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Browse all firms with extended profiles for Central America

Legal Market Overview

The eleventh-largest economy in Latin America, with a heavy reliance on agriculture and tourism for income, Central America was badly affected by the Covid-19 pandemic. Due to limited testing capacity and hospital facilities, most countries in the region, particularly in the Northern Triangle of Guatemala, Honduras and El Salvador, introduced highly restrictive lockdown measures – with the notable exception of Nicaragua, where President Daniel Ortega refused to bring in quarantine policies or a testing regime. The slowdown of economic activity caused by national lockdowns, combined with a sudden fall in the export of goods and arrival of tourists, took a severe toll on the region, with the IMF forecasting a 6% contraction in real GDP.

In addition, the region weathered several severe natural disasters which have had an impact on its economic outlook. El Salvador was struck by tropical storms Amanda and Cristóbal between 31 May and 6 June 2020, causing major landslides and flooding, and Guatemala, Honduras and Nicaragua were particularly badly affected by hurricanes Eta and Iota in November 2020, which led to more than 200,000 people being evacuated from their homes.

Another factor contributing to economic instability in Central America is the political uncertainty in a number of countries, most prominently Nicaragua – ahead of the November 2021 elections, President Ortega has ordered the detention of leading opposition politicians under a law passed in December 2020 which gives Ortega’s government the power to unilaterally declare citizens to be “terrorists” and “traitors to the homeland”. In Honduras, allegations of political corruption continue to surround President Juan Orlando Hernández, who is suspected by US prosecutors of taking bribes from drug traffickers. Meanwhile, in May 2021, El Salvador’s President Nayib Bukele used his party’s supermajority in Congress to remove the attorney general and five Supreme Court judges from their posts, drawing criticism from the US and international rights groups. His purpose in doing so is to open the route to re-election in 2024; clearly bolstered by his success in doing so, he has even used his own social media account to called himself a dictator – thereby undermining protests against his increasingly draconian administration.

However, the Central American economy is beginning to stage a recovery. Costa Rica, El Salvador and Panama are pressing ahead with swift rollouts of the Covid vaccine (although Guatemala and Honduras continue to lag severely behind in terms of vaccination rates). Remittances, particularly from the US, have rebounded strongly and agricultural performance has remained stable. In addition, the region has received emergency relief from multilateral institutions including the IMF and the Inter-American Development Bank, and US President Joe Biden has promised $4bn to the Northern Triangle countries to tackle the root causes of mass migration from the area. Costa Rica, the most politically stable country in the region, has also become the first to join the Organisation for Economic Cooperation and Development (OECD), becoming the 38th member in May 2021, which it is hoped will increase opportunities for foreign direct investment and continue the country’s social and economic progress.

For law firms in the region, economic and political instability have meant a wariness on the part of foreign investors to invest in Central America, adding to a slowdown in large-scale M&A and financial transactions as a result of the worldwide lockdowns. However, leading firms in the region have been active in assisting multilateral development agencies with emergency relief loans to regional banks, and on the corporate side, firms have shifted their attentions to restructurings rather than acquisitions. Recently, M&A work has begun to pick up as Central America begins to reopen. While certain sectors, particularly tourism and leisure, have seen a severe downturn, there has been a marked increase in work for clients in the life sciences, e-commerce and technology sectors.

Labour and employment work has been a significant area of activity for firms in the region, as they advise on the suspension and termination of employment contracts, reductions in working hours, the implementation of home-working policies, and compliance with (constantly changing) government regulations.

In the dispute resolution sphere, firms have seen a general increase in arbitration, as the already-overloaded court systems in many Central American countries have been further delayed by court closures due to Covid-10 restrictions. In the future, many firms predict a surge in claims relating to breach of contract, business interruption and labour issues stemming from the pandemic.

Central America is an area rich in renewable energy resources, and so it is unsurprising that firms have been active advising on the financing and development of projects, as well as the surrounding environmental and regulatory matters. One of the biggest recent developments is the $700m natural-gas fired power plant being constructed by New Fortress Energy to supply power to Nicaragua’s energy distribution companies. In Guatemala and Honduras, a number of mining and hydropower projects have been brought to a standstill by constitutional challenges raised by special interest groups and members of the local indigenous communities; representing mining and energy companies in related disputes has been a key area of work for many firms.

Central America’s real estate sector has also seen a boom. While firms have reported a sharp drop in work on the acquisition of office and retail properties, there has been an increase in demand for residential property – particularly in Nicaragua and Costa Rica, where the second-home market has been thriving during the pandemic – as well as industrial logistics properties and distribution centres.

Many Central American firms have also been active in pro bono work, joining the “Familias Unidas” (“Keep Families Together”) initiative, which was launched by the Cyrus R Vance Centre for International Justice in New York in 2018 in response to the Trump administration’s introduction of a “zero tolerance” policy to illegal immigration. The programme brings together lawyers in Central America and immigration attorneys in the US to assist migrant families who have travelled from the region to the US-Mexico border.

The legal market in Central America contains a healthy mix of full-service regional firms -among them, Aguilar Castillo Love (ACL), Arias, BLP and Consortium Legal– along with a number of international / global entities that have begun their expansion into the region, including Dentons Muñoz and ECIJA. The biggest shake-up in the market over the last 12 months was the launch in May 2021 of Alta, a new regional firm combining Alta QIL+4 Abogados in Guatemala, Batalla in Costa Rica, Valdés, Suárez & Velasco in El Salvador and Melara & Asociados in Honduras. More recently, since publication, ACL has announced the opening of an office in Bolivia (via merger with boutique firm Bernal & Franco Abogados), effective Janaury 2022; the firm -the first regional operation to step outstide the Central American isthmus- aready has an office in Ecuador.