What’s driving Chinese investment into the Dominican Republic?
Even though the Dominican Republic always had commercial relations with China, the business relationship between these countries is rapidly evolving. The reason behind is that in May 2018, the Dominican Republic and the People’s Republic of China established diplomatic relations, an alliance which promises to increase and strengthen cooperation in areas such as infrastructure, finance, technology, tourism, education and energy. In fact, we have seen an immediate and significant response from Chinese investors after May 2018. It is also worth noting that in the last two years, China has become the Dominican Republic’s second largest export partner.
The sectors where the greatest interest is displayed by Chinese investors are, first of all, energy. Specifically, there is interest in the generation of clean energy (solar and wind projects), as well as the development of transmission lines. We have also seen an increase in interest in developing public infrastructure projects, such as roads and cable cars.
How is Pellerano & Herrera positioning itself to help clients capitalise on these opportunities?
For more than a decade, our firm has advised Chinese investors or companies looking to deploy Chinese capital. In recent years clients of this nature have increased.
First of all, Pellerano & Herrera is the first and only law firm in the country that has an established China desk made up of a multidisciplinary team of lawyers with expertise on the Chinese market, with particular know-how and understanding of the needs of Chinese companies. We offer comprehensive advice on all business-related legal matters, custom tailored for the special profile and needs of Chinese investors. From market-entry strategy to guidance on bridging cultural differences, we can assist in all stages of your activities in the Dominican Republic. The leaders of our Chinese desk, Ricardo A. Pellerano and Alessandra Di Carlo, visit China regularly to meet clients and potential clients located in different cities.
In order to set up this China desk, our firm engaged the ongoing services of a consulting firm with vast knowledge of the Chinese commercial market to assist us, mostly to surpass the cultural differences; providing strategically guidance to the team on matters related to Chinese clients and potential clients.
As part of this process, our firm translated its Doing Business in the Dominican Republic legal guide into Mandarin. For the past 28 years, Pellerano & Herrera has been publishing this guide, which is known as the official investment tool of the Dominican government, to help those interested in investing in the country and provides basic information about the laws that regulate its economy and society, as well as the Dominican investment climate. Additionally, we have translators available in the Chinese language when needed. However, in most cases we have noticed that this is not necessary, since most executives of Chinese investment companies fluently handle the English and/or Spanish language, as the case may be.
Pellerano & Herrera also has a wide experience of advising Chinese clients on some of the most significant matters in the Dominican Republic. Among other clients and cases, our firm has helped important Chinese construction companies to establish operations in the Dominican Republic and provided guidance in connection with these companies’ participation in public infrastructure biding processes. We have provided assistance for the acquisition of a power purchase agreement (PPA) and a concession for development of a wind energy generation project in Dominican Republic whereby the finance was granted by a Chinese company, being this the first Chinese investment to energy sector of the country.
Our firm works with PRC-based law firms to help facilitate matters. As the exclusive member firm in the Dominican Republic for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+ countries worldwide – we have direct access to the member firm in China, in those cases where we need to liaise.
Among our clients are the most prominent Chinese companies from different industries, such as banking, construction, mining, energy, infrastructure and technology. We have also assisted the Chinese offices of international law firms, such as White & Case, Clifford Chance, Dentons and Jun He, in legal matters in the country.
What are some of the challenges Latin American entities need to be mindful of when engaging with PRC counterparties?
In our opinion, the most important challenge is cultural difference. It is a fact that we must accept. Our cultures are very different, and that difference, without a doubt, is reflected in the way of doing business. Naturally, this must imply an imminent and necessary change in the way of thinking of our Latin American countries, as is the case of the Dominican Republic, as countries receiving the investment. Distance, indisputably, is another challenge. However, with the available digitalisation and technology, this gap will be increasingly reduced.
For investors of any nationality, understanding these difficulties is key. In the case of Chinese investors, we always recommend paying special attention to the due diligence phase prior to an investment or acquisition, since considering the cultural differences, language differences and what may be a completely new legal framework. It is important to be aware of all aspects of a project. At the end of the day, part of our distinctive assistance, and our added value, lies in precisely helping the client to overcome these challenges smoothly.
Recent experience and representative matters:
We provided assistance to Perilya, through its local subsidiary Corporación Minera Dominicana (Cormidom) in registering Perilya’s US$100m investment in Sierra Maimón mine project under Foreign Investment Law 16-95; and counselled China Development Bank in a US$100m financing for the acquisition of Globestar Mining Corporation by Perilya, Ltd.
It is important to mention that, additionally, we have been contacted by Chinese companies that are in an exploratory phase of our jurisdiction, mostly understanding the market, the legal framework, and visualising business opportunities.