We analyse which law firms came out on top of our landmark research into "Who Represents Latin America's Biggest Companies" and take a look at developments in the legal market across the region.
After two years of negative growth in Latin America, 2017 signalled a shift for the region's economy. Global economic growth has been surging and the price of commodities has started to rebound, carrying the region with it. US and EU markets grew at the fastest rates in over a decade, while China played a key role in Latin America's recovery with regional exports increasing 30%, according to the Inter-American Development Bank.
While the flow of foreign direct investment (FDI) in the region had seen a steady decline for last five years, the more positive economic outlook means investors are looking increasingly to Latin American markets, driving work for leading international and local law firms in the process. Corporate and M&A departments have been busier than they have been for years, advising clients on both inbound and outbound investment. "It was a good year for the firm and we saw significant levels of work in all of our key jurisdictions in Latin America," says Francisco Cestero, partner at Cleary Gottlieb Steen & Hamilton LLP. "We saw a significant rise in work in all practice areas, especially in Argentina and Brazil, where areas including M&A, capital markets and finance, were very active."
In addition to the improving economic outlook which has boosted work for law firms, companies operating in Latin America have continued to face the ever-growing complexity stemming from legislative and regulatory developments across the region. Labour reforms were introduced in Brazil, Chile and Costa Rica, and while several other countries, including Argentina, Mexico and Colombia, took steps to simplify their corporate tax regimes..
On the compliance front, a growing number of countries affected by the Organisation for Economic Co-operation and Development's BEPS actions or similar BEPS-inspired rules have been implementing more stringent tax anti-avoidance and transparency rules. Added to this, major investigations into bribery across the region and growing social intolerance towards corruption has led some of the region's biggest jurisdictions including Argentina, Brazil, Peru and countries in Central America to enact a raft of new anti-bribery laws, leading companies both within these jurisdictions and further afield to hire external counsel for assistance with investigations, or in implementing or enhancing compliance programmes. "We have seen an amazing increase in the level of work for compliance matters," says David Gutierrez, partner at Central American firm BLP.
This ever-evolving legislative landscape means companies with operations or other connections to the Latin American region have to remain keenly focused on developments and rely heavily on their law firms to do so. Our research into "Who Represents Latin America's Biggest Companies" analyses this important relationship (see here for the introduction and methodology, or here for the full results of the research).
1) Most popular firms in the region
As our list of the region's largest 100 companies is heavily dominated by Brazilian companies, it is not surprising that Brazilian firms and international firms, which advise companies all around the region, take up the top slots when it comes to the most popular firms in Latin America (see figure one). This year, that award goes to Brazil's Pinheiro Neto Advogados. With major regional and international clients including Louis Dreyfus, Fiat and Petrobras, the firm has been at the top of Brazil's challenging legal environment for over three-quarters of a century. Following closely behind are the US's Milbank, Tweed, Hadley & McCloy LLP and Brazil's Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados. Other firms that have done well in our overall rankings are of a similar type – either top-level US firms with broad transactional practices across the region, or leading Brazilian full-service firms.
With decades of experience working in Latin America and a regional rather than jurisdictional focus, international law firms often possess a different perspective and set of priorities to their local counterparts. Cleary Gottlieb, for example, is regular counsel to more than one-third of the leading companies on our list; a broad reach that not only crosses national borders, but also a variety of sectors. "With the growth of Latin America businesses in the global marketplace, companies seek our counsel as a premier international law firm with the highest quality of lawyers and client services and unrivalled market knowledge across the region," says Clearly Gottlieb's Cestero..
2) Leading international firms
As the leading Latin American companies continue to operate more internationally, they are also looking for more sophisticated legal services, whose leading practitioners can advise a broad range of local, international and regional clients in a variety of different contexts. Other international firms (see figure two) which have done well in the research include, Paul Hastings LLP, Skadden, Arps, Slate, Meagher & Flom LLP, Clifford Chance LLP and Simpson Thacher & Bartlett LLP.
International firms with a strong regional presence are also high on this year's list of popular law firms. DLA Piper for example has established cooperation agreements with leading local firms across the region including Chile, Colombia, Mexico and Peru to expand its local capabilities.
While international firms have been growing their operations in the region, the number of Brazilian firms on our list of most popular law firms testifies to the continued influence of Latin America's economic powerhouse and Brazilian companies remain the engine of the region's corporate life, making up 38% of its top 100 companies..
3) Leading Brazilian firmsLawyers in Brazil are certainly not estranged to political and economic turmoil. While the country's economy may be showing signs of recovery after the worst recession in over a century, President Michel Temer's administration remains deeply unpopular among voters and the wide reaching and historic Operation Car Wash investigation has continued to claim victims among politicians, officials and business across the region. Such a situation has placed a strain on local companies looking to bolster their internal compliance programmes and safeguard their operations. Rather than downgrading to cheaper law firms or pushing for reduced fees from regular counsel, the high emphasis on the potential fall-out for non-compliance has led some companies to look for law firms with the best reputations, managing partner at Pinheiro Neto Advogados Alexandre Bertoldi said. "Brazil's corruption scandals changed the scenario and we saw a migration of work to well-established law firms," she added.
In addition to Pinheiro Neto Advogados and Mattos Filho, some of the Brazilian firms that came out on top this year (see figure three) included corporate and M&A specialist, BMA- Barbosa, Müssnich, Aragão, Demarest Advogados, Bichara Advogdos and elite full-service firm Veirano Advogados.
Temer's pro-business reform agenda, which has included a major overhaul of the country's labour laws, as well as changes to the country's pension programme and tax system, has helped strengthen consumer and business confidence. In fact, investors who had previously put long-term investment plans on ice due to the level of uncertainty have been re-examining plans and driving work for local firms. "As the macroeconomic environment started to improve, we benefited from that," says Jose Eduardo, partner at Brazil's second most popular firm, Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados. "Clients have started to invest more and the macroeconomic environment allowed for relevant things as the resurgence of the equity and IPO market."
Having become used to unpredictable circumstances, Brazil's legal community is very well versed in spotting growth opportunities and many firms spent the last few years investing in talent in the most highly profitable areas. "Obviously the activity of the firm is directly related to the political and economic moment faced by the country, but 2017 was better than expected," says managing partner at Pinheiro Neto Advogados Alexandre Bertoldi. "We had a particularly good year in tax litigation and issues related to the Brazilian regulatory system." In light of the uptick in work, the firm promoted six new partners and five new counsel to accommodate growth and in preparation for a more positive economic scenario..
4) Leading Argentine firms
More than a year on from President Mauricio Macri's historic election, Latin America's third-largest economy is poised for a comeback. Over the past year, the president has made important progress in his drive to liberalise the economy, and investors have been demonstrably more confident about putting their investments in what once was the most complex jurisdiction in which to do business in the region. In addition, Macri has been busy implementing a number of crucial reforms to help further boost the country's economy, including a controversial pension reform and new pieces of legislation reforming tax regulations and easing bureaucratic burdens.
The renewed business environment means corporate law firms in Argentina have started to feel the benefits of the return of foreign investors. "Argentina has opened up with the new administration and changed the course of the country's business environment. The country is once again a hot destination for investment and we have not seen this much activity in the last 20 years," says Diego Serrano, partner at Pérez Alati, Grondona, Benites, Arntsen & Martínez de Hoz (h). "All of our practice áreas were busy, but in particular, we dealt with a large number of high-profile M&A transactions and IPOs."
Many local firms have boosted their capabilities in response to the government's success to reinstate confidence in the country's economy and full-service firms in Argentina offer an impressive breadth of legal services; indeed, the most popular Argentina firms are the country's biggest and most established practices (see figure four). The country's largest firm, Marval, O'Farrell & Mairal, came out on top for the second year running, closely followed by corporate powerhouse Pérez Alati, Grondona, Benites, Arntsen & Martínez de Hoz (h). Nicholson y Cano Abogados and M & M Bomchil Abogados were also among the most popular with the region's top companies..
5) Leading Mexican firms
Despite the fears that the election of Donald Trump and the contentious NAFTA renegotiations could cause severe damage to Mexico's business and investment environment, the uncertainty has greatly boosted the country's legal landscape and local lawyers say Mexico is now one of the best countries in the region for growth opportunities. The economy performed better than expected with annual GDP growth at 2.3%, while conditions on financial markets have also improved as the peso appreciated with respect to the US dollar. "We expected there to be an increase in the demand for foreign trade and tax services due to the NAFTA renegotiations. However, our economy has kept growing and there are good expectations for 2018, so Mexico remains as a focus on investment in diverse sectors such as energy, electricity, automotive, banking, aerospace, food and drinks, retail and tourism," says Eduardo Kleinberg of Basham, Ringe y Correa.
Given the uncertainty regarding NAFTA renegotiations, many companies are looking to diversify their market reach and while the country already has various free trade agreements (FTAs) within Latin America, including with Chile, Colombia and Central America, Mexico has also negotiated FTAs outside of the region and entered into agreements with Israel, Japan, and the European Union."Fortunately, our workload has not been affected over the past years, as business has continued to move forward despite the relative uncertainty of foreign policy changes," says José Víctor Torres, of González Calvillo, SC.
Reforms implemented by the government over the past few years, including the liberalisation of the country's energy and telecoms market and implementation of a new tax policy have also been bearing fruit. "2017 was record-breaking for our firm on all fronts," says Torres. "The firm was extremely busy with a relevant number of complex local and cross-border transactions fostered, among other factors, by the implementation of constitutional legal reforms and reasonable strength of the economy. This is, even in spite of dismal forecast at the outset of 2017 with the threat of Trump's rhetoric becoming reality." .
Topping the table of Mexico's leading firms for the first time is Basham, Ringe y Correa, closely followed by González Calvillo, SC (see figure five). Also in the list of most popular this year was top tier transactional firm Ritch, Mueller, Heather y Nicolau, SC and leading disputes and corporate law firm Von Wobeser y Sierra SC.
6) Leading Central American firms
While Central America may represent some of the region's smallest markets, the region presents some big challenges for local GCs. As the process of political, economic and social integration continues to evolve, increasing regionalisation has created significant opportunities for companies who benefit from access to all of the region's markets through treaties and trade agreements, but legal teams are often expected to manage the multi-geographical cluster as one, relying heavily on local law firms to face the complex task of navigating the many differences and at times even conflicting legislation specific to each country.
In response to this demand, the Central American legal market is now dominated by firms with regional operations. "Our clients prefer a regional service, because we can provide a single point of contact for six small and very different jurisdictions, which is very attractive for companies," says Carolina Flores, partner at Arias (Costa Rica). Indeed, this year's chart-topping firms for the region include full-service banking powerhouse, Consortium Legal, Arias, and BLP (see figure 6)..
7) Leading Chilean firms
The tide seems to have turned for what was once the region's most stable country, both economically and politically. President Michelle Bachelet's ambitious legislative reforms failed to satisfy Chile's political and public sphere as the president faced a constant struggle against the dissolution of her alliance, which required a forging of compromises and lukewarm positions that were in stark contrast to the bold moves promised. "Stability was a major issue in our practice," says Sergio Diéz, partner at Cariola, Díez, Pérez-Cotapos. "During the last four years each and every measure adopted by the government was taken against (or at least turning its back) on investors and investments."
While many hope Chile's incoming president Sebastian Piñera, set to take office in March, will help to turn things around for the country that was once the safest place to do business and favoured by investors in the región, local law firms have been busy advising clients amid the barrage of regulatory changes and uncertainty. Regional firm Philippi Prietocarrizosa Ferrero DU & Uría (Chile) came out on top this year with 24 of the region's biggest companies on its books; however, local firms Carey, Cariola, Díez, Pérez-Cotapos and Guerrero Olivos were also favourites among the region's top 100 companies..
8) Leading Colombian firms
Colombia was one of the countries most affected by the commodities downturn over the past few years, but the country's economy has been resilient to this shock, supported by the macroeconomic and structural reforms that have been implemented by President Juan Manuel Santos. While the President is set to leave office in August this year, his historic achievement in ending the region's longest-running conflict with paramilitary group FARC in 2016 will likely go down in history and continue to bring positive change for the country's economic and investment outlook.
Regional firm Philippi Prietocarrizosa Ferrero DU & Uría (Colombia) tops the table this year,followed by Brigard & Urrutia Abogados in second position, who recently opened a new office in Cali. Other notable firms on this year's in this year's ranking includes Posse Herrera Ruiz and Gómez-Pinzón Zuleta Abogados..
9) Leading Peruvian firms
Peru has been experiencing a political crisis since late December, triggered by a call to impeach President Kuczynski following allegations he may have been involved in the wide-reaching Odebrecht corruption scandal. Despite this, the president survived the vote and reshuffled his cabinet in order to reboot confidence in his administration as well as in the country's commitment to business and trade.
While the country has experienced lower than expected growth over the past year, growth is expected to continue gaining speed this year, as higher infrastructure spending spurs fixed investment, and sustained global demand for minerals underpins the mining sector. "Notwithstanding the political uncertainty and lower than expected growth that the country experienced, this has been a record year for our firm," says Enrique Elías Laroza, managing partner at Rodrigo, Elías & Medrano Abogados. "Several practice areas have been especially busy, such as our tax department, but also our wealth management specialists have been really busy with the amnesty and repatriation of capital programmes, as well as our arbitration and litigation department and mining and natural resources."
Top of the table with the largest number of regular clients among Latin America's biggest companies is Rodrigo, Elías & Medrano Abogados, followed by Muñiz Ramírez Pérez-Taiman & Olaya, Hernández & Cía Abogados and mining heavyweight CMS Grau.
Further coverage on Who Represents Latin America's Biggest Companies will continue in LACCA's briefings over the next two months.