Latin America’s largest country. The far-right politician struck a chord with a population tired of political corruption and high levels of crime.
However, Bolsonaro’s disregard for environmental protection and indigenous rights and his vocal admiration for the country’s military dictatorship, which ended in 1985, are major causes for concern among commentators both inside and outside of the country.
2019 opened with an environmental disaster when on the 25 January a tailings dam owned by Vale collapsed in Brumadinho, in the state of Minas Gerais, killing over 200 people. The collapse came less than four years after the Samarco dam disaster in the same state, which caused the deaths of 19 people. A criminal investigation into the Brumadinho collapse was launched and several individuals, including Vale employees and outside contractors, were arrested.
In the legal market, law firms in Brazil are expecting to see new infrastructure projects and privatisations under the new government. Several are also bolstering their capital markets teams in anticipation of an uptick in work in this area. Most firms also expressed cautious optimism with regards to the economy, which appears to have emerged from the worst days of the economic crisis.
The M&A market has been relatively busy, with several lawyers noting that transactions have now become easier to close. Even during the peak years of the recession, though, the M&A market remained active. Indeed, the Brazilian market is simply too big for investors to ignore, and lower prices and distressed assets meant that foreign investors were able to purchase Brazilian assets cheaply.
The sprawling Lava Jato investigation has shone a spotlight on corruption in Brazil. Several politicians and business leaders – and even some Brazilian law firms, including well-known firms which feature in The Legal 500’s coverage – have been implicated in the scandal. In this context, compliance has become crucially important, and law firms have increasingly begun to invest heavily in this area. In recognition of its importance, The Legal 500 Latin America has established Compliance as a separate category for the 2019 guide.
Meanwhile, the real estate sector is finally showing renewed signs of life following several bleak years. Property lawyers are anticipating busier workloads and an increase in new residential and commercial developments.
Two of the trickiest areas of Brazilian law for outsiders to navigate are labour and tax. Sweeping labour reforms introduced by former president Temer in 2017 led to a reduction in employment claims and proved controversial. Employment law departments remain busy advising clients on the implications of the reform, and most balance a broad contentious and non-contentious workload.
Tax lawyers in Brazil are in constant demand no matter the external economic or political environment, given the immense complexity of the Brazilian tax system. Many full-service law firms have thriving, standalone tax departments, which handle federal, state and municipal tax, and the Tax category is among the most competitive of The Legal 500’s Brazil chapter.
After years – if not decades – of debate about tax reform, there are now signals that change may finally be on the way. Proposals have been submitted to amend, although not entirely overhaul, the tax system. However, Bolsonaro indicated that tax reform would wait until the government’s hotly anticipated social security reforms were approved. The pension reform seeks to balance the social security deficit and ultimately save R$1tn over a decade, although there are doubts as to whether the government can garner sufficient support in Congress and many see it as a make-or-break issue for the young Bolsonaro administration.
Although much of Brazil’s legal market is centred in São Paulo and, to a lesser extent, in Rio de Janeiro and Brasília, the country’s regional legal markets are also active. Large, mid-sized and boutique firms exist in the country’s regions, and some of the key cities include Belo Horizonte in the Southeast, Porto Alegre in the South and Salvador in the Northeast.
Brazil’s dynamic legal market sees regular change, as smaller law firms spin-off from traditional and well-established firms to create new start-ups. Individual movement at the partner, associate and even business development levels is also common. Recently established firms include Souza, Mello e Torres; tax boutique Utumi Advogados, set up by former TozziniFreire Advogados partners; and economic law and litigation firm Marchini Botelho Caselta Advogados, founded by lawyers previously at Cascione Pulino Boulos Advogados.
Among the top Brazilian law firms are BMA – Barbosa, Müssnich, Aragão; Cescon, Barrieu, Flesch & Barreto Advogados; Demarest Advogados; Lefosse Advogados; Machado Meyer Sendacz e Opice Advogados; Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados; Pinheiro Neto Advogados; TozziniFreire Advogados; and Veirano Advogados.
The Brazilian Bar Association restricts close cooperation between Brazilian and international law firms. Despite this, a number of successful international associations do exist, including Trench Rossi Watanabe, which is associated with Baker McKenzie, and Tauil & Chequer Advogados in association with Mayer Brown. Campos Mello Advogados has a cooperation with DLA Piper, while Vella Pugliese Buosi e Guidoni Advogados established a strategic alliance with Dentons in 2017.