Corporate Counsel, the American Lawyer, the National Law Journal

South Florida: A Latin Launch Pad • Mexico’s Reform Agenda • Ecuador’s Evolution FOCUS

LATINLATINA SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSELAMERICAAMERICA JUNE 2013 SOUTHERN EXPOSURE From Rio de Janeiro to Miami, firms are finding a carnival of legal work in Latin America

PLUS: Brazil’s Big Score: How the World Cup and the government are driving a building boom

LATAM_cover1_June2013.indd 1 5/1/13 12:54 PM COMMITED TO PROVIDE HIGH QUALITY INTEGRAL SERVICES

Established in Mexico City in 1994 by a team of highly quali ed lawyers focused on offering highly professional, sophisticated and quality legal services to satisfy its clients' business needs. Today, as a leading rm in the Mexican market, its level of expertise is well recognised in various practice areas. Deeply commited to quality and responsiveness, the rm has consolidated its status as one of the preeminent Mexican Law rms.

“Transactional excellence from full service team” -Latin Lawyer 250

“Deeply committed to quality and responsiveness” -Chambers and Partners 2013

AWARDS AND NOMINATIONSCREATING VALUE FOR OUR CLIENTS 2012: Nominated for the “Latin America Awards for Excellence” by Chambers and Partners. 2011: Winners of “Mexican Law Firm of the Year” by International Financial Law Review (IFLR). 2010: Winners of “Mexican Law Firm of the Year” by Chambers and Partners.

Javier Barros Sierra 540 4th Floor, Park Plaza I - Santa Fe, CP 01210 Mexico City, Mexico www.macf.com.mx | T: +52 (55) 5201-7400

C2pFLA0613.indd 2 5/2/13 12:55 PM Contents FOCUS LATIN AMERICA • A SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSEL • JUNE 2013

6 BRAZIL: BUILDING A BOOM Sports windfall, thriving construction industry generate abundant legal opportunities.

18 MEXICO: BRACING FOR CHANGE Law firms gear up for sweeping reforms in tax, energy and communication industries.

32 ECUADOR, PERU, VENEZUELA: A RACE FOR RESOURCES Times are changing in the legal markets of Ecuador, Peru and Venezuela as demand for natural resources spurs regional investment. Which markets are open for business?

40 COLOMBIA, COSTA RICA, CHILE: A NEW ORDER TAKES SHAPE Increased dynamism in Chile, Colombia and Costa Rica marks those as the jurisdictions to watch.

52 PANAMA: TORRID PACE How is hot GDP growth reflected in law firm deal flow?

58 GOLD RUSH 62 Canada’s law firms scramble to get involved in Latin America’s mining boom

62 A GATEWAy OPENS WIDER As economies and deals heat up in Latin 4 EDITOR’S NOTE 81 COMMENTARy America, Miami lawyers jockey for a piece of World Bank group renounced by Latin the action. By Carlos Harrison American powers, faces competition from 68 NAVIGATING MIAMI‘S WATERS new regional alliances. By Juan Ramirez Whether they’re expanding their operations to the U.S. or want a safe place to invest their 83 BIG DEALS wealth, Latin American developers are turn- $1 billion financing for a Venezuelan oil ing to Florida attorneys for help. refinery, Export-Import Bank of China’s $570 by Paola Iuspa-Abbott million loan to Ecuadorean electric utility.

74 THE RISE OF PEACEMAKERS 18 Arbitration takes on critical role as cross-border deals surge and many nations claim trade agreements governing conflicts are unfair. By Susan Postlewaite

78 HEMISPHERIC HEADACHES Compliance, labor, tax issues among ‘hot buttons’ for multinational GCs in 68 Latin America. COVER: JEREMy WALKER/GETTy IMAGES

JUNE 2013 | FOCUS LATIN AMERICA 3

LATAM_TOC2_June2013.indd 3 5/1/13 12:49 PM Litigation | Editor’s notE Editor’s Note

dEspitE a sLowdown in worLdwidE Economic activity, Latin amErica Daily Business Review & ALM Group Publisher, FL/GA/TX remains a dynamic economic and political force with deals to be done, resources to sell and consumer Chris Mobley Daily Business Review Editor In Chief David Lyons markets still to be opened. Daily Business Review Special Reports & Projects Editor other nations with strong economic fundamentals including chile, colombia, costa rica, Jay Rees Ecuador and peru are fertile ground for american lawyers and their Latin partners to develop business VP/Group Publisher Scott Pierce and grow practice areas. VP/National Advertising Mike Medwig it is in response to this robust activity that aLm launches its inaugural Managing Director/International Law Firm Division edition of Focus Latin america, a chronicle of the business of law all Danny Collins around the americas. Associate Publisher/International Law Firm Division Jeremy Stephenson starting with five country reports about prospects from mexico Marketing Director/International Law Firm Division city to rio de Janeiro, this new magazine takes the reader on a tour of Deepak Vohra old guard countries and emerging markets that are fueling burgeoning Vice President/ALM Editor in Chief David Brown legal markets. Editor In Chief (The American Lawyer) Robin Sparkman The edition also contains a view from miami, where an influx of ma- Editor In Chief (Corporate Counsel) Anthony Paonita jor and midsize firms are using this gateway to the americas as a plat- Design Director (The American Lawyer) Joan Ferrell form to serve clients to the south as well as northbound clients who seek Executive Editor (The American Lawyer) Emily Barker to hedge their bets with investments in Florida and elsewhere in the U.s. Deputy Editor (The American Lawyer) Mary Ellen Egan “i don’t think you can break into the Latin american market meaningfully without an office in mi- Supplements Editor Brian Zabcik ami,” said pedro martinez Fraga, coordinator of international disputes for Latin america and Florida Art Director (Corporate Counsel) Morris Stubbs Photo Editor Maggie Soladay for dLa piper. “all the captains of industry and significant leaders come to miami. The logistics of be- Senior Editors Judy Lopatin, James Schroeder ing in miami and being able to access key parts of the caribbean Basin and Latin america has become Senior International Correspondent Michael D. Goldhaber indispensable to the practice.” Chief European Correspondent Chris Johnson also in this edition, you’ll find stories about the challenges faced by general counsel who work for Contributing Writers Tom Blass, Rebecca Geiger, multinational corporations that are large stakeholders in the region. Philippa Maister, Heather O’Brian, Joseph Rosenbloom what keeps gc’s up at night? Assistant Managing Editor Patricia Paine Copy Editor Tom Coster “we are seeing a trend toward increased protectionism, nationalism and localism,” said Jose Art/Photo Assistant Paul Dilakian sariego, senior vice president and general counsel, HBo Latin american group in miami. “The Executive Assistant Eileen Vella pendulum is swinging in that direction, and some markets are being closed or restricted. when there Corporate Account Managers Barrie Harmelin, is not a level playing field, U.s. multinationals can be at a disadvantage and that concerns me.” Marnie Maroney, Joe Pavone Those worries may help explain the growing acceptance of miami as a center of alternative dispute Law Firm Account Managers JoAnn Cannon, resolution. in an article about arbitration, lawyers who represent commercial adversaries from Latin Jennifer Jones, Nicole Kramer, Jai Wallace america say their clients are becoming increasingly comfortable with the venue. Advertising Coordinator Brenda W. Bailey Finally, as readers digest the content of this inaugural edition, they should consider it to be the first Circulation Director: Shane Molloy installment of a long-term commitment by aLm to conduct a continuing conversation about the legal Group Account Manager: Judy Weiss ([email protected]) and financial issues facing practitioners who do business in Latin america. Subscription Customer Service: (800) 755-2773 as a sweetener, aLm is planning a hemispheric conference in miami this november called “Law [email protected] Reprints: Syndia J. Torres (347) 227-3382 summit of the americas: The Key to doing Business across Borders.” ([email protected]) By then, the second edition of Focus Latin America will be in print and online to help contribute Senior Production Manager John Cusmano to the discussion. Production Coordinator Sam Marcus see you in miami. VP/Operations Abby De Millo VP/Events Henry Dicker VP/Research And Continuing Education Projects Kevin Iredell

Alm Senior Management President/Ceo Bill Carter Senior VP/Chief Operating Officer Kevin H. Michielsen david v. Lyons Senior VP/CFO Eric F. Lundberg [email protected] Senior VP/Chief Technology Officer Jeffrey K. Whittle Senior VP/Chief Marketing Officer Lenny Izzo Senior VP Of Sales Kevin J. Vermeulen VP/Real Estate Media Michael Desiato VP/Editor In Chief Aric Press

LATAM_EdNote1_June2013.indd 4 4/30/13 6:40 PM 05pFLA0613.indd 5 5/2/13 3:32 PM BRAZIL | FOCUS LATIN AMERICA

Building a Boom Brazil’s domestic growth has combined with its preparations for the hosting of two major sporting events to push infrastructure development to the top of the national agenda.

BY MARIA JACKSON

In March 2013, newspapers around the world published pho- ‘The Federal Government, with its “Growth Acceleration tos of a partially-renovated sports stadium submerged by Program” is planning some strategic infrastructure projects flooding. Waterlogged arenas rarely make global news head- over the coming years’, says Ana Carolina Barretto, partner at lines but this was not any old stadium; it was Brazil’s famous Rio de Janeiro-headquartered Veirano e Advogados. ‘Billions Maracanã Stadium, which was undergoing significant remod- of dollars will be invested both by the public and private sec- elling work before becoming a site for the 2014 World Cup. tors in the expansion of Brazilian roads, railroads and ports, The timetable for completion had already been delayed – it along with the construction of several hydro, wind and ther- was originally supposed to be finished in December 2012, mal power plants. Some regions of Brazil have also been at- then the deadline was put back to February 2013 and then to tracting major mining projects, which also require significant April. The effects of a March storm meant that FIFA, soccer’s construction works.’ world governing body, had to cancel a planned inspection of The consensus is that dated infrastructure is stalling Ithe stadium. Brazil’s economic progress. So the government is focusing its The episode provides a useful metaphor for Brazil’s macro efforts on fuelling investment in that area to modernize Brazil situation; the country has ambitious plans, and the potential as well as stimulate economic growth. The decision to host to fulfil those, but stops and starts have become the norm, the World Cup and the Olympic Games in 2016 has given even in its economic success. Brazil an urgent impetus to fix its logistic weaknesses and the The country’s economy expanded by a mammoth 7.5% in world’s major construction companies are scrambling to get 2010, then it grew by 2.7% in 2011 and leapfrogged the UK involved in the awarding of the biggest concessions. Of course to become the sixth largest economy in the world. However, where clients go, law firms boldly follow. in 2012 growth almost came to a standstill and the country recorded a rise of 0.9%, the lowest out of the BRICS (Brazil, MOUTHS TO FEED Russia, India, China and South Africa). To add insult to in- ‘Due to the present high demand for infrastructure services, jury, its economy slid back to seventh in the world following law firms have been focusing on their infrastructure practice the devaluation of the Brazilian real, which lost about 10% of groups,’ says Barretto. ‘There are newcomers in this market its value in 2012. The government is now looking towards in- as well, with law firms seeking to benefit from the boom in centives in the construction sector to stimulate growth. this sector. However, this is an area where expertise is key and

6 JUNE 2013 | FOCUS LATIN AMERICA

Brazil--p6-11.indd 6 5/2/13 7:06 PM ESTÁDIO DO MARACANÃ, RIO DE JANEIRO: ONE OF THE MOST FAMOUS SOCCER STADIUMS IN THE WORLD

Brazil--p6-11.indd 7 5/2/13 7:06 PM BRAZIL | FOCUS LATIN AMERICA

few firms truly have the expertise to advise clients on complex in- road and railroads are being projected and built to enhance Brazilian frastructure projects.’ logistics facilities, including the ambitious project for the construc- Where expertise is lacking, firms have made big plays to ramp tion of a high speed train which will connect two of the largest cities up their experience. For example Mattos Filho, Veiga Filho, Marrey in the country (Rio de Janeiro and São Paulo). These investments Jr. and Quiroga Advogados, one of Brazil’s gold standard firms, are highly important, but they are only the beginning when com- rarely makes lateral hires and notoriously favours organic growth to pared to Brazil’s need and potential for infrastructure.’ ensure perpetuation of its values and culture. However in 2013, the firm hired Fabio Ferreira Kujawski, a founding partner of specialist HARD WORK telecoms, media and technology boutique Barretto Ferreira e Brazil’s need for so-called “hard” infrastructure (such as roads, Brancher Sociedade de Advogados (BKBG) to boost its infrastruc- bridges, water supply, sewers, electrical grids, telecommunications) ture experience in those areas. That followed on from the hire of is clearly a priority and as the Guarulhos International Airport deal partner Bruno Dario Werneck from Tauil & Chequer Advogados in testifies, BNDES’s involvement is becoming more central to ensuring association with Mayer Brown in 2011. The firm has also recently these projects come off the ground. hired several senior associates from local rivals. ‘From a financing perspective BNDES is playing an important The fact that the firm has invested laterally to quickly expand role in funding infrastructure projects, either for local or foreign in- its infrastructure capability demonstrates the strategic importance vestors,’ says Heloisa Ferreira Andrade Scaramucci, co-head of of having a presence in this area and it is not just full-service TozziniFreire Advogados’ energy, bioenergy and engineering & con- firms that have been moving in on the opportunities. Brazil’s infra- struction industry groups. ‘In 2012, BNDES’ disbursements reached structure ambition has provided fertile ground for new boutiques $78bn’. and there has been a growth in firms with a focus on PPP, The demand for economic infrastructure is being driven both construction and financing. The new arrivals include Tauil & by domestic need and to meet requirements for the World Cup. Chequer spin-off, Soares Bumachar Chagas Barros Advogados BM&A – Barbosa, Müssnich & Aragão recently advised Cibe In- (which established in 2011) and Stocche, Forbes, Padis, Filizzola, vestimentos e Participações on the formation of a R$3.3bn joint ven- Clapis Advogados, which was formed in 2012 through partners from ture with Autostrade per l’Italia, which shall hold various toll road M&A heavyweight Souza, Cescon, Barrieu e Flesch Advogados concessionaries in Brazil. (SCBF) and full-service powerhouse Machado, Meyer, Sendacz e ‘In the area of transportation – subways, highways, railways, wa- Opice Advogados. terways, ports and airports – and electric energy there is currently Brazil’s legal market is already very mature and spin-offs are not a lot of work being generated,’ says Eduardo Carvalhaes, senior as- uncommon (it its turn, SCBF was a breakaway from Machado, sociate in public and regulatory Law at BM&A. ‘Either as a conse- Meyer, Sendacz e Opice –Advogados) so questions are being asked: quence of changes to the regulatory framework (which is the case is there enough work to go round? in relation to Pay TV, ports, railways and energy generation) or be- ‘With ambitious energy programmes in place and it being the cause of public bids for projects related to the upcoming World Cup eve of Brazil’s hosting the World Cup in 2014 and the Olympic and Olympic and Paralympic Games (highways and airports) or Games in 2016, major infrastructure projects are springing up all simply to meet ordinary infrastructure demands.’ over Brazil, provoking a substantial increase in demand in the con- In addition to the transport sector, real estate has been ear- struction industry,’ says Júlio César Bueno, infrastructure specialist marked for major development works. at Pinheiro Neto Advogados, one of Brazil’s premier law firms. ‘A ‘Brazil has a significant deficit of housing, especially for low-in- total of $809.4bn is expected to be put into infrastructure projects come families,’ says Ana Barbara Costa Teixeira, infrastructure and between 2012 and 2020.’ public law partner at full-service firm Demarest & Almeida Advo- Pinheiro Neto Advogados should win a significant proportion gados. ‘The Federal Government provides subsidized credit to low of those project mandates. Already it has been involved in some of middle class families to help them buy their properties through the Brazil’s pathfinder infrastructure deals. Most notably, the firm ad- program “Minha Casa, Minha Vida” (“My house, My life”).’ vised the concessionaire in the project financing to fund the expan- It is an issue that has become a key consideration for the govern- sion, maintenance and operation of the Guarulhos International ment and it is continuing to invest in this area. Airport in São Paulo. The $1.2bn bridge loan, which closed in De- ‘Recently, The State of São Paulo announced that is planning to cember 2012, is the first funding ever provided by Brazilian Devel- build more than 20,000 habitation unities to low-income families in opment Bank (BNDES) for a federal airport concession in Brazil. the down-town of city of São Paulo,’ explains Teixeira. ‘It will be ‘Along with energy, the transportation sector is also at the top of funded through PPP and it is a project that is expected to cost ap- the list of Brazilian governmental priorities,’ says Bueno. ‘New ports, proximately R$4.6bn (about $2.3bn).’

8 JUNE 2013 | FOCUS LATIN AMERICA

Brazil--p6-11.indd 8 5/2/13 7:06 PM BRAZIL | FOCUS LATIN AMERICA

Energy is also booming. On the oil and gas side, recent shale gas frastructure practice. Among its recent deals, energy and project fi- discoveries are expected to significantly boost Brazil’s total proved nance partner José Virgílio Lopes Enei led advice to the banks on gas reserves, which should drive exploration activity. the financing of the construction, operation, maintenance and ex- ‘The oil & gas industry has been attracting a considerable num- ploration of a R$53m greenfield mining project in Bahia. ber of foreign companies, which are hiring the construction of their ‘Sustainability is one of the main trends leading the Brazilian own sites in the country, along with pipelines and petrochemical fa- construction market. Entrepreneurs have been using their best ef- cilities,’ says Veirano e Advogados ’s Barretto. forts to emphasize long term affordability, quality and efficiency of The future also looks bright on the power front. the projects with the purpose of reducing environmental impacts,’ ‘In the power sector, the challenge is to construct new generation says Ana Karina Esteves de Souza project finance and energy partner transmission and distribution facilities to meet the increasing de- at Machado, Meyer, Sendacz e Opice Advogados. ‘For instance, con- mand,’ says Scaramucci. ‘In the power sector, consumption is ex- tractors are investing in solar power plants with the purpose to sup- pected to almost double until 2020. From 2013 to 2017, the ply energy exclusively for the soccer stadiums in the States of Rio de estimated expansion in power generation corresponds to almost Janeiro, Minas Gerais and Bahia. The Brazilian Government is also 33GW with investments of $60.5 bn. In the same period, the expan- supporting the Búzios Intelligent City project, which has the pur- sion of transmission lines is expected in 23,200 km with investments pose of deploying efficient energy consumption mechanisms in the of $13.9bn.’ city of Búzios, which is in the State of Rio de Janeiro, such as the use Scaramucci recently acted alongside Pedro G. Seraphim to lead of LED lightening, implementation of PV panels in commercial and TozziniFreire Advogados’s advice to Norte Energia S.A., an SPC cre- residential buildings, availability of controlling instruments regard- ated for the construction of the Belo Monte Hydroelectric Power ing energy consumption (through internet or telephone).’ Plant, on various issues relating to the ongoing work of the plant. The need to supply soccer stadiums may not seem as strategically Belo Monte is the largest hydroelectric project currently in construc- important as the need for other forms of infrastructure but it is cer- tion in the world, and with an installed capacity of 11,233MW, will tainly more pressing. Brazil will host the FIFA Confederations Cup be the world’s third largest hydroelectric plant. in June 2013 and it will provide a crucial assessment of how the ‘Work in this area is just beginning,’ says Scaramucci. ‘A lot needs country can expect to fare during the hosting of its next major sport- to be done. Investments in infrastructure have been an important ing tournaments. drive of the Federal Government, which has been creating conditions for the construction and development of infrastructure.’ PREPARING TO HOST THE WORLD Alternative energy projects are also steaming ahead. Brazil al- There is no doubt that Brazil needs to update its infrastructure as it ready derives most of its electricity from renewable sources. In 2012, takes its place among the world’s largest economies. The fact that Brazil’s Energy Research Company released its National Energy Bal- the world’s eyes will be watching intently in 2014 and 2016 has not ance Report (BEN 2012), which found that 88.8% of Brazil’s elec- dramatically changed the content of its infrastructure demands; it tricity in 2011 came from renewable energy sources. The capacity has just increased their urgency. of wind power grew by 24.2% on the back of the affordability of ‘The 2014 World Cup is already in the active planning stage, with wind as the cheapest form of low carbon electricity. Biofuels are still hundreds of infrastructure projects being developed to support the a major source of power, with biomass energy from sugarcane ac- games to be hosted by 12 Brazilian cities. The federal government, counting for 44.1% of energy supplies. The government is now look- the governors of the relevant states and the mayors of the 12 host ing to diversify into new renewable sources. cities have signed an agreement that pledges $11.8bn in investment ‘One area that is beginning to develop in Brazil is solar energy. This and sets responsibilities for implementing the planned infrastruc- technology is well developed in other countries, where it is a source of ture,’ says Bueno. ‘Private investment will be required in the hotel, power for energy networks,’ says Rafael D’Avila Dutra, finance and cap- catering, transport, leisure and consumer industries, as well as in ital markets partner at BM&A. ‘New projects of this nature should be the plans, processes and experience for building and modernizing implemented in Brazil over the coming years, even though regulation stadiums and accommodation for the games.’ of the area is still quite basic, and the risk associated with solar energy So the 2014 World Cup seems to be in hand, but what about the projects is not well understood by Brazilian financiers.’ Olympics? Brazil is not just paying lip service to renewable energy targets. ‘The International Olympic Committee’s decision to select Rio More generally, sustainability has become an important ethos that de Janeiro as the host city for the 2016 Olympic and Paralympic links across the country’s infrastructure programme. Games is likely to have significant repercussions for Brazil’s future Founded in 1972, Machado, Meyer, Sendacz e Opice Advogados infrastructure and economic development,’ says Bueno. ‘From new is one of Brazil’s most respected law firms and it fields a strong in- investment in roads, airports and railways to the rapid development

JUNE 2013 | FOCUS LATIN AMERICA 9

Brazil--p6-11.indd 9 5/2/13 7:06 PM PRESENT: THE LAW SUMMIT OF THE AMERICAS THE KEY TO DOING BUSINESS ACROSS BORDERS

NOVEMBER 2013 • MIAMI, FLORIDA

ALM, the publisher of The Daily Business Review, Corporate Counsel, and The American Lawyer is pleased to present The Law Summit of the Americas: The Key to Doing Business Across Borders, to be held this November, in Miami, Fla. This one-day event is designed for in-house counsel, law firms, banking and financial executives navigating today’s complex global business environment.

With the recent upswing in activity across borders throughout the Americas, strategies on securing financing for your M&A deals, due diligence in determining possible regulatory and compliance roadblocks, as well as litigation and alternate dispute resolution are essential to your business’ success and future growth. The Law Summit of the Americas event, features a collection of thought-leaders, both from outside and in-house counsel, to guide you through these issues, divided into three distinct segments – Southbound Business and Investment; Northbound Business and Investment; and Litigation and Arbitration.

TOPICS UNDER DISCUSSION INCLUDE:

• Overview of the Latin American Political and • Strategies for Latin Client Successes Economic Scenes • Seizing Business and Trade Opportunities • Strategies for Conducting Business in Latin America • View From the Bench • Joint Ventures with North, Central and South American Law Firms

10pFLA0613.indd 10 5/2/13 2:51 PM BRAZIL | FOCUS LATIN AMERICA

of the country’s hotel and tourism industry, Brazil will witness the tied in to the size and complexity of the problems that arise. launch of a number of large-scale projects over the course of the next ‘The usual complexity involved in construction projects such as six years. Rio de Janeiro alone is expected to receive about $14.4bn engineering technicalities, project financing, issuing bonds, insur- in investment for infrastructure improvements.’ ance, the regulatory framework, and environmental matters have As Bueno suggests, the sheer scale of the Olympic Games will led to an increase in arbitration,’ says Pablo Sorj, project finance and necessitate the highest amount of structural projects, but the devel- infrastructure specialist at Mattos Filho, Veiga Filho, Marrey Jr. and opment of new tourism and accommodation projects will be assisted Quiroga Advogados. ‘The majority of infrastructure-related con- through construction for the World Cup. tracts currently call for disputes to be resolved via arbitration, since And of course the growth in infrastructure is translating into an arbitral tribunal may resolve a dispute with much more efficiency work for other law firm departments. In particular dispute resolu- and accuracy than a typical court in Brazil.’ tion is expected to grow as construction contracts turn contentious. In addition, other alternative dispute resolution tools are also becoming increasingly utilized. ALTERNATIVE METHODS Siqueira Castro Advogados is often cited as Latin America’s Already litigation is increasing and that is expected to continue as largest law firm, with 21 offices throughout Brazil and an enviable more projects come on stream. BMA is already seeing a surge in en- litigation capacity, making it perfectly placed to witness the growing vironmental litigation, particularly involving environmental licens- trend across Brazil. ing and occupation of protected or contaminated areas. Many of ‘We have already verified that private and public construction these disagreements will stop construction and make large projects contracts, especially those that are more complex, are much more unviable. likely to adopt an alternative dispute resolution mechanism, such as ‘In addition, regulatory licensing, quality and universalization dispute boards, mediations, and in greater quantity, arbitrations,’ goals have also been generating substantial disputes, mainly in the says Carlos Fernando Siqueira Castro, manager partner of Siqueira energy and telecommunications services sectors,’ says Carvalhaes at Castro Advogados. ‘This reveals a business concern not only with BM&A. ‘In the civil construction area, obstacles faced both by own- the celerity in obtaining a final judgment, but also with the quality ers and construction companies – such as labor and social security of these decisions, since the disputes will be settled by specialized claims, delivery problems, acceptance issues – have contributed to and qualified professionals, most often to be appointed by the parties the growing numbers of lawsuits,’ adds Lie Uema Carmo, senior as- involved, and who may devote more studies to the questions in com- sociate in the corporate team at BM&A. parison to the judiciary power, which rarely is able to meet the same Conveniently for investors, Brazil boasts a strong pro-arbitration qualification and expertise.’ climate. Recent International Chamber of Commerce (ICC) statis- tics, ranked the country first in Latin America and fourth in the BUILDING BLOCKS world by number of parties submitting their disputes to ICC Arbi- In addition to the boom in project construction and dispute resolu- tration. tion, the influx of construction companies and related service In 2012, new legislation was passed extending the potential for providers are keeping firms busy across the full spectrum of service introducing arbitration clauses in defence contracts under the areas as they set up shop in Brazil. Brazilian Public Private Partnership Law. The new arbitration rules BKBG recently advised NYSE Technologies, a division of NYSE of the Arbitration and Mediation Center of the Brazil-Canada Euronext, in the formation of a new joint venture with Americas Chamber of Commerce (CCBC) also came into effect. These devel- Trading Group, which will develop a liquidity center targeting the opments will help to raise the profile of arbitration in Brazil even Brazilian exchange market called Americas Trading. It is an example further and are designed to coincide with the infrastructure boom of the gold rush that law firms are seeing in Brazil; companies are being felt in the country. lining up to get a foot in the market. ‘The economic growth of a given sector brings disputes as a nor- ‘Legal work related to M&A, IP, IT, corporate, tax, labor, envi- mal consequence,’ says Ricardo Barretto Ferreira da Silva, a founder ronmental, regulatory in general is all following the growing trend partner of Barretto Ferreira e Brancher Sociedade de Advogados of the Brazilian economy, as new investors come from abroad to pur- (BKBG). ‘The contractual structure of the larger projects has mi- chase companies or to enter in joint-ventures with Brazilian com- grated towards arbitration as the preferred method to solve disputes, panies,’ says Barretto Ferreira da Silva. ‘Brazil is considered the entry alongside the state judicial courts, which remain as a normal source door to all the other South America markets.’ of help to solve the majority of the disputes.’ The boom may have been ushered in by the country’s decision The reasons for arbitration being a preferred method to to host the world’s most popular sports tournaments, but its legacy resolve disputes in the construction sector are many and are will continue until long after the final medal is won. ■

JUNE 2013 | FOCUS LATIN AMERICA 11

Brazil--p6-11.indd 11 5/2/13 7:06 PM BRAZIL

CONSTRUCTION CONTRACTS IN BRAZIL: EMPLOYMENT LIABILITIES IN SUBCONTRACTS

By Lie Uema do Carmo

RAZIL ranks among the countries which, over the Due to years of insufficient past few decades, have faced major transformations. Democracy was re-installed and is investment, the country faces now – fortunately – well-established. From a Bpredominantly rural country, Brazil has become an urban an urgent need for investment and industry-oriented world player. Due to years of insufficient investment, the country faces an urgent need in infrastructure, a need that is for investment in infrastructure, a need that is only only increased by major increased by major upcoming events such as the World Cup and the Olympic and Paralympic Games. upcoming events such as the Legislation in respect of major construction projects still lags behind when compared to other global World Cup and the Olympic and economic players. Construction contracts in Brazil rely heavily on a type of contract called empreitada, or Paralympic Games. contract of enterprise (similar to the Italian l’appalto), used for a wide range of purposes, from building houses high labor costs, and high turnover are just some of the to constructing industrial plants. The set of rules on reasons behind subcontracting. empreitada contained in the Brazilian Civil Code of A core question in subcontracting is: what is the 2002, however, are virtually the same as the rules nature and extent of liability of the contractor, vis-à-vis under our former code of 1916: No real update was the employees of the subcontractor? made in the 2002 revision. Aside from the empreitada Article 455 of the Consolidation of Labor Laws (the and contracts for the rendering of services (i.e. for “CLT” – Consolidação das Leis do Trabalho) provides at engineering or architectural services), both of which least a partial response to that question: have a statutory basis, construction contracts in Brazil Art. 455. In subcontracts of enterprise, the have followed models developed in other jurisdictions subcontractor is liable for the obligations arising out of and used internationally, such as the EPC and, quite the employment contracts made by him, provided, recently, other types such as project alliancing and however, that the employees have the right to bring project partnering, although these newer forms are not claims against the principal contractor for the yet common. subcontractor’s failure to perform those obligations. Regardless of the chosen contract model, an ever- Sole paragraph. The principal contractor has a right present concern both for owners and for contractors is of recourse under the civil law against the labor liability in subcontracting. This article examines subcontractor, and the right to retain amounts owed to the issue of labor liability in subcontracting when the the subcontractor, as security for the obligations basic contractual framework is the empreitada. provided for in this article. However, the same legal issues can be found in other It is common to find contractual provisions making types of construction contracts in which the payments under the contract or subcontract conditional relationships of owner-contractor and contractor- on proof that all labor and social security obligations subcontractor are present. owed in respect of the employees assigned to the work Subcontracting is a very common practice in the have been duly paid. This provision, commonly found in Brazilian construction industry. Specialized knowledge, construction contracts and in construction subcontracts

JUNE 2013 | FOCUS LATIN AMERICA

BM&A.indd 12 5/3/13 9:34 AM BRAZIL

(subempreitadas) represents a services, such as receptionists, janitors, etc.) or who had precaution against potential no part in the subcontracted work. liability under Article 455 of the Attempts to expand the scope of Article 455 of the CLT. Thus, for the diligent CLT have, unfortunately, succeeded in extending contractor, it is not enough for the liability to the owner of the project. Until recently, the subcontractor to deliver what was prevailing interpretation was that Article 455 of the promised: the subcontractor must CLT does not apply to the owner of the project, unless also comply with all its obligations carrying out the project was part of the owner’s to its own employees. business, i.e. if the owner of the project was a builder or The nature of the contractor’s developer or in some way had construction as its core Lie Uema do Carmo liability for the subcontractor’s business. at BM&A obligations generated considerable This position has changed. Because of the long-term controversy among legal scholars. allocation of workers to the project site, the commercial For many years, the position that the subcontractor had purpose of the contract, and by analogy to project joint liability prevailed. More recently, however, the owners’ joint liability for social security contributions Superior Labor Appeals Court, Brazil’s highest court in that are not paid by contractors and subcontractors, employment and labor matters, modified item VI of both the courts and legal scholars have adopted an Restatement of Precedents 331, making it clear that the interpretation of the law that extends secondary liability principal contractor’s liability in subcontracting to the project owner for the contractor’s and the situations is secondary. Since then, the position that subcontractor’s unpaid employment obligations. contractors’ liability under Article 455 is secondary These provisions of the CLT strengthen the rights of liability has been consolidated in the courts. employees and encourage project owners and the Since there is an employment contract between the principal contractor to ensure that subcontractors are subcontractor and its employees, the principal financially sound, and to monitor performance of contractor's liability arises only if the subcontractor has employment obligations. The result is closer supervision not paid the amounts arising out of the employment of compliance with labor and social security obligations contract. If the subcontractor’s employees are not paid, and solvency of subcontractors, generating positive they can bring labor claims against subcontractor and externalities. contractor, or against the contractor alone. In the latter The solutions developed by the courts and the legal situation, the contractor should implead the scholars seem to be reasonable. The secondary liability subcontractor, if only to facilitate exercise of the of the principal contractor, the extension of secondary contractor’s right of recourse against the subcontractor liability to the project owner, and the longer list of referred to in article 455. The subcontractor has the employees protected by Article 455 of the CLT are, in burden of proving that the amounts owed to the reality, a simple redistribution of burdens. In other claimant employee were paid (a burden of proof shared words, the subcontractor has primary liability for by the contractor, with the obvious practical difficulties employment obligations to its employees, a burden that of discharging this burden), and if proof is not made, the corresponds to the benefit of the price paid under the principal contractor will be required to make payment subcontract. However, if the subcontractor fails to fulfill to the claimant employee (except in the unlikely event its employment obligations to workers allocated to the that the subcontractor does so), and hope to recover project, the burden is shifted to the contractor, and the amount paid from the subcontractor. ultimately to the project owner rather than letting it fall As for the scope of secondary liability under article on the workers who contributed to the project with their 455 of the CLT, the predominant position among legal labor. scholars is that the principal contractor will have The interpretation and application given to article liability only for obligations owed to the subcontractors’ 455 of the CLT also highlight the Brazilian labor courts’ employees who are directly allocated to the bias in favor of employees, reinforcing the importance subcontracted work, regardless of where the work is of careful negotiation and drafting of construction actually performed, or whether the work is related to contracts and subcontracts to deal with these issues. ■ the contractor’s and subcontractor’s core business. To illustrate, subcontractor employees who are physically allocated to the project site and office employees who Author perform tasks specifically for the project are entitled to Lie Uema do Carmo bring labor claims against the principal contractor. In [email protected] contrast, the principal contractor would not have Tel: 55 11 2179-4537 secondary liability for amounts owed to the Fax: 55 11 2179-4597 subcontractors’ employees who participated only indirectly in the subcontracted work (i.e., support www.bmalaw.com.br

JUNE 2013 | FOCUS LATIN AMERICA

BM&A.indd 13 5/3/13 9:35 AM BRAZIL

Q&A: M&A IN BRAZIL

IN 2012, 40% OF BRAZILIAN M&A TRANSACTIONS We believe that this year consumer goods, health, INVOLVED FOREIGN INVESTORS; WHAT IS MAKING THE education and infrastructure will be the hot industries for COUNTRY SUCH AN ATTRACTIVE INVESTMENT foreign investors seeking growth potential, as a result of DESTINATION? the expansion of the Brazilian domestic market and HE number of M&A transactions remained high in projects connected to the 2014 World Cup and 2016 Brazil in 2012. According to information from Olympic Games. PricewaterhouseCoopers annual survey, 770 transactions were announced in 2012. This is 2.5% HOW HAS BRAZIL IMPROVED ITS M&A REGULATIONS TO KEEP Tmore than the total in 2011 and is close to the 2010 PACE WITH FOREIGN DEMAND? historical record, when 799 transactions were announced. Brazil has changed the way it regulates mergers. When The amount of money involved in the transactions for Law 12,529/2011 went into effect in May 2012, it became which an amount was announced was approximately mandatory to submit merger transactions for analysis by US$95.3bn. These numbers demonstrate a consistent the Brazilian antitrust authority (Economic Defense level of transactions over the last three years, with an Administrative Council (Conselho Administrativo de annual average of 773 transactions a year. Defesa Econômica), or CADE) before a transaction is Approximately 40% of the acquisition transactions in carried out. Previously, the transaction could be submitted 2012 involved foreign investors. This showed a marked to CADE after the binding document for the transaction increase on 2011, when 37% of transactions involved had been signed, with the transaction’s efficacy depending foreign investors, and from 2010, when the figure was on CADE’s approval. Under the new law, mergers cannot 39.9%. be completed before CADE considers them, under penalty These numbers indicate that although Brazilian of being held void and a fine being imposed. Additionally, economic growth was weak in 2012, the outlook for future the new law made it mandatory to preserve competition growth, together with the economic crisis affecting industrialized countries, mainly in Europe, appears to have cemented foreign investors’ interest in Brazil and Brazilian At BKBG we are committed to companies. service quality and accessibility of WHICH GEOGRAPHICAL RELATIONSHIPS ARE DRIVING our professionals. We also seek to INBOUND INVESTMENT? It is important to emphasize the diversity in the origin of stay directly involved in our clients’ foreign investors who are involved in transactions to acquire Brazilian companies. businesses and needs. According to information from KPMG annual survey, the United States continues to be the most important between the companies involved until CADE has approved country of origin for investors interested in mergers and the merger. The law establishes a period of up to 330 days acquisitions in Brazil: US-based investors have to analyze the transaction, with simpler cases being participated in approximately 38% of the cross-border decided in up to 30 days. transactions in 2012. European countries such as the The new law has eliminated control of 20% of the United Kingdom (7%), Germany (5.9%), Spain (3.8%) and relevant market as a trigger for antitrust authority France (5.7%) also have a significant share in the total involvement and has made the revenue of the parties number of cross-border transactions that involve the involved the only criteria for determining whether antitrust acquisition of Brazilian companies. approval is necessary. An inter-ministerial ordinance Additionally, foreign investors from a broad variety of published at the end of May 2012 increased the minimum countries, such as China, Japan, Mexico, Sweden, Israel, annual revenue of the companies involved in the merger Belgium, the Netherlands and Chile, have sought Brazilian that triggers the requirement to submit the transaction for companies to buy. approval by antitrust authorities (CADE), with the amounts

JUNE 2013 | FOCUS LATIN AMERICA

BKBG.indd 14 5/3/13 9:38 AM BRAZIL

now being R$750 m for one banking, mining, education and assorted others), with an company and R$75 m for the other. emphasis on information technology, which was In the first cases processed under the responsible for 38% of transactions, and dot-com new rules in 2012, the new CADE companies. This shows the Brazilian economy’s showed speed and efficiency in its diversification and the scope of the M&A market in Brazil. evaluation of the transactions, BKBG’s activity in M&A consists precisely in advising approving them in much less time domestic and foreign companies and investors, as well as than the companies involved had private equity funds, in purchase and sale transactions for expected. equity interests and assets (both tangible and intangible) It is also worth noting that in mid- in small, medium and large-scale companies from a broad André de Godoy 2012 the Mergers and Acquisitions range of industries. Our firm’s unique experience in the Fernandes at Committee (Comitê de Aquisições e information technology, telecommunications and Internet BKBG Fusões), or CAF, which is modeled areas qualify us to work in the areas that are responsible on the English Takeover Panel, was established by the for the largest number of M&A transactions in Brazil. BM&FBovespa and trade associations. The CAF will be a private, self-regulating entity with a code of conduct HOW DO BKBG’S SPECIFIC SECTOR SPECIALISMS COMBINE TO focused on corporate restructuring, mergers, acquisitions PROVIDE A UNIQUE M&A OFFERING IN THE MARKET? and tender offers for the shares of publicly traded BKBG is a full-service law firm in the business area. Our companies to which companies can voluntarily adhere. lawyers have diverse training and experience, which The CAF rules of conduct will not replace or derogate the allows them to meet the needs of Brazilian and foreign legal regulations and rules established by the Brazilian companies that directly or indirectly have business Securities Commission (Comissão de Valores Mobiliários), relationships in Brazil in various industries. We have or CVM. various professionals who are considered leaders in their areas of specialization, which include corporate/M&A, FOR THE FIRST TIME IN BRAZIL’S HISTORY, LOCAL technology, media and telecommunications, intellectual INVESTMENT BANKS COMPRISED SIX OUT OF THE TOP 10 M&A property, Internet and e-commerce, regulatory, tax, ADVISERS IN Q1 OF 2013, WHAT ARE THE MAIN TRENDS outsourcing, international trade, employment and dispute BEHIND THAT DEVELOPMENT? resolution. An analysis of information from PricewaterhouseCoopers Our participation in M&A transactions and structuring on the transactions whose value was disclosed in 2012 of joint ventures is guided by intense collaboration and indicates that only 16 transactions during the year constant interaction among all of the areas of expertise in involved amounts of greater than US$1bn, meaning they our firm (tax, employment, intellectual property, can be considered large-scale transactions. Approximately information technology, dispute resolution, regulatory, 80 were medium-scale transactions, involving amounts etc.), offering a unique service that is adapted to the between US$100m and US$1bn. Another 212 transactions client’s needs. involved amounts of up to US$100m and can be Last, but not least, at BKBG we are committed to considered small-scale transactions. service quality and accessibility of our professionals. We Domestic and foreign investment banks have also seek to stay directly involved in our clients’ traditionally focused their activity on large and medium- businesses and needs. Finally, it is worth mentioning that scale transactions and on advising private equity funds. BKBG is amongst the very few Brazilian law firms certified On the other hand, M&A advisors and consulting firms are under ISO 9001:2008 rules. This certification assures that more active in advising on small and medium-scale all internal processes of our firm (including the delivery of transactions. legal services) follow detailed and rigorous rules, in order Local investment banks’ activity has been increasing to achieve the highest standard of excellence in legal recently because of their proximity to the clients services and client relationship. ■ (companies in Brazil), greater Brazilian market knowledge and an effort to expand advising services to include Author: medium and even small-scale transactions. André de Godoy Fernandes Partner and Coordinator of Corporate/M&A WHY IS IT NECESSARY FOR A FOREIGN CLIENT TO INSTRUCT A + 55 11 96338 3411 FULL-SERVICE FIRM LIKE BKBG TO ASSIST WITH THEIR [email protected] BRAZILIAN DEALS? It’s interesting to note that information from BKBG | Barretto Ferreira e Brancher PricewaterhouseCoopers’s and KPMG’s reports shows R. Dr. Eduardo de Souza Aranha, 387, 15º andar that M&A transactions in Brazil in 2012 involved 04543-121, São Paulo, Brasil companies active across a variety of industries + 55 11 3897 0300 (chemical/petrochemical, energy, public services, food, [email protected]

JUNE 2013 | FOCUS LATIN AMERICA

BKBG.indd 15 5/3/13 9:39 AM BRAZIL

FIRM PROFILE: VEIRANO ADVOGADOS Few firms are as equipped to advise clients on Brazil’s infrastructure boom as Veirano; Robson Goulart Barreto explains why the firm has the most appropriate tools to act on the country’s biggest projects

INTERNATIONAL ROOTS EIRANO ADVOGADOS is one of Brazil’s premier Veirano was one of the original full-service law firms and packs a punch in corporate transactions, project development pioneers in bringing global- and dispute resolution work. Headquartered in VRio de Janeiro, the firm began operations in 1972. standard service levels to the Veirano was one of the original pioneers in bringing global-standard service levels to the Brazilian market Brazilian market and the firm, and the firm, adopting an international law firm model, prides itself on providing transactional advice that adopting an international law sophisticated global businesses would expect from their home markets through an institutional approach firm model, prides itself on to clients and culture. providing transactional advice A NEW BREED OF FIRM that sophisticated global Unlike the traditional Brazilian “old guard” firms that are family-led and controlled, meritocracy is a businesses would expect from cornerstone of Veirano’s philosophy and ensures that the firm’s values and quality permeate throughout the their home markets through an firm. Although Rio is Veirano’s home base, the firm has institutional approach to clients been committed to growing its São Paulo office and and culture. now both operations are around the same size and house approximagtely 110 lawyers each. Unlike many Rio firms that have been unable to gain the critical mass to provide a full-service offering from both offices, an aggressive hiring strategy has seen São APPETITE FOR INFRASTRUCTURE Paulo become the firm’s flagship office, which was Veirano is more than just a transactional firm, underlined by its recent move to brand new office in although it is important to note that it is one of the Faria Lima, at the heart of the country’s financial premier firms in Brazil for corporate matters. Veirano district. Among the firm’s highest profile lateral hires has also one of the best records for regulated industry in São Paulo, in January 2013 it welcomed Olavo work in the country, with expertise in Chinaglia, formerly acting president of the Brazilian telecommunications, infrastructure projects and antitrust agency, to spearhead our competition energy and natural resources. Veirano has practice, and in April 2013 it engaged Bruno Ferla, participated in some of the largest and most formerly general counsel and later director of transformative infrastructure projects in Brazil, corporate affairs of the Camargo Correa group. including advising Brazil-based multinational oil giant

JUNE 2013 | FOCUS LATIN AMERICA

Veirano.indd 16 5/3/13 9:54 AM BRAZIL

Petrobras on the construction of a and also serves a significant number of high-profile $3.1bn ethanol pipeline, the domestic clients. largest in the world. We are also Its clients include major multinational brands such advising on the construction of as Philip Morris – we advise them across a number of the Olympic village for the 2016 areas, including on all their tobacco litigation; Mars, Olympic and Paralympic Games, which is also another institutional client of the firm; which will be held in Rio, and on AES; Dell Computers; JP Morgan; Laureate; Pfizer; the construction of the expansion and Telecom Italia. On the domestic front we act for of the Rio subway system. As a Eike Batista, one of Brazil’s richest men, and have result, we are well positioned to been his counsel for the past 30 years. In addition, we Robson Barreto assist clients’ needs in this area. act for an impressive number of multinational at Veirano In addition to its experience, the construction companies including Odebrecht and OES Advogados in Rio de Janeiro firm has a major competitive Oilfield Services. advantage in its support teams. Energy, construction and FOREIGN RELATIONSHIPS corporate work are clearly a speciality at Veirano but As a fully integrated, full-service law firm in a it is a one-stop-shop for all related infrastructure globalized market, Veirano needs to ensure that it has requirements due to its supplementary strengths in strong associations in place so that its clients get the three other key areas: public and administrative law, quality of cross-border advice that they expect. which is always core to building big projects in Brazil; Veirano is nowadays a first choice referral partner for environment, as many of these projects have Australasian, European, Latin American and North environmental consequences and those consequences American law firms and regularly exchanges work and need to be understood so the project can be licensed; internships with them. and real estate, which was the final piece of the puzzle These relationships guarantee that its multinational that Veirano managed to slot in last year – at the end clients can expect to receive “gold standard” legal of September 2012, the firm hired new partner services across the globe. ■ Rodrigo de Castro and six associates from a top- ranked real estate practice in Rio. Veirano is now perfectly placed to advise across the full spread of infrastructure matters.

CLIENTS From its origins as an internationally-focused firm, Veirano has now substantially diversified its client base

About the author Guides Latin America and Who's Who Legal as an Robson Goulart Barreto outstanding professional in the areas of Project Partner Finance and M&A. Robson has a law degree from [email protected] the State University of Rio de Janeiro – UERJ (1984), specializing in corporate law from Main Practice Areas Fundação Getulio Vargas (1985). Corporate Law, Mergers & Acquisitions, and Telecommunications.

Professional Experience Robson G. Barreto is a partner of Veirano Advogados law firm with extensive experience in VEIRANO ADVOGADOS international corporate practice. He has been Av. Presidente Wilson, active representing several of the firm’s clients 231 – 21st and 23rd floor, in international commercial and financial 20030-021 – Rio de Janeiro, transactions across many different industries, RJ – BRASIL specially in cross-border project finance and M&A. Robson is a former chairman of the São Paulo – Porto Alegre – Brasília American Chamber of Commerce, Rio (2009- 2010). He features in Chambers & Partners www.veirano.com.br

JUNE 2013 | FOCUS LATIN AMERICA

Veirano.indd 17 5/3/13 9:54 AM MEXICO | FOCUS LATIN AMERICA

Step Change Mexico’s new president has promised sweeping constitutional reform. How are law firms greeting the proposed changes?

BY MARIA JACKSON

Historically, Latin America has been a place where time slows uct (GDP) grew by 3.9% in 2012 and is expected to grow by down. Over the past ten years, the region may have rein- 3.5% in 2013. But since being elected, Peña Nieto has effectively vented itself into a dynamic economic hotspot but adminis- shown the world that Mexico is not resting on its laurels. trative inertia still exists; investors familiar with local markets understand that it can take a while for decisions to be made REGULATION STATIONS and reforms to be implemented. Against that background, The most significant changes are expected in the telecoms Mexico’s new president is a breath of fresh air. sector. After only a few months in office it was very evident that In March 2013 Mexico’s lower house approved reforms Enrique Peña Nieto had a “can-do” attitude. Already he has aiming to inject competition and boost investment into an done a deal with opposition parties to ensure the safe passage industry that is currently dominated by two companies: tele- of major constitutional reforms and his main target is to break phone corporation America Movil (which is owned by Carlos Hdown the monopolies that have restricted Mexico’s economic Slim, the world’s richest man, and controls about 80% of the development. The changes proposed by Peña Nieto’s govern- country’s fixed line market and 70% of its mobile market); ment are extensive and far reaching, encompassing the and Televisa, which is the world's largest Spanish-language telecommunications sector, the energy industry, the tax sys- television network and controls more than 60% of the televi- tem and even labor. Law firms are gearing up for a legislative sion market. windfall. ‘The reform in the telecommunications sector is very am- ‘Already there have been sweeping, unexpected reforms bitious. One of the main aims of the new law is to foster com- in a fairly short period of time,’ says Pablo Mijares Ortega, petition in the various telecommunication sectors including founding partner at Mijares, Angoitia, Cortés y Fuentes. ‘After cellular telephony and open television,’ says Michell Nader S, having grown used to the stagnant speed of the last twelve chairman at Nader, Hayaux & Goebel. ‘Legislative changes years, nobody really expected such a fast pace. As a firm, we also limit the rights of private parties to enjoin certain deci- are continuously strengthening our practice groups in each sions of the government in the sector. From a competition of these areas, excited about the many opportunities that may perspective the reform provides broader powers to the gov- arise as a result of this transformation.’ ernment to determine monopolistic positions and, in certain The World Bank has highlighted that Mexico has huge po- cases, to order the divestiture of certain holdings.’ tential for accelerating economic growth. Gross domestic prod- Mijares, Angoitia, Cortés y Fuentes recently advised Tele-

18 JUNE 2013 | FOCUS LATIN AMERICA

Mexico.indd 18 5/3/13 9:57 AM MEXICO CITY

Mexico.indd 19 5/3/13 9:58 AM MEXICO | FOCUS LATIN AMERICA

visa in its acquisition of a 50% interest in Mexican mobile telephone generate a more litigious environment for this sector in general. service provider Lusacell (Ricardo Maldonado led the team). On the Other sectors related to the telecoms industry, such as infrastructure surface, the $1.6bn deal may have been seen to increase competition will have great opportunities for investors also.’ by giving Televisa a foothold to challenge American Movil’s control Infrastructure opportunities are also expected to stem from Mex- of telephone market but it also illustrates just how concentrated that ico’s proposed shake-up of the energy and public-private partner- market is. Mexico has decided that it is time for change. ships (PPP) regimes. ‘The proposed reforms are very extensive; more than anyone could have expected,’ says Mijares Ortega. ‘The proposed constitu- A NEW MODEL tional amendment contains very innovative measures. This is a re- Mexico’s oil industry has been beleaguered by years of mismanage- form that does not favor anyone in particular and actually may have ment. Petroleos Mexicanos (Pemex), the state-run oil monopoly, has an impact on the way the large players do business. I think we were seen output drop by over 25% since peaking at 3.4 million barrels all quite impressed by the depth of the reform, and the position per day in 2004. The government warns that the situation could see adopted by the opposition parties attests to that fact.’ the country, which is one of the world’s biggest oil exporting nations, There is no doubt that the plans have been well received by in- importing crude oil as soon as 2018. Reform is urgently needed. vestors. In particular, the reach and scope of the proposals have im- ‘The most anticipated reform is to the energy sector, where the pressed the business community. government-controlled oil and electricity industries have languished ‘The reforms proposed are extensive in berth and depth; they in- for decades and are now in great need of new investment,’ says San- clude substantial constitutional amendments that will materially tiago Sepúlveda. ‘This reform is expected to be presented to Con- change the sector’s legal framework,’ says Santiago Sepúlveda, energy gress in the second half of 2013 and although it is likely to be a and infrastructure partner at Creel, García-Cuéllar, Aiza y Enríquez. contested process, it should be approved by the end of the year. If

• • • The core of the reform is intended to open the telecommunication and broadcasting sectors to ample competition and new investment opportunities.

‘The core of the reform is intended to open the telecommunication passed, the energy reform will undoubtedly cause a major shift in and broadcasting sectors to ample competition and new investment Mexico’s economy and create very important investment opportu- opportunities. These two goals are to be achieved by the creation of nities along the whole production chain.’ a new independent telecoms regulator with significant power to de- The problems will come from any perceived public threat to pri- clare as dominant any company with a market share of over 50% vatize Pemex; the Mexican oil expropriation of 1938 is still cele- and impose a range of antitrust measures (including asymmetric brated annually in Mexico and leftist opposition to reforms has pricing and even asset sales), as well as by the opening of the sector already manifested in rallies and protests. However, it is expected to foreign investment.’ that while a full-scale privatization is off the agenda for now, foreign The opening of the sector to foreign investment is a key devel- investment will be encouraged to tender for contracts to support opment. The bill provides for raising the maximum ownership levels Pemex’s development projects. that foreign companies are permitted to hold in broadcasting to The exact content of the reform is still being thrashed out but 49%, while it will allow FDI of up to 100% for telecoms and satellite firms are gearing up for big interest from investors. Mexico’s new services. Currently foreign investment is prohibited in relation to PPP law, which was enacted in January 2012, should help the gov- television activities, while foreign investment in telecoms and satel- ernment to find models suitable to appease those against the insti- lite is limited at 49%. Law firms are envisaging that the reforms will tutional privatization of Pemex, while still allowing for an injection be a big spur to work flow, and not just on the transactional side. of much needed private sector cash. Increasing private sector par- ‘If the proposed reforms go through the Mexican Congress, we ticipation in Mexico’s energy sector is already being seen. For exam- believe the telecoms sector will become very attractive to domestic ple, Santiago Sepúlveda led Creel, García-Cuéllar, Aiza y Enríquez’s and foreign investors,’ says Cristina Sánchez Vebber, partner at advice to the initial purchasers (led by Morgan Stanley) in a $575m Sánchez DeVanny Eseverri. ‘We also foresee that the opening up will global project bond offering to finance Grupo Mexico’s development

20 JUNE 2013 | FOCUS LATIN AMERICA

Mexico.indd 20 5/3/13 9:58 AM MEXICO | FOCUS LATIN AMERICA

of a greenfield 500MW-power generation project. Importantly, this says Jorge G. De Presno, head of employment at Basham,Ringe y was the first project-bond issuance in Mexico that was structured Correa. ‘The concept of “decent work” is incorporated, which relates as a non-recourse financing for a power generation project that was to the dignity and treatment of all employees, as well as non-dis- anchored on power supply contracts with private parties (i.e., other crimination issues, and the right to social security for all employees. than government owned entities such as Pemex or CFE). The The inclusion of this concept is in line with international treaties of growth in PPP is expected to cement that growth in private sector the International Labor Organization ratified by Mexico.’ participation. Other headline features that the bill includes are: the introduc- ‘The recently published federal and state PPP laws are opening tion of outsourcing provisions (the concept of outsourcing is defined up major investment opportunities in infrastructure, such as in the for the first time in Mexican labor law); the freedom for businesses case of concessions to run public services by the private sector,’ says to offer employees part-time work and hourly wages; and the defi- Cristina Sánchez Vebber. ‘In addition, many infrastructure projects nition of what constitutes “harassment” and “sexual harassment”. for transportation, water treatment, energy generation (especially ‘It is expected that foreign companies will be more encouraged green sources), urban development and tourism have been imple- to come to Mexico and make some important investments in our mented through the PPP scheme.’ economy as the labor reform incorporates and allows for much Sánchez Vebber was recently involved in a PPP project involving needed flexibility in types of working arrangements,’ says De Presno. the renovation and construction of certain federal and state premises However, some proposed changes did not make the final bill; used in the Mexican penitentiary system. Already the appetite for most significantly, the calls to improve the transparency of Mexico’s PPP is translating into solid transactions and the model is being uti- trade unions through such measures as allowing outside audits of lized for a variety of schemes. Infrastructure is about to boom. union financial records or lifting a ban on union members viewing ‘Several projects related to passenger trains have also been union contracts. announced by the government,’ says Marco Tulio Venegas, partner ‘Provisions relating to union transparency which were initially at Von Wobeser y Sierra. ‘The government announced new included in the project sent by the president were not approved by passenger trains that will cover the Toluca – Mexico City and the Lower House of Congress,’ says De Presno. ‘As the majority of Queretaro – Mexico City routes. It also announced a project for the Congress is held by the PRI, the political party of the current presi- Yucatan´s Peninsula.’ dent Enrique Peña Nieto, and by political allies of PRI whose mem- In addition, toll roads, education, health and water have also bers include former and current union leaders, it was expected that been earmarked for investment. union related provisions would most likely be untouched.’ ‘There are wide open opportunities in infrastructure projects, Nevertheless, the general context of the reforms has been seen and with the new deregulation the energy areas are expected to be as Mexico taking a positive step. particularly busy,’ says Juan Francisco Torres Landa R., partner at Barrera Siqueiros y Torres Landa (BSTL). ‘In the months to come, MANAGING GROWTH we are expecting important announcements of big investments. Although telecoms, energy and labor are among the most high pro- Other areas that are already enjoying substantial development file elements of Peña Nieto’s reform programme, they are not the are mining, tourism, real estate, automotive, aerospace and full extent of his party’s commitment towards improving Mexico’s electronics. There are very important projects in all these areas efficiency. throughout Mexico, and the new era of prosperity will make those ‘Peña Nieto is about to present to congress a significant amend- activities multiply.’ ment to banking legislation that will seek to increase lending at a cheaper cost to borrowers,’ says Mijares Ortega. ‘Furthermore, gov- LABOR DAY ernment officials have stated that in the second half of 2013 a tax The changes to telecoms and infrastructure are yet to fully take reform will also be proposed to Congress.’ shape. However, reform of the country’s antiquated labor regime has Tax reform is necessary because Mexico currently takes so little already been put in motion. In November 2012 Mexico's Senate ap- in taxes; in fact its tax take is currently the lowest in the Organisation proved a labor reform bill that came fully enforceable on December for Economic Co-operation and Development (OECD) as a propor- 1, 2012. These represented the first substantial amendments to Mex- tion of GDP by 6 to 8 percentage points. Changes mooted by ican labor law since 1980 and were aimed at increasing market flex- the government to combat this include a review of both direct and ibility and reducing hiring costs. indirect taxes as well as proposals to increase the efficiency of ‘The labor reform is aimed to increase the productivity and com- tax collection. petitiveness of our country, increase the number of jobs and espe- On the banking side, the government is imminently due to an- cially to provide greater equity, protection and work related safety,’ nounce proposals designed to revamp the financial services sector.

JUNE 2013 | FOCUS LATIN AMERICA 21

Mexico.indd 21 5/3/13 9:58 AM New Book! The Foreign Corrupt Practices Act: Compliance, Investigations and Enforcement by Martin J. Weinstein, Robert J. Meyer and Jeffrey D. Clark

Corporate and individual prosecutions are at record levels. Get the essential guide to identifying red flags, minimizing risk and avoiding penalties.

Special Offer Save 25% Print and Online OR Online Only

Print/Online Or Online Only Use Promo Code 571509 when ordering the print/online bundle or online only subscription to receive your discount.

120 Broadway 5th Floor | New York, NY | 10271 | 877-807-8076

22pFLA0613.indd 22 5/2/13 3:40 PM MEXICO | FOCUS LATIN AMERICA

Among the measures expected are rules to boost lending, new reg- GEARING UP ulations governing consumer protection and plans to raise the al- Law firms are already responding to the changes. lowed limit of foreign investment into financial institutions. ‘Based on the expected legislative changes, we are currently de- Ensuring that businesses get access to credit is fundamental to main- signing the growth of our infrastructure and project finance practice taining the country’s economic growth and encouraging investment. in order to assist our clients in handling these multiple new and sig- These banking reforms will send a strong message to investors that nificant investment opportunities,’ says Santiago Sepúlveda. Mexico provides a dynamic economic opportunity. It is not just domestic firms that are moving to capture a piece of Mexico’s willingness to create a more investment-friendly regime the action. Foreign firms are also opportunistically circling the mar- combines with a solid economic infrastructure that has coped envi- ket, waiting for a ripe moment to swoop in on the potential windfalls ably well against a challenging global economic backdrop. In fact at stake. the country’s success could dramatically transform the region’s eco- ‘One of the main trends affecting the local market is the greater nomic landscape: Brazil’s economy may currently be the regional presence of global firms on the ground in Mexico,’ says Juan Fran- monolith but indicators suggest that Mexico could step out of the cisco Torres Landa R. ‘While firms like Baker & McKenzie and shadow of its Latin American neighbour within 20 years. In July White & Case have been around for a while, in recent times we have 2012, financial services giant Nomura published a report suggesting seen others joining that group such as Jones Day, Greenberg Traurig, that if Mexico’s economy continues to grow at its current rate it could DLA Piper and others. It seems that with Mexico's expected growth overtake Brazil as the largest economy in Latin America by 2022; this trend will continue and other firms will want to have their own with Mexico’s economy growing by 4.25% to local presence to validate their global reach to 4.75% during that time and Brazil’s growing by • • • multinational clients with interest in Mexico's 2.75% to 3.25%. It is not as unlikely as it may Domestic ﬁrms are not expected economic boom.’ first appear. just adding bolt-on Domestic firms are not just adding bolt-on ‘Mexico has enjoyed financial stability for practices to cope with increased demand for practices to cope with many years,’ says Michell Nader S. ‘Unlike other sophisticated legal services and growing com- countries that dealt with the 2008 crisis by loos- increased demand for petition; Torres Landa R., also sees more defen- ening monetary policies, Mexico retained a sophisticated legal sive moves being made in the market. ‘Another tight control in its monetary policies and built services and growing important trend is the expected consolidation up significant international reserves. The coun- competition. of local firms,’ he says. ‘This may actually be a try operates with a very small fiscal deficit and consequence of the increased presence of for- these policies are attracting very significant flows of capital both to eign firms, but the expectation is that in order to face increasing the real economy and the capital markets.’ competition from the new multinational arrivals, some of the exist- That fiscal discipline is only part of Mexico’s attractions as a se- ing local firms will want to merge and thus have larger organizations, cure base for foreign investment into the region. It also houses a ro- similar to what you can already see in other countries in the region bust legislative environment and an unswerving commitment to like Brazil, Argentina, Chile or Peru.’ foreign trade. The reform agenda embraces so many areas of Mexico’s economy ‘Mexico can presently offer a fairly reliable rule of law that ade- that all law firms are expecting to receive their fair share of mandates quately protects investments. With the clear realization that there from the anticipated scramble of foreign investors into Mexico. remains plenty of work to be done, in the last two decades Mexico However, it is important to note that the reforms are still in their has made great strides in modernizing its laws, making them more early stages. There is no doubt that Peña Nieto is keeping Mexico’s investment-friendly, whilst improving on the judicial enforceability lower courts busy as his party churns out proposal after proposal of its legislation and contractual undertakings,’ says Mijares Ortega. to increase the country’s economic competitiveness, but despite ‘Add to the foregoing the fact that Mexico boasts one of the most his patent dynamism, law firms and investors will have to show open economies in the world, having entered into approximately patience as some institutional processes inevitably slow down the 42 free trade agreements with as many countries, probably a pace of change. world record; today only a handful of industries are still ‘The transformations resulting from these legislative reforms will restricted to foreign investment (in terms of ownership percentages not happen overnight but we are finally in the process of undertak- or outright participation).’ ing them, and that is exciting,’ says Mijares Ortega. ‘I like a Chinese The government’s ongoing efforts to increase private sector in- saying that goes something like this: “Even the longest journey be- volvement in Mexico’s economy will reduce the existing restrictions gins with the first step”. We are finally taking those few, long-awaited on foreign investment and provide a further boon to FDI inflows. first steps and good opportunities will come.’ ■

JUNE 2013 | FOCUS LATIN AMERICA 23

Mexico.indd 23 5/3/13 9:58 AM MEXICO

Q&A: TELECOMS REFORM IN MEXICO

N March 11, 2013, the Executive Power presented a HOW EXTENSIVE WILL THE CHANGES BE? bill to reform diverse provisions of the Mexican The changes can be divided into two categories: Constitution (“Bill”), mainly in relation to (i) changes proposed to the constitutional text telecommunications matters. The Bill is a (although with excessive detail), and (ii) provisions Oconsequence of certain commitments enclosed in the so- contained in transitory articles that order the called “Pact for Mexico”, which was executed by the implementation of different actions under certain President and the three principal political parties one day deadlines (uncommon for constitutional reforms). after Enrique Peña Nieto took office as the new President. However, most of the changes could have been The current telecom regulatory framework was put achieved through legal or regulatory provisions. in place in 1995 through the publication of the Federal Generally, the constitutional changes include: Telecommunications Law (“FTL”), almost five years (i) Establishing as a human right the access to a) after the privatization of Telmex and was the base for information and communications technology, and b) the liberalization process. broadcasting and telecommunications services (as The FTL has been amended a number of times, but public services), including broadband and Internet. the most structural amendment was made in 2006 (ii) Creating the Federal Institute of (“Televisa Law”), even though it was partially Telecommunications (“IFETEL”) as a constitutional challenged by one-third of the Senate and the Supreme autonomous entity, in charge of the regulation of all Court declared the unconstitutionality of some of its broadcasting and telecommunications matters. provisions (2007). The Televisa Law was published (iii) Creating judges and courts specialized in months before the presidential elections in which Lopez broadcasting, telecommunications and economic Obrador (left-wing) was a potential winner. competition matters, appointed by the Federal The Bill is still in the process of being approved, but Judiciary Council. it has been sanctioned (with some changes considered The main provisions of the transitory articles are the herein) by the Deputies and the Senate. It is expected following: that the Deputies will approve the changes proposed by (i) The Federal Congress must amend the regulatory the Senate and that the State legislatures (majority) will framework according to the Bill (180 calendar days), ratify the Bill. In addition, secondary provisions must be including the issuance of a convergent law to regulate issued in order to detail and implement the Bill. telecommunications and broadcasting together. (ii) Foreign investment in: a) telecommunications and WHAT ARE THE MAIN AIMS OF THE BILL? satellite communications up to 100%, and b) According to the Pact for Mexico, the Bill has three broadcasting up to 49% subject to reciprocity from the aims: (i) strengthen the rights related to the freedom of country of the ultimate investor. speech and introduce the right to access a) information (iii) The transition to digital terrestrial television and communications technology, and b) (“DTT”) must finish on December 31, 2015 (as originally telecommunications and broadcasting services, stated) and the Deputies should grant the necessary including broadband and Internet; (ii) improve and budget. secure effective competition in the following markets: (iv) Must offer and must carry obligations will apply open and paid television; radio; fixed and mobile on a free basis, subject to: a) the must carry obligation telephony; data services, and all telecommunications is applicable to DTH operators if they cover 50% or services, and (iii) generate conditions to increase more of Mexico, and b) the gratuity of both obligations infrastructure and its efficient use, in order to reduce do not apply x) to concessionaires with substantial or the prices and rise the quality of services. preponderant power, and y) when IFETEL determines Although everybody may celebrate the aims of the the existence of competition in broadcasting and Bill, there is no common agreement that the proposed telecommunications markets. changes will actually generate the desired results. (v) IFETEL must issue (180 calendar days) the

JUNE 2013 | FOCUS LATIN AMERICA

BSTL.indd 24 5/3/13 10:00 AM MEXICO

bidding rules for two new accountability mechanisms to limit the power of IFETEL television networks with national (e.g. internal control body, summons, annual program, coverage. quarterly reports). (vi) IFETEL must determine (180 calendar days) the existence of IN WHAT WAYS WILL THE BILL MODERNIZE economic agents who hold a TELECOMMUNICATIONS IN MEXICO? market share greater than 50% of If effectively implemented, the Bill could modernize the users, subscribers, audience, traffic telecommunications sector in Mexico basically through or installed capacity more national (private and public) and foreign (“preponderant agents”), in order investment due to: (i) the elimination of restrictions to Federico to: a) impose measures to avoid foreign investment in telecommunications activities and Hernández Arroyo at BSTL affecting free competition up to 49% in the broadcasting industry (subject to (including unbundling of its reciprocity); (ii) the possibility of providing all services essential facilities); b) issue general guidelines to allow technically possible (convergence); (iii) the bid of two them the provision of additional services, and c) issue new broadcasting national networks; (iv) the transition measures to enable the unbundling of the local network to DTT; (v) a more independent and credible regulator; of the preponderant agent. (vi) the application of the competitive measures such (vii) The Executive Power and IFETEL shall secure as: must carry, must offer, unbundling, preponderant the installation (2014-2018) of a shared agents, and (vii) the installation of a wholesale telecommunications network for wholesale services, telecommunications network. which will use at least 90 MHz of the 700 MHz band. Assuming that the foregoing actions result in more competition, notwithstanding the limitations of the Bill, HOW SIGNIFICANT IS THE CREATION OF A NEW INDEPENDENT there is no doubt that telecommunications in Mexico REGULATORY BODY IN THE TELECOMS SECTOR? will improve as well as its social, political and economic The current broadcasting (except content) and conditions. telecommunications regulator is the Federal Telecommunication Commission (“COFETEL”), which was WHAT OTHER HEADLINES DOES THE BILL PROPOSE? created as a governmental subordinated body in 1996, The Bill sets forth the creation of a decentralized public although its independence was boosted through the body with technical, operational and decision-making Televisa Law and other Supreme Court decisions. The Bill autonomy, in charge of promoting non-profit proposes the substitution of COFETEL by IFETEL. broadcasting services, in order to secure the access to The main improvements of IFETEL are: constitutional national, educational, cultural, civic, diverse and plural autonomy; management of its own patrimony and content. Also, the Bill prohibits the broadcast of budget; independence of resolutions, including its own publicity or propaganda to be presented as journalism statute and general provisions; public deliberations; or news. powers to directly grant/revoke concessions; exclusive On the other hand, the Bill orders the Federal powers in economic competition matters regarding the Electricity Commission to assign its public broadcasting and telecommunications sectors; telecommunications network concession to legitimation for constitutional disputes and content “Telecomunicaciones de México” (a body subordinated regulation (except electoral). to the Ministry), in order to secure an efficient and One controversial characteristic of IFETEL is that all shared use of the infrastructure (which is not of its acts could only be challenged via indirect “amparo” transferred). and could not be stayed through injunctions, although Finally, the Bill also addresses the structure and the new Amparo Law (April, 2013) limits the injunction powers of the Federal Economic Competition only with respect to public goods (such as the spectrum). Commission (that will substitute the Federal Another point for debate is the process to appoint the Competition Commission) – similar to what is proposed seven commissioners of IFETEL (on a staggered basis, to IFETEL. ■ for nine years without reelection), as the Bill introduces a new mechanism (i.e. evaluation process by a Author committee; presidential proposal, and Senate’s approval Federico Hernández Arroyo and appointment of the president for four years) and a D. +52 (55) 5091-0164 set of strict requirements to be complied with by the [email protected] individuals proposed as commissioners, but there is no guarantee to avoid the political interests involved. Barrera, Siqueiros y Torres Landa, S.C. (BSTL) The Ministry of Communications and Transporation Paseo de los Tamarindos #150-PB (“Ministry”) and the Ministry of Finance and Public Bosques de las Lomas Credit may issue (within 30 days) non-mandatory 05120 México, D.F. opinions with respect to certain acts of IFETEL. T. +52 (55) 5091-0000 Fortunately, the Senate included various http://www.bstl.com.mx/hernandez-arroyo-federico

JUNE 2013 | FOCUS LATIN AMERICA

BSTL.indd 25 5/3/13 10:01 AM MEXICO

Q&A: LABOR AND EMPLOYMENT IN MEXICO

IN NOVEMBER 2012 MEXICO'S SENATE APPROVED A LABOR enjoy the same labor conditions as permanent REFORM BILL; HOW LONG HAS REFORM BEEN IN THE PIPELINE? employees on a pro rata basis. EXICAN Federal Labor Law was enacted 43 The concept of telework (“home office”) is years ago in 1970. Apart from amendments incorporated and acknowledged as long as made in 1980 to certain procedural aspects communications and information technology is there have not been substantial amendments involved. The following provisions are added to the Mor reforms to the Law until last year. On September 1, chapter corresponding to household or domestic 2012, the former President of Mexico, Felipe Calderon employment: household employees living at the Hinojosa sent a bill to the Lower House of Congress workplace will have to enjoy at least three hours of rest concerning a much needed labor-related reform. between morning and evening activities and at least a By virtue of recent authorities granted to the nine hour sleep period. Mexican President, the bill had to be discussed within Provisions for the protection of Mexican expatriates the next 30 natural days starting from the date in which would also be acknowledged. the bill was sent to the Lower House of Congress. The bill also introduces outsourcing provisions. The On November 30, 2012, the Labor Reform was concept of outsourcing is defined for the first time in published in the Federal Official Gazette and became Mexican labor law as the sub hire of personnel in order fully enforceable on December 1, 2012. to perform activities in favor of a beneficiary of the services. However, the following deadlocks were WHAT ARE THE MOST SIGNIFICANT CHANGES THAT THE NEW BILL LOOKS TO IMPLEMENT? In general, employers should The concept of “decent work” is incorporated, which relates to the dignity and treatment of all employees, as revisit their employment practices well as non-discrimination issues, and the right to social security for all employees. The inclusion of this concept in Mexico to take advantage of, is in line with international treaties of the International Labor Organization ratified by Mexico. and ensure compliance with, the When it comes to equal employment conditions, for recently enacted Labor Reform. similar or analogous services, the same employment conditions should apply. No difference should be made by virtue of ethnical origin, nationality, gender, sexual included in order to consider outsourced services to be preference, age, disability, social condition, religion, rightfully contracted: they cannot relate to substantial political opinions and/or marital status. activities which are necessary in order to fulfil the Current modalities of employment relationships for a company’s main corporate purpose; they cannot cover definite, indefinite and specific job are unchanged. the entirety of activities of the company; they cannot be Seasonal and initial training employments have been similar or analogous to activities already performed by added. In this regard, Mexican labor law would also the company’s own employees; and the reason for recognize three new kinds of employment contracts: for contracting outsourced services must be clearly a trial period of no more than 30 days for regular justified. Should any of the aforementioned deadlocks employees and six months for managing or technical not be complied with, the beneficiary of the outsourced positions; for initial training and teaching for a period of services will be considered as the employer of the no more than 30 days for regular employees and six personnel rendering the outsourced services for all months for managing or technical positions; and for labor and social security legal purposes. seasonal activities. These new agreements cannot be The following additional grounds for dismissal are extended and employees hired under such schemes included without incurring the employer in liability:

JUNE 2013 | FOCUS LATIN AMERICA

Basham.indd 26 5/3/13 10:04 AM MEXICO

violent acts against the employer’s without just-cause are banned, among others. Sexual clients and/or suppliers, unless the harassment provisions would also be included for the employee was taunted; sexual first time and they are also being considered as harassment; and lack of sufficient grounds for dismissal. documentation required by In the event that labor authorities detect any minors Mexican legislation in order to aged 14 years or less, the authority will order the minor perform certain activities. The to terminate his or her activities and the employer will employer may notify the dismissal incur a fine equal to 250 to 5000 days of MGDW. either directly to the employee or Child labor is prohibited in non-industrial through the corresponding labor establishments after 10pm; in intoxicating beverage Jorge G. De and arbitration board. outlets, pubs or taverns; in work places likely to affect Presno There are also grounds for their moral or customs and in hazardous or unhealthy dismissal attributable to the workplaces. employer: encountering the employer during working hours, or any of its relatives or representatives, in acts WHAT MEASURES ARE MISSING FROM THE NEW LABOR LAW of dishonesty, violence, threats, sexual harassment, THAT ORIGINAL PROPOSALS INCLUDED? mistreating or any other similar or analogous acts Provisions relating to union transparency which were against the employee, spouse, parents, children or initially included in the project sent by the president brothers. were not approved by the Lower House of Congress. As The employer will be obligated to notify competent the majority of Congress is held by the PRI, the political authorities and alimony beneficiaries of any terminated party of the current president Enrique Peña Nieto, and employee. by political allies of PRI whose members include former For the first time, technological-related and current union leaders, it was expected that union circumstances would be considered as evidence in labor related provisions would most likely be untouched. related proceedings, such as: audio and video On the other hand, the concept of employment “at recordings, fax documents, e-mail transmissions, will” was not included in the Labor Reform and remains electronic signatures, and in general all information invalid in Mexico; therefore, an employer in Mexico may technology devices and related information. In addition, dismiss an employee without liability only if there is a the figure of conciliation officials is created; it is specific ground for the dismissal. provided that only certified lawyers or students will be able to participate in labor trials; all officials of the WHAT IS YOUR ADVICE TO CLIENTS LOOKING TO ADAPT TO conciliation and arbitrations boards will have to be THE TO THE NEW EMPLOYMENT RULES? certified professionals; a new summary proceeding is While the Labor Reform will allow much needed included; the amount for fines incurred for labor related flexibility, employers must observe all provisions in breaches is raised from 350 to 5000 times the order to take advantage of the new employment Minimum General Daily Wage in Mexico (MGDW). The modalities and agreements, as failure to observe any of current MGDW equates to approximately US$5, the requirements would likely cause the employer to therefore depending on the circumstances of each case, lose the ability to terminate an employee that does not the fine would range between US$300 and US$25,000. meet the required skills or that failed to acquire the The proposed reform also addresses the matter of necessary abilities required for the job. back pay derived from labor trials. A cap of 12 months In general, employers should revisit their would be placed on back pay starting from the alleged employment practices in Mexico to take advantage of, dismissal date. From the 13th month onwards, an interest and ensure compliance with, the recently enacted Labor rate of 2% would have to be observed over a 15-month Reform. ■ basis, considering the initial 12 months and three more months corresponding to mandatory severance. Authors: Jorge G. De Presno, Head of Employment IN ADDITION TO THE HIRING AND DISMISSAL ELEMENTS, [email protected] THE NEW LAW ALSO AIMS TO MODERNIZE MEXICO'S APPROACH TO GUARDING AGAINST CHILD LABOR AND Alvaro Gonzalez, Senior Associate PROTECT WORKING WOMEN, HOW HAVE THOSE [email protected] DEVELOPMENTS BEEN RECEIVED? They have been very well received. Even though Basham, Ringe y Correa, S.C. Mexican Labor Law already included provisions in order Paseo de los Tamarindos 400-A 9° Piso to protect children and women, new provisions were Bosques de Las Lomas, México D.F. included as follows: There is now flexibility on maternity Tel: +52 55 5 261 0415 periods, pregnancy tests and dismissals whilst pregnant www.basham.com.mx

JUNE 2013 | FOCUS LATIN AMERICA

Basham.indd 27 5/3/13 10:04 AM MEXICO

MEXICO’S INFRASTRUCTURE REACHES A TIPPING POINT

URING his inaugural speech as President of Mexico controlled oil and electricity industries have languished last December and in speeches throughout the first for decades and are in great need of new investment. month of his term, Enrique Peña Nieto announced This reform should be sent to Congress in the second bold actions meant to bring profound changes to semester of 2013, and although it will likely be a much Dmany of the country’s stagnant economic sectors. Some contested process, it is expected to be approved by the skeptics doubted his intent and said little would change, end of the year. If passed, the energy reform will declaring that these speeches were only designed to grab undoubtedly cause a major shift in Mexico’s economy headlines and change the topic of conversation from and create very important investment opportunities questions on his legitimacy and competence to govern. along the whole production chain. One has only to remember that President Felipe Calderon Following is an analysis of the main infrastructure declared six years before that the signature policy of his sectors where reforms are expected to create administration would be promoting infrastructure, only to investment opportunities. It should be noted that these see this goal dissolve amid the global financial crisis and reforms will not only open the core industries to new the drug-related violence that together crippled Mexico investment, but also create additional opportunities in and had brought governmental action to a standstill. ancillary and supporting industries, opening the While recent years have seen many presidential Mexican market for many new global players. proposals disappear into the morass of Congress, it seems that current conditions – strong social demand ENERGY for significant change, post-electoral disarray in Although the exact terms of the energy reform have opposition parties, and the unquestioned need for not been made public, the National Strategy on Energy investment into core sectors – have aligned political prepared by the Ministry of Energy and approved by the interests. These favorable political conditions, coupled Senate in March is an excellent guide to identify with solid performance in the overall economy and opportunities in the sector and provides a clear view of global events shining a positive light on Mexico, will the scope and depth of the necessary reforms. likely be the best opportunity in over a decade to Recognizing that in order to promote long-term implement much needed structural reforms in the economic growth the country requires reliable and country’s infrastructure. efficient energy sources, the core of the National Recognizing the favorable prospect for change, over Strategy on Energy addresses investment in developing the past months Mr. Peña Nieto has followed his initial required infrastructure. speeches with well-orchestrated legislative actions. The The natural gas industry saw significant growth in first salvo came on the education front with an in-depth the 1990’s but has since tapered off, leaving the country constitutional reform designed to modernize the with an insufficient and unreliable National Pipeline crumbling system and free it from the stranglehold of System. While the northern part of Mexico has the Mexican teachers’ union. Although the bill was met developed a natural gas infrastructure, the southern with strong opposition, it was promptly approved by part has the natural resources but has limited transport Congress and state legislatures, and is being followed and distribution infrastructure, imposing critical limits by secondary laws and regulations. on the efficient use of national resources and Now the administration’s efforts have turned to dependence on imports. This situation creates the reforms meant to incentivize significant growth in the immediate need for the construction of (i) natural gas economy through investment in core infrastructure. transportation infrastructure that allows efficient The first step was the Telecom Bill presented to import of natural gas from the United States, as well as Congress in March which passed legislative review and secondary lines for distribution throughout the country; approval, bringing substantial constitutional and (ii) storage facilities. Mexico will also need to invest amendments that are extensive in berth and depth. in leading technologies to efficiently exploit its natural While other changes are expected, the most anticipated gas resources, both in traditional form and as shale gas. reform is to the energy sector where the government- These two areas will create investment opportunities

JUNE 2013 | FOCUS LATIN AMERICA

Creel.indd 28 5/3/13 10:06 AM MEXICO

larger than any seen since the government has already assigned budgetary expenditure opening of the market to private and executed development agreements with the relevant investment. states to obtain the necessary rights of way. We expect The oil and petrochemical these projects should be ready to commence public sector, controlled by state-owned bidding procedures by 2014, and that they will be Pemex for over six decades, is in developed under the PPP Law approved last year, which dire need of modernization and the provides the legal framework for public-private present administration is no longer partnerships to develop core infrastructure and promote a avoiding this reality. It is now clear reduction in development costs, faster project that the only way forward is to implementation, and provide investors with legal certainty. Santiago allow private investment in the Sepulveda at Mexican oil industry, in the TOLL ROADS CREEL understanding that the Mexican The expansion of the Mexican highway system seen in state will remain in control of the reserves and their past administrations is expected to continue through extraction. Nevertheless, we will likely see significant two main drivers: (i) new roads to be developed at the investment in (i) drilling platforms and the ancillary federal and state level, which will include toll roads, as maritime fleet necessary for extracting and well as smaller country roads; and (ii) modernization transporting oil products; (ii) transportation and storage and improvements to the existing network. As with infrastructure for oil and petrochemicals (both through other infrastructure projects, the new roads will be pipelines and by rail); (iii) new refineries and other developed in accordance with the PPP Law. petrochemical processing facilities; and (iv) all value- added services in the exploration, extraction, As can be concluded from the brief descriptions transportation, processing and sale of oil and above, we anticipate important changes in the petrochemicals. infrastructure sector that will trigger a large array of The total demand for electricity in Mexico is infrastructure projects in coming years, requiring expected to increase 50% in coming years, requiring significant investment that can only be obtained by greater power generation and larger transmission allowing private investment on a global scale. With this infrastructure. Recognizing these needs, the present in mind, market players in each industry and throughout administration has decided to anchor its generation the supply chain should design and implement infrastructure in new gas-powered facilities, while strategies that will allow them to participate in this shift, promoting diversification through cogeneration, which is opening momentous opportunities in Mexico. ■ renewable sources and exploring possible expansion of existing nuclear facilities. We also expect significant Creel, García-Cuéllar, Aiza y Enríquez is an award investment in the decaying transmission infrastructure. winning, full-service corporate law firm with a wide array of practice areas with specialized expertise TELECOMMUNICATIONS working closely together in a true partnership to The core of the Telecom Bill is intended to open the provide clients a unique team of attorneys with telecommunication and broadcasting sectors to ample extensive knowledge to anticipate and resolve issues competition and new investment opportunities. These and efficiently achieve clients’ legal and business two goals are to be achieved by creating a new goals. The Firm is a strategic service provider to independent telecom regulator with significant power to clients with the most complex and demanding impose antitrust measures, as well as by opening of the transactions and projects, affording them certainty sector to foreign investment. and peace of mind. The Firm has been distinguished Once the secondary legislation is published, we for its extensive expertise in representing foreign and expect the Ministry of Telecommunications will domestic clients in the structuring, financing and commence an aggressive effort to promote new implementation of large gas, electricity, oil, investment in satellites, cellular telephony, internet petrochemical, telecommunication and infrastructure broadband, and radio and television broadcasting. It is projects, representing major energy companies, also expected that the opening of these markets will be project sponsors and developers, engineering and designed to limit the incumbents’ power to disincentivize construction companies, lenders and investors in competition and the entrance of new global players. infrastructure projects in Mexico.

PASSENGER TRAINS For more information on our expertise in energy and President Peña Nieto has announced plans to develop infrastructure projects and project finance please three new high-speed passenger trains to link key urban contact Santiago Sepulveda at areas: Mexico City-Queretaro, Mexico City-Toluca, and the [email protected] Trans peninsular Yucatan-Quintana Roo. The federal or +52-55-4748-0613

JUNE 2013 | FOCUS LATIN AMERICA

Creel.indd 29 5/3/13 10:06 AM MEXICO

REAL ESTATE INVESTMENT TRUSTS (REITS) IN MEXICO

IBRA UNO’s latest equity offering represented not only the first but the largest Mexican REIT to be From an investor’s viewpoint, seen on the market so far. The offering raised over US$1.7bn in one of the biggest and most significant REITS are an attractive asset Fequity deals of the year in Latin America. Evercore Partners acted as the senior advisor and structuring class because exposure to real agent in this and other FIBRA transactions. Under the leadership of former Mexican Secretary for Finance estate is usually part of any Pedro Aspe and Adrian Cano, Evercore has been the diversified portfolio. They are a leading innovator in the development of this asset class in Mexico. Since then, three more FIBRAS have gone to very efficient vehicle for market and more are expected imminently. This new product into the market is pioneering and signifies creating exposure to real Mexico’s move towards emerging as a global financial hub and a leader in the region. estate assets without Akerman’s Carlos E. Méndez-Peñate, Co-Chair of the firm’s Latin America and Caribbean group and sacrificing liquidity. Alejandro Garcia Villalpando, a Mexican and US licensed Akerman partner specializing in cross border taxation, focus their practices on investing and financing assignments in Latin America. Here they discuss this Like US REITs, under Mexican law FIBRAS must groundbreaking new product in Mexico, what it means distribute annually at least 95% of their net taxable for the market and its players, and why REITs are an income, and at least 70% of their assets must be efficient way of bringing capital into the region. invested in real estate held for lease, among other requirements. Also like US REITs, the FIBRA is treated MEXICO’S STOCK EXCHANGE RECENTLY LISTED THE as a pass-through entity for Mexican Federal income tax COUNTRY'S FIRST REAL ESTATE INVESTMENT TRUST. purposes. US holders of FIBRA certificates will generally WHAT IMPACT DID THIS HAVE ON THE MARKET? not be subject to Mexican income tax on gains from the We believe that Mexican REITs (or FIBRAS as they are sale of FIBRA certificates on the Mexican Stock known in Mexico) will have a very positive impact on the Exchange. Distributions received by US taxpayers from Mexican and potentially all of the Latin American capital Mexican FIBRAS, although subject to Mexican markets. The FIBRAS are creating a new asset class and withholding tax (which is offset by an equivalent US tax there is a lot of real estate in Mexico with no debt that credit), is generally treated as dividend income in the can be monetized through FIBRAS. Mexican FIBRAS are US to the extent paid out of current or accumulated organized as Mexican trusts, which issue trust earnings and profits. certificates. These certificates are typically distributed FIBRAS are attractive investments for Mexican through a Mexican public offering, in conjunction with pension funds, which still have uncapped resources that an international offering in the US to qualified may be invested in them. US and other institutional institutional investors. investors are likewise FIBRA certificate buyers.

JUNE 2013 | FOCUS LATIN AMERICA

Akerman.indd 30 5/3/13 10:08 AM MEXICO

DOES THIS MOVE SIGNIFY THE FIRST Mexican and international investors. We think Mexico OF MANY NEW REITS IN THE did a fine job on both the regulatory and the tax aspects MARKET? WILL THIS NEW ASSET of the FIBRAS. We are confident that the Mexican CLASS TAKE OFF? regulatory and tax regimes used for FIBRAS will help Yes, we believe that the REITs will other Latin American countries to develop their own form a new asset class and that for similar products. the next 10 to 15 years, we will see more new REITs. Traditionally, WHY ARE REITS SEEN AS AN EFFICIENT WAY TO BRING IN Mexican taxpayers have invested CAPITAL TO THE MARKET, AND WHY HAS IT TAKEN UNTIL heavily in real estate with no debt, NOW FOR THIS TO HAPPEN IN MEXICO? Carlos E. Méndez- due to the perception that real From an investor’s viewpoint, REITS are an attractive Peñate estate is an inflation hedge. Thus, asset class because exposure to real estate is usually there is a very large pool of real part of any diversified portfolio. They are a very estate assets available for the creation of FIBRAS in efficient vehicle for creating exposure to real estate Mexico. This suggests to us that there are many more assets without sacrificing liquidity. REITs that can be structured. In addition, FIBRAS like The reason it has taken a number of years for these FIBRA UNO allow investors to invest in a diversified developments is that while Mexico has had FIBRA Mexican real estate portfolio by asset type, geography legislation in place for some years, the original and tenant base. FIBRA UNO's initial portfolio consisted legislation did not provide sufficient tax advantages. of sixteen properties. These deficiencies were corrected in the past few years, making these public offerings possible in a tax efficient HAS THE VOLUME OF FOLLOW-ON PLACEMENT BEEN manner. SIGNIFICANT? The issuance of FIBRA UNO was $300 million and was DOES THIS MOVE SIGNIFY A GROWING TREND OF followed by a $700 million issuance in 2012. We would ALTERNATIVE FUNDING IN THE MEXICAN MARKET? expect this trend to continue taking into account the The FIBRAS definitively provided a very attractive uncapped resources of the Mexican pension funds and alternative to investment in the Mexican market in the strong appetite for Mexico lately shown by foreign addition to the traditional players and asset classes investors. already available. ■

HOW FAR DOES HAS THIS CAPITAL INJECTION BOOSTED THE PROPERTY MARKET? Due to the recent issuance of the FIBRAS, we have not seen an immediate impact on the prices of Mexican real estate. However, we expect that the FIBRAS will boost the Mexican real estate market in the mid and long term.

HOW FAR DOES THIS MOVE SIGNIFY THE EMERGENCE OF THE MEXICO MARKET AS A LEADING SOUTH AMERICAN OR EVEN GLOBAL MARKET? CAN IT COMPETE WITH MARKETS SUCH AS BRAZIL, FOR EXAMPLE? The FIBRAs offerings are a very important step for Author: Mexico to become the leader in Latin America in this Carlos E. Méndez-Peñate, Co-Chair of Akerman’s Latin area. The Mexican real estate market is large and America and Caribbean group. significant enough to serve as a proxy in Latin America. [email protected] We expect that other major Latin American economies will follow the Mexican precedent established by the Alejandro Garcia Villalpando, Mexican and US licensed FIBRAs. If FIBRAs can be successfully replicated Akerman partner. throughout Latin America, the potential market is enormous. Akerman Senterfitt LLP 666 Fifth Avenue TO WHAT EXTENT IS THE MEXICAN MARKET ATTRACTIVE New York IN TERMS OF REGULATIONS AND CONDITIONS FOR BOTH Dir: 212.880.3894 DOMESTIC AND INTERNATIONAL INVESTORS IN THIS Main: 212.880.3800 ASSET CLASS? Fax: 212.905.6450 Mexican authorities worked very hard to create a favorable and tax efficient regime for FIBRAS for both www.akerman.com

JUNE 2013 | FOCUS LATIN AMERICA

Akerman.indd 31 5/3/13 10:08 AM ECUADOR, PERU, VENEZUELA | FOCUS LATIN AMERICA

Evolving Landscapes As the economies of Latin America continue to surge ahead, Focus Latin America looks at how the legal markets of Ecuador, Peru and Venezuela are adapting to meet new industry demands.

BY MARIA JACKSON

Change is spreading across the corporate regimes of Ecuador, America and the Caribbean at 3% for 2012. By contrast, Peru and Venezuela – and not necessarily for the good. Ecuador’s gross domestic product (GDP) climbed by 4.8% in Venezuela is hoping to fix its ailing economy by increasing 2012 and Venezuela’s economy grew by 5.6%. However, it was the tax burden on companies. In addition, controversy sur- Peru that was the real star performer, recording growth of rounding the country’s recent presidential elections quickly 6.2%, over twice the regional average. Importantly, growth is escalated into a potential trade row with the US. expected to continue in Peru through 2013, whereas The But it’s not all bad news; following Ecuadorean President World Bank expects Venezuela’s economy to stumble to 1.8% Rafael Correa’s re-election in February he is making solid at- growth in 2013. Certainly, the country is not winning any tempts to attract more foreign investment into the country. friends on the foreign investment side, with the World Bank And Peru’s strong growth and commitment to international ranking it 179 in the world in terms of ease of doing business. trade has seen it retain its record as one of the best countries ‘Venezuela has a legal framework that is largely in line Cto do business in Latin America, with the World Bank rank- with regulations in many other countries. That said, private ing it 43 in the world. businesses in Venezuela, whether domestic or foreign, are While Venezuela and Ecuador continue to be tricky places overcharged with red tape: obtaining permits, licenses and to conduct business, Ecuador’s rapidly growing economy and authorizations and getting certificates of good standings for Venezuela’s enviable oil reserves make them difficult jurisdic- every single activity involved in the operation of their busi- tions to ignore. On the other hand Peru, which is bordered on nesses. A very simple procedure can be very time-consuming the north by Ecuador, is becoming a “go-to” market for law and generate extra costs to the business involved,’ says Mari- firms due to its potential as a stable platform into the region. anella Morales, tax and corporate finance specialist in the Nevertheless, the countries all have one thing in common: as Caracas office of Miami-based firm Genovese Joblove & Bat- Latin America’s continued economic growth continues, clients tista. ‘Another major challenge is presented by the existence are waiting for change to see what opportunities could unfold. of a restrictive exchange control regime: a two-tier exchange control system, which severely curtails access to foreign cur- KEEPING PACE rency and represents a hidden tax to private investors.’ In April 2013, The Economic Commission for Latin America It is not just bureaucracy that holds Venezuela back but (CEPAL) published its Economic Overview of Latin America also its challenging political climate. Following the death of and the Caribbean 2012 report, which put growth in Latin Hugo Chavez in March 2013 after 14 years as head of state,

32 JUNE 2013 | FOCUS LATIN AMERICA

Emerging Markets.indd 32 5/3/13 10:10 AM CARACAS, VENEZUELA SKYLINE

Emerging Markets.indd 33 5/3/13 10:11 AM ECUADOR, PERU, VENEZUELA | FOCUS LATIN AMERICA

Socialist Nicolas Maduro was declared President after a snap elec- socialist governments,’ says Neher. ‘This requires strong legal safeties tion that The National Electoral Council announced he won with a for mining projects and the ability to adapt to different environ- 1.8% margin. Maduro has been quick to continue with the anti-US ments over time. These changes also result in interesting windows rhetoric that characterized his predecessor, announcing that US sup- of opportunity for companies and legal advice has to allow for deals port of a vote recount was “brutal” – although he relented a week to be made but take care of the clients’ backs.’ later with public pleas for a “dialogue” with the US government. Al- Of course minerals are not the only natural resources that attract though Venezuela is particular case, government whims can have a investors to the region. Oil is also a big lure. dramatic influence on investment projects throughout the region. Ecuador is a significant oil producer and its output increased by Norton Rose has platforms in Venezuela and Colombia through 0.8% in 2012 to an average of 504,000 barrels per day. In November its tie-up with Canada’s Macleod Dixon, which officially joined the 2012, the country launched a licensing round for 13 oil blocks in UK-headquartered firm’s Swiss Verein in 2012. Mining is one of the Amazon areas and expects to attract around $1bn in oil exploration. firm’s specialist areas globally, meaning that it is active in some of Unlike Venezuela and Ecuador, Peru is not a member of The Or- the region’s most difficult climates. ganization of the Petroleum Exporting Countries (OPEC), but its ‘Latin America can be divided into business friendly and non- Energy Ministry has announced that it is looking to develop projects friendly countries,’ says Jorge Neher, natural resources, infrastruc- worth around $20bn before 2018 as it focuses on doubling its oil and ture and public law partner in the Caracas and Bogotá offices of gas output. Norton Rose. ‘For instance, Venezuela, Ecuador and Bolivia are very But of course it is Venezuela that is the jewel in the crown for re- difficult to do business, so for the moment they are almost closed gional oil investors. to mining investment. On the other side of the scope, countries Caracas firm DLA InterJuris Abogados entered into an associa- like Peru, Chile, Mexico and Colombia promote private mining tion with UK-US heavyweight DLA Piper in March 2011. Since then investment and have institutional frameworks providing guarantees the firm has increased to 25 lawyers to meet market demand and oil for investment.’ and gas work is driving deal flow. In particular, the firm is antici- Latin America is one of the world’s major hotspots for mining pating the development of Venezuela’s Orinoco Oil Belt to draw the work and that industry provides a useful analogy for macro foreign investors in. investment trends. ‘Because the oil in the Orinoco Belt is extra-heavy crude, enhanced recovery methods to increase the area's recovery factor (the current MINE OR YOURS? recovery factor is 7%-10% and the Government expects to increase it Strong demand for precious metals has driven growth across the to at least 20%), and upgrading facilities, are needed for deep conver- continent and according to the UN Economic Commission for Latin sion to produce synthetic crude of higher API for market placement,’ America and the Caribbean (ECLAC), the sector accounted for 6.1% says Gabriela Rachadell de Delgado, head of the energy team at DLA of the region’s GDP in 2011, up from 4.3% in 2001 – that is a rise of InterJuris Abogados. ‘Thus, the capital costs and technological com- $90.1bn to $305.8bn in ten years. plexities to monetize these reserves are huge, and it will only be pos- Peru saw mining exports leap by 26.7% to $20.5bn in 2011, ac- sible with private investment and financing. The investment for each cording to figures from PricewaterhouseCoopers (PwC) – although Greenfield Orinoco Belt project is estimated to be between $14bn to lower gold exports saw the country record a 1.7% slide in 2012, min- $21bn. We expect that the structuring of these investments and fi- erals still represent around 60% of the country’s exports. nancing will generate a significant amount of legal work.’ In Ecuador, the government is pushing to encourage investment In addition, the development of the area will also require signif- in mining. Canada’s Kinross Gold Corp is waiting for reforms to icant ancillary infrastructure, such as industrial condominiums, pass relating a windfall tax before developing the Fruta del Norte a liquids and solids reception terminal, a marine terminal and a gold project in southeastern Ecuador. massive oil pipeline. Gas is also expected to generate a steady stream Venezuela is also trying to position itself as a major minerals proof instructions. ducer following announcements that its steel requirements are rising ‘Since the enactment of the Gas Law in 1999 (which opened the on the back of oil sector demand. However, following Chavez’s opportunity for private investors to participate in the exploration decision to pass a decree in 2011 that the government would be and production of non-associated gas reserves), there have been sev- collecting a 13% royalty on gold mining and establishing military eral gas licensing rounds,’ says Rachadell de Delgado. ‘A few have zones to crack down on illegal mining operations, its future looks lead to significant offshore discoveries that are expected to be de- more unpredictable. veloped as LNG projects.’ ‘The fun, but also challenging, thing about Latin America, is that So far the LNG projects have been delayed because of every now and then countries sway between market oriented and government changes to the business framework terms. However, if

34 JUNE 2013 | FOCUS LATIN AMERICA

Emerging Markets.indd 34 5/3/13 10:12 AM ECUADOR, PERU, VENEZUELA | FOCUS LATIN AMERICA

these projects kick-off there will be interesting opportunities ‘As this is the first time a large international firm has entered the for energy work. market, it is certainly significant,’ says Thomas Thorndike, corporate ‘The government has stated that its “gas expectations” (additional partner at full service Peruvian firm Rubio Leguia Normand. ‘How- reserves that could be added as a result of exploratory efforts) would ever, the fact that they have entered the market through Echecopar nearly double the country’s proven reserves,’ said Rachadell de Del- (an already well recognized top tier Peruvian firm) will certainly gado. ‘These expectations are focused mostly on offshore opportu- make their inclusion to the market much more simple.’ nities so it is foreseeable to see in the future more gas exploration Thorndike remains sanguine about the impact of Baker & licensing rounds for offshore areas. How soon this will happen, we McKenzie’s entry because Peru already has a well-developed legal cannot say. And whether market conditions will allow for any dis- market. The recent rise in Peru’s fortunes has led to a rise in complex coveries to be commercially viable – which is what would eventually foreign investment deals and ever-more sophisticated corporate lead to a substantial increase in energy work, is also uncertain.’ finance transactions, and local firms have been well equipped to However the oil and gas sectors play out, DLA InterJuris Abo- meet the demand. gados is priming itself to mop up some good instructions. The firm ‘Domestic firms have responded positively to the interest and in- recently showcased its experience in the energy area through its ad- volvement of foreign firms in Peru, as competition is always good vice to Gazprom Latin America on its acquisition of Venezuelan as- for the market and the quality of services rendered,’ says Thorndike. sets following a worldwide restructuring, it also advised the oil giant ‘Rubio Leguia Normand has always tried to maintain international

• • • ‘The fun, but also challenging, thing about Latin America, is that every now and then countries sway between market oriented and socialist governments. This requires strong legal safeties for mining projects and the ability to adapt to different environments over time.’

on EPC contracts for a natural gas compression plant (Gabriela (New York) quality standards, so the trend should be for other firms Rachadell de Delgado and Juan Jose Delgado led the team). to either maintain their top quality standards or improve to remain Together, DLA InterJuris Abogados and Norton Rose occupy an competitive and active in the market.’ enviable position in Latin American deals. Both boast strong inter- However, as Thorndike points out, the fact that Baker & McKen- national track records and are among a handful of major global law zie has absorbed a local firm will make its arrival easier to swallow. firms to have an office on the ground. In particular, Norton Rose’s ‘It would be interesting to see how an international firm would specialist projects and mining experience will ensure that it will be position itself or grow if it starts from “scratch” (i.e. “poaching” considered among the top choices for tricky deals in the region. attorneys from top tier firms and initiating positioning strategies, However, rivals will be looking to test that dominance as more firms etc.),’ he says. line up to launch a platform in Latin America. Rumours are constant that a large Spanish firm would consider launching in Peru, Colombia or Chile, however the speculation is HEALTHY COMPETITION yet to materialize into a solid announcement. Thorndike does not As international Swiss Verein structures become more common- predict that many international players are pondering following place in the global legal market, moving into new jurisdictions is Baker & McKenzie’s lead. less daunting for partners worried about profit share. Although ‘As to large US or European firms entering Peru, we believe a Ecuador is still a no-go area for foreign law firms, Venezuela is home legal market trend approach is not really key or relevant and that a to a host of foreign legal players, namely: Baker & McKenzie, Despa- case by case approach would be more suitable,’ he says. ‘Each firm cho de Abogados Miembros de Norton Rose, DLA InterJuris Abo- would have to consider their potential client base in Peru, their ap- gados and Despacho de Abogados Miembro de Hogan Lovells. proach as to the legal services to be offered, the fee policies to be es- The arrival of international law firms into Peru’s legal market tablished (as fees tend to be lower than US or European lawyers has long been heralded, but in 2012 Baker & McKenzie officially would charge in their home markets), specific local office structures became the first foreign entrant to lead the charge, following its tie and finally whether they would prefer to enter through already es- up with Peruvian heavyweight Estudio Echecopar. Are domestic tablished firms (such as the Echecopar and Baker & McKenzie firms worried? model) or to open offices from scratch.’

JUNE 2013 | FOCUS LATIN AMERICA 35

Emerging Markets.indd 35 5/3/13 10:12 AM THE CROSS-BORDER M&A AND LITIGATION FORUM SEPTEMBER 18, 2013 • THE HARVARD CLUB • NEW YORK, NY

TOP REASONS TO ATTEND:

• EXAMINE M&A strategies and • EXPLORE all financial options measure risk across international borders when structuring your deal

• DETERMINE the best approach to • EARN beneficial insight from your using in-house and legal firm teams international peers in-person while earning valuable CLE credits • IDENTIFY all aspects of integrating an international work force

For sponsorship information, please contact Al Liberty at 212-457-9486 or [email protected] For program details, please contact Jennifer Coniglio at 212-457-7926 or at [email protected]

from the publishers of:

36pFLA0613.indd 36 5/2/13 2:50 PM ECUADOR, PERU, VENEZUELA | FOCUS LATIN AMERICA

That said, Thorndike believes that regional firms might be business understanding of the need for skilled tax counsel.’ tempted to make the move. Clearly legislation is required to handle the new demands, par- ‘Interest from neighbor country law firms (such as Colombia or ticularly in relation to arbitration, which is usually part and parcel Chile) would not surprise us,’ he says. ‘Strategic regional growth has of the kind of infrastructure contracts Ecuador hopes to attract. always been the trend for law firms in general, however we have not However Ecuador has spoken out against the ICSID (International heard anything to this regard.’ Centre for Settlement of Investment Disputes) Convention, with While the legal markets of Venezuela and Peru are capturing the the result that international arbitration is suffering a difficult period interest of international firms, Ecuador is yet to ignite the spark of in the country. foreign interest. However, while it may not be welcoming new ‘There is a negative trend in arbitration. Ecuador has denounced arrivals, its economic growth has made some changes necessary the ICSID and certain bilateral treaties, which are obviously there as practices look to ramp up to respond to higher demands for to protect foreign investment,’ says Daniel Pino, partner at Ecuador legal services. firm Coronel & Pérez. ‘So naturally, a lot of investors are waiting to ‘Law firms that handle work for foreign and multi-jurisdictional see how that will unfold. The government is sending mixed mes- clients have continued to improve their communications and tech- sages to the world about foreign investment but I do think that the nological capacities,’ says Bruce Horowitz, name partner at full serv- climate will prove friendly to foreign investment going forward.’ ice Ecuadorian firm Paz Horowitz Robalino Garces. ‘We are also Venezuela famously withdrew from the ICSID in January of seeing a small increase in mergers to add bolt-on practices as well 2012, just months after its dispute with ExxonMobil saw the oil

• • • Although the road to a developed economy is a marathon not a sprint, as regional competition heats up Venezuela and Ecuador would do well to follow Peru’s example: foreign investment is the fastest way to growth.

as a small increase in the size of major firms and an increase in the major awarded $747m (it initially claimed $7bn) for losses arising number of firms that are merging, associating or adding offices in from Venezuela’s nationalization of assets in 2007. It is a tough ju- other major cities in Ecuador.’ risdiction for foreign investors and the signs are it could get even Among the market’s recent mergers, in 2013 Quito-based Corral more challenging. & Rosales joined forces with Guayaquil-headquartered Carmigniani ‘Earlier this year, the Ministry of Finance of Venezuela said: “we Pérez Abogados to create a national powerhouse that will bridge all had to pay more taxes”. The Ministry therefore projected a fiscal both of Ecuador’s main business centers. The combined Corral Ros- reform in order to achieve that increase in taxes,’ says Marianella ales Carmigniani Pérez will field 34 lawyers, making it one of the Morales. ‘It is expected that the most important reform would be in biggest firms in Ecuador. Critical mass is becoming much more im- the income tax area and special taxes may apply to some specific ac- portant as Latin America continues to globalize, resulting in new tivities. The proposal was expected to be presented to the National types of projects that need unique skills. Assembly in March but it has not yet occurred. In any case, we expect an increase in the tax burden of companies.’ LOOKING AHEAD On the other hand, Peru’s outlook remains traditionally stable Energy and natural resources work is fuelling a boom and govern- and foreign investment is increasing, not being restricted as the ments are looking to maintain growth by spending that money country continues to attract cash from across the globe. wisely. It is not just physical infrastructure that is needed but legal ‘In addition to the customary interest of U.S. and Spanish com- and financial systems are demanding modernization too as multi- panies in Peru, we are seeing a much greater presence in Peru from national clients move in. Chilean, Brazilian and Colombian companies, an increase in Chi- ‘Among the main business trends driving our practice on the nese interest, and a a much direct focus from large Spanish infra- commercial side is the growing telecoms business in Ecuador and structure entities in projects in Peru,’ says Thomas Thorndike. growing investment in energy, hydro and minerals projects,’ says Although the road to a developed economy is a marathon not a Horowitz. ‘On the legal side we are seeing growing use of alternative sprint, as regional competition heats up Venezuela and Ecuador dispute resolution mechanisms, an increasing awareness of the value would do well to follow Peru’s example: foreign investment is the of intellectual property and other intangible assets and a growing fastest way to growth. ■

JUNE 2013 | FOCUS LATIN AMERICA 37

Emerging Markets.indd 37 5/3/13 10:12 AM VENEZUELA

Q&A: TAX IN VENEZUELA

WHAT ARE THE HEADLINE TAX RATES THAT ALL FOREIGN foreign, are overburdened with red tape: obtaining INVESTORS SHOULD KNOW BEFORE CONDUCTING A DEAL permits, licenses and authorizations and getting IN VENEZUELA? certificates of good standings for every single activity HE tax system in Venezuela is complex but not involved in the operation of their businesses. A very dissimilar to regimes that exist in other countries. At simple procedure can be very time-consuming and the National Level, Income Tax is the primary tax generate extra costs to the business involved. levied on individuals and corporations. All those Another major challenge is presented by the Tdomiciled in Venezuela are subject to tax on their existence of a restrictive exchange control regime: a worldwide income. A credit is recognized in the law for two-tier exchange control system, which severely income taxes paid on foreign source income, up to the curtails access to foreign currency and represents a amount of the Venezuelan tax payable on the same hidden tax to private investors. income. A company is deemed to be domiciled in Venezuela when it is incorporated in the country according DOES VENEZUELA HAVE ANY FREE ECONOMIC ZONES? to the Commercial Code. Venezuelan Permanent Venezuela has established two free zones: the Zona Establishments (PE) of Foreign Companies are also Franca Industrial, Commercial and Paraguaná Services deemed to be domiciled in the country, but pay taxes only and the Industrial Zone, Commercial and Services on income related to PE. ATUJA (ZOFRAT). Within these areas it is possible for There are three categories of tax rates: Tariff 1 is authorized persons to engage in the production and applicable to individuals; Tariff 2 is applicable to marketing of goods for export, as well as providing domestic corporations and branches of foreign services related to international trade with special companies as well as PE, it is also a progressive tariff incentives granted in the applicable laws. (depending of the level of income) and varies between We also have free ports located in Santa Elena de 15%, 22% and 34%; Tariff 3 is applicable to the oil Uairén and Nueva Esparta state. sector and is 50% and 60%. Capital gains are taxable as included in regular WHAT ARE THE TAX INCENTIVES IN PLACE FOR FOREIGN income. Dividends paid by Venezuelan companies and BUSINESSES? profits remitted by PE of foreign companies to their The legal framework for the treatment of private home country are taxable at a general rate of 34%. Tax investments in Venezuela is based on equal treatment is collected at source. and legal guarantees for domestic and foreign In addition, Venezuela has a Valued Added Tax imposed investors. This framework is composed by: the Decree on the sale of goods and services at a rate of 12%. There Law on the Promotion and Protection of Investments; a are several exonerations granted by the government to the set of Bilateral Treaties for the Promotion and acquisition of certain goods and services. Reciprocal Protection of Investments (including, among At the local level (Municipalities) there is a Tax others, treaties with Spain, Barbados, United Kingdom, imposed on industrial and commercial activities Germany, Belgium, Brazil, Chile, Canada, France, the calculated over the gross income of the business. Rates Netherlands and Switzerland); the Commercial vary depending upon the activity, usually between 0.5% Arbitration Law and the existence of Tax Stability and 10%. Contracts in the Tax Code that allow the execution of Then there are many other day-to-day contributions such contracts between investors and tax authorities at and taxes levied on businesses that will affect clients’ all levels national, state and municipal. ongoing commercial activities. In Venezuela pre-authorization on investment is not required. However, some areas are restricted to foreign WHAT ARE THE MAIN CHALLENGES THAT FOREIGN investments including, gaseous hydrocarbons, INVESTORS MAY FACE WHEN CONDUCTING BUSINESS IN professional services regulated by law (administration, THE COUNTRY? accounting, law and journalism), broadcast television, Venezuela has a legal framework that is largely in line radio and Spanish-language newspapers. with regulations in many other countries. That said, Additionally, the law provides for the following private businesses in Venezuela, whether domestic or benefits on foreign investments: free remittance of

JUNE 2013 | FOCUS LATIN AMERICA

Genovese.indd 38 5/3/13 10:14 AM VENEZUELA

dividends and repatriation of HOW EXTENSIVE IS VENEZUELA’S DOUBLE TAX TREATY capital; open recruitment of NETWORK AND HOW COMMITTED IS THE GOVERNMENT TO technologies; and free access to WIDENING THAT LIST? capital and credit markets. Venezuela has signed an extensive network of Moreover, Venezuelan tax agreements to avoid double taxation. As you know legislation contains various these agreements limit the tax that the country can incentive programs directed at apply on dividends, interest and royalties (among other domestic and foreign investments, income) paid to nationals of other countries (parties to namely: a treaty). To date, the nation has signed agreements with the Marianella Morales Income Tax following countries: Austria, China, Germany, Spain, The income tax law establishes that Brazil, Mexico, The Netherlands, Barbados, Czech the national government may exempt all or part of the Republic, Norway, United States, Belgium, Cuba, France, income tax over profits derived in sectors considered of particular importance for the economic development of the The legal framework for the country, or those that could generate increased jobs. The national government has used this provision to treatment of private investment in issue several decrees and laws granting exoneration from income tax originating in activities such as construction Venezuela is based on equal (for housing units), fishing and agriculture. There are also treatment and legal guarantees for a number of incentives, consisting of tax cuts and exemptions for investments into tourism, agriculture, domestic and foreign investors. livestock, fisheries or fish, hydrocarbons and related activities. Sweden, Iran, Indonesia, Portugal, Kuwait, Switzerland, Denmark, Canada, Italy, Russia, United Kingdom and Value Added Tax (VAT) Trinidad and Tobago. This tax has been particularly used by the government The treaties refer mainly to income tax. Until now, to give sectorial incentives and benefits through Special the tax authorities in Venezuela and the tax courts have Decrees granting exonerations to the acquisition of generally recognized and respected the application of different goods and services. The VAT Law itself the tax treaties currently in force. However, the list of contains an extensive list of exemptions. Some treaties is already extensive and there are others needs examples of such exemptions and exonerations are: to be addressed by the government in the short term, a) Import, sale and delivery of services in the Ports and so we do not believe that widening the list of the Free Zones. existing treaties is a priority for the authorities today. b) Import of ships and navigation accessories, drilling platforms, accessories and equipment for the ship IS THERE ANY LEGISLATION BEING PLANNED IN THIS AREA building industry and shipyards, machinery and THAT CLIENTS SHOULD BE AWARE OF? cargo handling equipment. Earlier this year, the Ministry of Finance of Venezuela c) The temporary importation of movable property. said that ‘we all had to pay more taxes’ and therefore d) Sales of intangible or incorporeal movable property projected a fiscal reform in order to achieve that other than services as defined at the VAT Law. increase in taxes. It is expected that the most important e) Financial services. reform would be in the income tax area and special f) Purchase of agricultural machinery and vehicles, taxes may apply to some specific activities. automobiles, ships and aircraft for the public The proposal was expected to be presented to the transport of persons. National Assembly in March but it has not yet occurred. g) Public transport, land, maritime and domestic air In any case, we expect an increase in the tax burden of passengers. companies. ■ h) Purchase of unprocessed foods, medicines, and supplies products for human and animal consumption. Author Marianella Morales Customs Taxes Tel: + (58212) 771-5500 There is an Import Tax Refund System known as Draw [email protected] Back, that consists of the tax refund of tariff levied on intermediate goods for export of final products. Also a Despacho de abogados Miembros de la Firma Temporary Admission for Inward (ATPA) System allows Genovese Joblove and Battista, S.C. the import of goods with the suspension of payment of Av. Francisco de Miranda, import duties on all goods that are brought into the Torre Provincial "A" piso 8 oficina 81 y 82 country for some improvement and then exported. 1060 Caracas, Venezuela

JUNE 2013 | FOCUS LATIN AMERICA

Genovese.indd 39 5/3/13 10:14 AM CHILE, COLOMBIA, COSTA RICA | FOCUS LATIN AMERICA

Leading by Example Chile, Colombia and Costa Rica all have well-developed legal markets that are responding strongly to the increased dynamism brought by regional growth. These are the markets to watch.

BY MARIA JACKSON

It’s easy to get caught up in the hype surrounding the emerg- Norton Rose was recently awarded a platform in the country ing economies of Latin America and assume that strong re- following its 2011 merger with Canada’s Macleod Dixon and gional growth is a consequence of a poor starting point. Miami-based Holland & Knight opened the doors to its Although for some that is certainly the case, there is no doubt Bogotá office in 2012. As their economies continue to that it is a scattered picture, particularly in regards to the re- rack up some of the highest growth rates in the region, gion’s legal markets. there is no doubt that these legal markets have ample room Brazil and Mexico have the highest global profile, and an to develop further. accompanying legal environment to match that, but equally their legal markets are already home to legions of foreign law EASY DOES IT firms. On the other hand Chile, Colombia and Costa Rica all Strong legal markets do not spring up around poor corporate have well-established legal markets, but are less saturated with regimes; these markets provide stable environments for in- Iforeign players. And their legal markets are booming. vestors and that is a fact that is supported by The World Costa Rica may have the smallest economy out of the Bank’s ease of doing business report. In 2013, Chile was three, but it is the largest country in Central America and its ranked 37 in the world for doing business (first in the Latin political stability marks it as a top choice for companies look- American and Caribbean region) while Colombia was ranked ing for an investment platform in the region. Chile has long 45. Although Costa Rica was considerably lower down the list been open to international trade and its legal market is highly at 110 that represents an improvement of 12 places in one year sophisticated. On the international front, UK firm DAC and puts it above Argentina, Brazil, Ecuador and Venezuela. Beachcroft officially launched in Chile at the end of 2012, fol- ‘Costa Rica stands as one of the most politically stable lowing a three-way merger with local firms SegurosLex and countries in Latin America with an open economy that has Amunategui & Cia while Baker & McKenzie has been repre- made foreign direct investment (FDI) the principal force for sented in Chile for over fifty years. economic dynamism,’ says Rodrigo Zelaya, partner at promi- In line with its international prominence, Colombia’s legal nent Costa Rica law firm Batalla Abogados. ‘Since the late environment is the most sophisticated out of the three but 1980s, the country has managed to progressively shift its ex- foreign firms still have a limited presence. The ever-present port composition from primary products to high-tech man- Baker & McKenzie has had an office in the country for over ufacturing and services. Targeted actions to attract FDI have five decades but there has only been two recent newcomers: resulted in multinational companies in the areas of advanced

40 JUNE 2013 | FOCUS LATIN AMERICA

Old Guard.indd 40 5/3/13 10:17 AM BOGOTÁ, COLOMBIA

Old Guard.indd 41 5/3/13 10:18 AM CHILE, COLOMBIA, COSTA RICA | FOCUS LATIN AMERICA

manufacturing, life sciences and clean technologies, such as Intel, gion from companies looking to expand and invest in Chile,’ says Agilis, Avionix, Abbott Laboratories, Boston Scientiﬁc, St. Jude Alejandro Huneeus, corporate and energy partner at Santiago-based Medical and Hospira, establishing a significant local presence. In Morales & Besa. ‘Chile’s track record has meant that it is well placed addition, service exports (excluding tourism) have grown at a rate to act as a stepping stone to the region. The country’s respect for the of 17.7% annually since 2004.’ rule of law and long history of economic growth and stability lends As Zelaya also points out, the World Economic Forum ranks itself well to investors looking at the region for the first time.’ Costa Rica among the most innovative economies in Latin America In short, these are all vibrant economies actively looking to (in terms of global competitiveness it is ranked 57 out of 144 coun- promote foreign investment and business opportunities are tries) and it is one of the world’s top high-tech exporters; computer snowballing. parts, semiconductors, medical equipment and pharmaceuticals are the country’s main exports. STIMULATING GROWTH Colombia is also responding to the increased dynamism of the Colombia’s commitment to increasing growth has climbed up the regional market. The World Bank predicts its gross domestic prod- government agenda and it is expected to invest around $55bn in uct (GDP) to swell by a mammoth 21.9% during 2013 to 2017. transport initiatives over next decade including airports, railways Growth slowed to 4% in 2012, from 6.6% in 2011, but the govern- and waterways. ment has announced a stimulus package that it expects will push ‘The Government of Colombia is working very hard at main- growth up to 4.8% in 2013. The Latin American research division taining and increasing growth and it is an encouraging sign for in-

• • • As the tourists flock in and the economy diversifies, meeting the escalating demands of energy consumption and infrastructure development has become a top priority. It is a trend that is being seen across the region and law firms in Costa Rica, Colombia and Chile are gearing up to service clients in these sectors.

of multinational Spanish banking group Banco Bilbao Vizcaya Ar- vestors,’ says Camilo Martinez, partner at Bogotá-based Martinez gentaria (BBVA) also predicts GDP growth of over 4% in 2013. Neira Abogados. ‘In the past when times were bad politicians ‘In the last decade, the Colombian state has promoted through sat and waited for something to happen, now they actively look public policies a good macroeconomic environment for foreign in- to promote growth and that represents the change in the vestors,’ says Andres Godoy Cordoba, partner at leading Colombian Colombian mentality.’ employment law boutique Godoy Cordoba Abogados. ‘These meas- In a strong example of this new mentality, President Juan Manuel ures include reducing inflation, interest rates and taxes, establishing Santos launched a stimulus package in April 2013 to combat poten- free zones and encouraging Colombian entrepreneurs to formalize tial strains on the Colombian economy. their activities.’ Godoy Cordoba Abogados recently launched a sec- ‘Although the measures included under the stimulus proposals ond office in Barranquilla, Colombia’s fourth largest city, to service are quite specific in nature, they affect the economy quite broadly, the boom in clients locating to the bustling port town to take ad- as they are applicable in the majority of industries and sectors,’ says vantage of its growing international trade links. Jaime Trujillo, head of Baker & McKenzie’s corporate group in Bo- Chile is also excelling. In 2013 Forbes India voted Chile first in gotá. ‘The stimulus policies are mainly aimed at: weakening the its list of the seven hottest emerging markets globally and it is easy Colombian peso, because the current strength of the peso is consid- to see why; not only does the country regularly score among the best ered by many as the main reason for the lack of competitiveness of in the world for its economic freedom, but its GDP growth rate of some Colombian products and services; reducing the cost of gener- 5.6% (on the back of 5.9% in 2011 and 5.8% in 2010) mark it as an ating formal employment; reducing tariffs for the importation of booming economy. raw materials not produced in Colombia; and making more cash ‘In light of the current economic crisis affecting Europe, and available to the economy.’ given that a number of large multinationals have already focused on Other measures include making more funds available to infra- Asia (and in particular China and India) for their companies’ structure and subsidizing interest rates for buyers of homes. growth, we have seen a growing interest in Chile and the wider re- ‘The jury is still out on whether these measures will have any

42 JUNE 2013 | FOCUS LATIN AMERICA

Old Guard.indd 42 5/3/13 10:18 AM CHILE, COLOMBIA, COSTA RICA | FOCUS LATIN AMERICA

meaningful effect in the short term. At the outset, commerce and exports comprised around 6.5% of Costa Rica’s GDP in 2011 and trade will probably be adversely impacted adversely by the measures, this sector is facing some critical challenges, which has resulted as this sector relies heavily on imports (which will become more ex- in the loss of jobs in the traditional agriculture industries. pensive, as the dollar appreciates),’ explains Trujillo. ‘However, as However, the country has used the tough climate as an opportunity the long term goal is to provide stimulus to the economy, local com- to modernize. merce and trade should benefit from the measures as well.’ ‘A strong movement toward diversification, greater efficiency and Certainly, the country’s infrastructure plans are already creating production yields, more value-added products and an aggressive pol- work for lawyers as investors look to get involved; it seems there are icy of opening new markets (i.e. China, South America, India) plenty of projects to go around. through the implementation of FTAs are a cause for optimism in the ‘We believe there is a whole universe of opportunities for in- agriculture sector,’ says Mariano Batalla, managing director at Batalla vestors and we are starting to see an important number of investors Abogados. As Batalla also points out, the country’s increasing attrac- interested in being part of the infrastructure development in Colom- tion as a tourist destination has also encouraged diversification. bia,’ says Ricardo Seligmann Villegas, partner at Colombian firm ‘Tourism held its stead during and after the 2008 financial crisis. Muñoz Tamayo & Asociados, which has a strong record in projects Industry indicators during 2012, such as the number of visitors, ev- and privatizations. ‘This would include constructors, investment idence a return to pre-crisis levels as well as a healthy growth rate,’ bankers, foreign law firms and auditors, among others. There is also he says. ‘During 2012, sector related jobs rose to 61,000 (12,000 a strong presence of foreign companies setting up local vehicles to more that in May 2009) and FDI in the sector grew 24% on the pre- be part of this dynamism – including consulting companies and re- vious year. Significant trends include greater ecological, community tailers, basically companies offering all types of products and serv- and adventure tourism offerings that have precluded the industry ices like we have never seen before.’ from being neither concentrated in specific geographical areas nor Chile is a solid example of the kind of success that these types of pigeonholed in the high-end resort or all-inclusive categories. Due policies can bring. In 2009, the country approved a $4bn stimulus to the quality of local healthcare, medical tourism has also seen an package aimed at seeing it through the global financial crisis. Meas- important surge in recent years.’ ures included public spending on infrastructure and providing sub- As the tourists flock in and the economy diversifies, meeting the sidies and tax rebates. Now, according to Export Development escalating demands of energy consumption and infrastructure de- Canada, the country has a pipeline of infrastructure projects worth velopment has become a top priority. It is a trend that is being seen $60bn, with power and transport opportunities leading the way. It across the region and law firms in Costa Rica, Colombia and Chile has one of the highest numbers of free trade agreements (FTAs) are gearing up to service clients in these sectors. signed of any country in the world and in 2010 it became the first South American country to become an official member of the VALUABLE RESOURCE OECD. That success has translated into serious growth for law firms Costa Rica currently garners more than 90% of its electricity from as they try to keep pace with globalization. renewable energy sources and aims to increase that to 95% by 2014. ‘As a transactional law firm, we have seen the demand for our Costa Rica’s state-owned electric monopoly ICE (The Instituto services increase as more and more companies look to do business Costarricense de Electricidad) recently announced proposals to ac- here. We have responded to this trend by hiring more lawyers and cept bids for privately-owned renewable projects (100 MW of hydro our firm now comprises 55 lawyers,’ says Alejandro Huneeus. ‘All of and 40 MW of wind). Although these plans demonstrate growing our senior associates have completed masters overseas and we also demand they are extremely modest compared to the resources boom encourage inbound and outbound foreign internships. This helps in other parts of the region. Most notably, Colombia’s energy and us keep abreast of legal trends and requirements overseas. We reg- natural resources market is really attracting the cash. Alejandro ularly work with leading players in the United States and Europe Mesa recently led a team from Baker & McKenzie’s Bogotá office (both directly for companies coming to Chile from these jurisdic- that advised French oil major Total in the $1bn disposition of its tions, or alongside overseas counsel).’ mature assets in Colombia. Among the transactions that series of If Chile is an example of the economic success that commitment disposals involved, Sinochem acquired Total’s TEPMA unit, which to foreign investment can bring, then Costa Rica is the before pic- has holdings in two pipelines and a share of the Cusiana oilfeld. It is ture. Despite recording a 1.3% contraction in its economy in 2009 a deal that shows the appetite of investors in Colombia’s energy and following the global economic crisis, Costa Rica has recorded natural resources market. growth of around 4.5% per year during 2010 – 2012. However, ‘Right now, the most active area in Colombia is the natural re- growth is predicted to fall this year on the back of decreased demand sources sector,’ says Camilo Martinez. ‘In particular, the mining in- from its primary export markets (the US and Europe). Agricultural dustry is really opening up. Colombia has a large number of gold

JUNE 2013 | FOCUS LATIN AMERICA 43

Old Guard.indd 43 5/3/13 10:18 AM June 13-14, 2013 Convene (Midtown West), New York 16th AnnuAl GlOBAl CORPORAtE AIRCRAFt tRAnSACtIOnS FORuM InsightAircraft.com

Conference Highlights: Sponsors

• How (non-Chinese) lenders can finance aircraft in China (on the Chinese register) • Trends in financing business jets in mature and emerging markets • Optimal ownership structures and Registry selection – where, why? • Discharging illegal liens, de-registration and repossessions • Mitigating multi-jurisdictional risks to keep lenders and jet owners out of trouble Sponsorship Opportunities • International joint ventures: solutions for growing your business Contact in emerging markets Amy Leung [email protected] • Gray chartering – a problem for owners, operators, financiers, insurers or all?

Save $200 off registration price by using promo code LEX598

“ Great networking opportunities. Good opportunity to get broad overview on lot of topics from the best in the business.” – Crowley Aircraft Management Advisors

“ Enjoyed quality and professionalism of speakers. The candour was refreshing. The team spirit of the industry was highlighted.” – London Air Services Limited

44pFLA0613.indd 44 5/2/13 12:52 PM CHILE, COLOMBIA, COSTA RICA | FOCUS LATIN AMERICA

mines and the country is in a very early stage of exploration so ‘18 years ago the civil community couldn’t enter into all parts of there is still a considerable geographical area that is yet to be Colombia because of guerrilla violence,’ explains Camilo Martinez. explored. The potential for this sector is attracting consider- ‘Now we have seen peace talks there is a rise in discussions concern- able interest, particularly from investors in Canada, Australia and ing infrastructure. We are still at the bid-preparing stage but already South Africa.’ we are seeing serious interest, especially from Chinese investors.’ Martinez is also seeing increased interest from international in- Colombia’s legal framework is being updated accordingly to fa- vestors in the Colombian oil sector, and expects the area to become cilitate those plans. an FDI sweet spot. ‘A bill of law was recently submitted to congress which aims at ‘Venezuela is one of our neighbouring countries and it is a major giving the government and its contractors better tools to deal with oil producer however, Colombia is yet to fully explore its territory. the bottlenecks that have historically plagued the development of It is still early days but companies are coming to explore with suc- large scale transportation infrastructure projects,’ says Jaime Trujillo. cessful results,’ he adds. ‘These refer to issues such as the acquisition of land and rights or In Chile, mining is the big money-spinner. The country’s copper way and environmental licensing the mechanisms that should allow resources account for 20% of GDP and around 60% of exports. A for a swift resolution of disputes, without affecting the development team from Morales & Besa, led by energy and finance partner Pedro of the relevant project.’ García, recently worked alongside Shearman & Sterling to advise the lenders and agents on the Chilean aspects of the $1bn project fi- READY TO LAUNCH nancing of the AES Gener thermoelectric plant, Cochrane. As a rising number of Latin American markets line up to attract for- ‘The strength of Chile’s mining sector continues to be one that eign finance, it is no surprise that law firms are increasingly looking attracts foreign investment. Outside of the large international (and for a stable launch pad in the region. The jurisdictions of Costa Rica, national) mining companies there is a wealth of investment oppor- Colombia and Chile could provide sound bases for regional devel- tunity in supporting the mining industry,’ says Alejandro Huneeus. opment: despite being the smallest market of the three, Costa Rica ‘Project Cochrane is a good example of the types of institutional in- provides a democratic socio-political environment and a diversified vestment which this area attracts; finance came from some of the business platform in the heart of Central America; Chile boasts a world’s leading international institutions, including JBIC, The Bank sterling record for economic freedom and a legal market yet to be of Tokyo Mitsubishi, Sumitomo Mitsui Banking Corporation, saturated by foreign law firms; and Colombia’s commitment to free Mizuho, NEXI, K-Sure and HSBC.’ trade and the strength of upcoming cities such as Barranquilla, Cali, • • • As a rising number of Latin American markets line up to attract foreign ﬁnance, it is no surprise that law ﬁrms are increasingly looking for a stable launch pad in the region.

Of course mining development requires hefty infrastructure and Pasto and Huila highlight it as a major contributor towards regional Chile has serious ambitions on that side too. Among the country’s growth going forward. most high profile projects it plans to spend over $568m by 2020 on Of course a handful of foreign law firms have been quick to bridges, around $600m – $1bn in ports, and around $5bn in roads notice the potential and have already stolen a march, particularly and highways. Costa Rica is also thinking big. In 2011, APM Ter- in Colombia. But how long will Baker & McKenzie, Norton Rose minals signed a $992m 33-year concession contract to design, con- and Holland & Knight remain the only foreign law firms on the struct and operate the new Moin Container Terminal (TCM), the ground in Bogotá? largest infrastructure project in Costa Rican history. Generally ‘I don’t doubt that other international law firms will come to speaking, the government is keen to show its commitment to con- Colombia,’ says Camilo Martinez. ‘And that is a good development cession models to finance public works and in March 2013 it also for the local legal market; their wider reach means that they are ca- announced that tender details had been drawn up for the design and pable of attracting more foreign investors and local law firms can construction of a $200m project to link three major roads (the Gen- only benefit from that growth in business.’ eral Cañas highway, San José-Caldera and San José-Limón). So commitment to foreign investment is not just lip service it Colombia too, could provide an infrastructure windfall after seems; in these countries, and in many others across the region, years of stagnation. Latin America is open for business. ■

JUNE 2013 | FOCUS LATIN AMERICA 45

Old Guard.indd 45 5/3/13 10:18 AM COLOMBIA

Q&A: EMPLOYMENT IN COLOMBIA

GODOY CORDOBA ABOGADOS WAS ESTABLISHED OVER 20 YEARS AGO, HOW MUCH OF A LEAD DOES THAT Over the past 22 years, there has EXPERIENCE GIVE YOU OVER NEWER EMPLOYMENT been a noticeable shift in the BOUTIQUES IN COLOMBIA’S LEGAL MARKET? HE most important advantage that our history importance that companies attach provides is the warranty of a solid brand. We are committed to perpetuating the quality and to labor issues; it is pretty obvious experience that our brand represents and that to management boards that HR is Tcommitment permeates throughout every department at Godoy Cordoba Abogados. We have created a firm playing a more important role in culture that puts client satisfaction first, which means that clients will receive the same service from all lawyers business strategy. across the firm, in every case undertaken by us. advisory services are increasingly important to ensure ALTHOUGH THE FIRM PRACTICES EMPLOYMENT AND that companies have the right HR programmes in place CORPORATE IMMIGRATION EXCLUSIVELY, IT IS DIVIDED to avoid potential litigation. INTO SEVEN DISTINCT DEPARTMENTS. WHAT ARE THE REASONS BEHIND THAT STRUCTURE? FROM 2010 ONWARDS, LABOR LAW IN COLOMBIA HAS Although we practice employment and corporate BEEN SIGNIFICANTLY REVISED. WHAT RECENT CHANGES immigration exclusively, the firm is split into seven HAVE BEEN THE MOST NOTABLE FOR CLIENTS? separate groups: advisory in employment law, The first steps towards modernization of Colombia’s litigation,collective bargaining, M&A support, labor law labor legislation were taken with the changes provided audits, corporate immigration advisory and procedures by Law 50 in the 1990s and Law 789 in 2002. These as well as training services. This ensures that every modifications showed a commitment on behalf of lawyer has a strong unswerving focus on their Colombia to adapt to the demands of globalization. particular area, which provides obvious cost In 2010, there were other significant reforms. Law advantages to clients because each lawyer comes to 1429 ensured that tax incentives were awarded to each case with the relevant body of knowledge and corporations that hired workers from minority groups. perspective to handle it as expeditiously as possible The law also granted tax benefits to small start-up companies and simplified work-related proceedings. TO WHAT EXTENT HAS LABOR AND EMPLOYMENT LAW 2010 also saw the introduction of Law 1393, which CLIMBED UP THE CORPORATE AGENDA IN RECENT YEARS? implemented several regulatory reforms including the Although we act for both domestic and foreign clients, establishment of a maximum limit of 40% of total our market share is comprised more of global income for non-salary payments that employees can companies than Colombian companies. There is no receive as remuneration for rendering their personal doubt that our global clients are very concerned with services. human resources (HR) matters. Over the past 22 years, there has been a noticeable WILL THE RECENT SIGNING OF AN FTA WITH THE UNITED shift in the importance that companies attach to labor STATES EFFECT COLOMBIA’S LABOR LAWS? issues; it is pretty obvious to management boards that The signing of the long-awaited Free Trade Agreement HR is playing a more important role in business (FTA) with the United States in May 2012 does have strategy. It is also true that directors are becoming important implications for clients. In 2011, Colombia more aware that “prevention is better than cure” and and the US agreed an “Action Plan Related to Labor

JUNE 2013 | FOCUS LATIN AMERICA

Godoy.indd 46 5/3/13 10:29 AM COLOMBIA

Rights” that included concrete motions to improve labor We maintain a broad network of relations, most notably to protect both local and international union members, end impunity, and improve worker rights. association relationships to ensure Since the targets for the Action Plan were realized, the Colombian that clients receive the best president has said that he will not change labor laws further as part service possible and we are of the FTA, although he has Andrés Godoy agreed to strengthen existing always looking to extend our area Cordoba, regulations. Steps required by the managing partner of influence throughout Colombia at Godoy Cordoba FTA include hiring 480 new labor Abogados inspectors in four years. and worldwide. The FTA will also raise other employment law notifications for clients. Among the matters that clients should be aware of are issues surrounding clients receive the best service possible and we are professional rights regarding collective bargaining and always looking to extend our area of influence also new regulations for the prevention of work place throughout Colombia and worldwide. harassment. There are also attempts to reduce the As we have a strong record in advising multinational bureaucratic burden around the whole labor law area. companies in employment and labor issues, it is important to us that we have the capability to act WHAT ARE THE MOST COMMON CASES THAT YOU quickly in cross-border matters and that we can CURRENTLY HANDLE ON BEHALF OF YOUR CLIENTS? guarantee excellent service levels for our clients. We The most common reasons to file a labor claim against have a gold standard reputation to protect and the corporations arise from the lack of clarity regarding firms on our referral list are capable of meeting our salaries and other benefits in labor contracts. These strong service criteria. This ensures that wherever our misunderstandings motivate employee complaints for clients are in the world they will not get any surprises; the payments recognitions just the value-added advice that they rely on us to provide. ■ YOU RECENTLY DECIDED TO LAUNCH AN OFFICE IN BARRANQUILLA, A PORT ON THE CARIBBEAN COAST, WHAT WERE THE DRIVERS BEHIND THAT DECISION? Barranquilla is the fourth most populous city in Colombia, after Bogotá, Medellín and Cali. The city is home to the largest industrial city and port in the Colombian Caribbean region and it is a base for many multinational companies. However, it is currently not well served by law firms. Colombia’s legal market is centered in Bogotá and our existing clients were calling for sophisticated legal services outside of the capital. Author: Following the recent signing of the FTA with the US Andrés Godoy Cordoba, managing partner we believe the city is set to become an even more Email: [email protected] strategically important business hub. Barranquilla is only three-days by sea from New York and it will be an Godoy Cordoba Abogados S.A.S. increasingly useful gateway for international trade. As Main Office: such a high proportion of the firm is geared towards Cra 7 # 71-21 Torre B, Oficina 303, Bogotá servicing international clients we thought that Tel: +57 1 3174628 Barranquilla was a logical next step for us. Fax: +57 1 3174637

YOU ACT FOR AN ENVIABLE ROSTER OF MULTINATIONAL Caribbean branch: CLIENTS, HOW USEFUL ARE YOUR INTERNATIONAL Cra 53 # 82-86, Oficina 801, Barranquilla ASSOCIATION RELATIONSHIPS IN MANAGING MULTI- Tel: +57 5 3856071 JURISDICTIONAL CASES? Email: [email protected] We maintain a broad network of both local and international association relationships to ensure that Website: www.godoycordoba.com

JUNE 2013 | FOCUS LATIN AMERICA

Godoy.indd 47 5/3/13 10:29 AM COLOMBIA

Q&A: FOREIGN INVESTMENT TRENDS IN COLOMBIA

WHY IS COLOMBIA AN ATTRACTIVE JURISDICTION FOR INTERNATIONAL INVESTMENT? It always gives comfort to clients OLOMBIA is being discovered by foreign investors. It is not a secret that 15-20 years ago, that Colombia has never had an it was a very difficult and violent time for expropriation; successive Colombia. Since then the country has Cestablished a more secure environment and governments have always seen everything has changed. Growth has improved significant and foreign investors feel confident in foreign investment as the best bringing their business here. The Colombian economy grew by 4% in 2012 and it way to improve the country’s recorded 6.6% growth in 2011. In fact, growth has been sustained in high numbers for the past eight economic situation. years – and this is against a tough global economic backdrop. Investors are increasing realising that our government has made a series of good economic decisions and that Colombia provides an attractive potential for this sector is attracting considerable investment climate. interest, particularly from investors in Canada, The first question that every foreign client asks Australia, South Africa and the U.S. when they come to do a deal in Colombia is: how Oil is also becoming an active investment area. secure is my investment going to be? A few of our Colombia is yet to fully explore its territory. It is still neighbours may have governments with troubled early days but companies are coming to explore, with track records relating to foreign investment but successful results. Colombia actively supports FDI. It always gives We are also seeing a growth in infrastructure comfort to clients that Colombia has never had an projects. 18 years ago the civil community couldn’t expropriation; successive governments have always enter into all parts of Colombia because of guerrilla seen foreign investment as the best way to improve violence. Now we have seen peace talks there is a rise the country’s economic situation. in discussions concerning infrastructure. We are still On the tax side, congress recently announced a tax at the bid-preparing stage but already we are seeing statue that aims to facilitate foreign investment, serious interest from foreign investors. which demonstrates the commitment the Colombian In addition, the retail sector is receiving substantial government has to promoting Colombia as a global interest, particularly from Chile. We have seen two investment destination. major Chilean retail brands move in over the past two years. At the end of 2012, Chilean retail giant WHAT ARE CURRENTLY THE MOST ACTIVE BUSINESS Cencosud agreed to acquire the Colombian operations AREAS FOR FOREIGN INVESTORS INTO COLOMBIA? of France-based Carrefour for $2.6bn. Right now, the most active area is the natural The financial sector is also booming. A significant resources sector. In particular, the mining industry is proportion of the financial sector is controlled by local really opening up. Colombia has a large number of entities but that is changing slowly. In 2010, gold mines and the country is still in a very early stage Scotiabank established a presence in Colombia and of exploration so there is still a considerable other banks have followed; now 30% of the financial geographical area that is yet to be explored. The sector is owned by foreign institutions.

JUNE 2013 | FOCUS LATIN AMERICA

Martinez.indd 48 5/3/13 10:31 AM COLOMBIA

Finally, we are seeing growth in IF A BUSINESS RELATIONSHIP DOES TURN SOUR, WHAT the leisure sector. The ARE THE OPTIONS AVAILABLE TO AN INTERNATIONAL government has created a CLIENT TO INITIATE LITIGATION IN COLOMBIA? package of business incentives for Most foreign investors choose to resolve disputes hotel businesses that want to through international arbitration and it is welcomed in start development here. this jurisdiction. Last year our firm was chosen by the government to draft a statute to allow foreign COMPLIANCE HAS CLIMBED TO THE arbitration in Colombia and that willingness to provide TOP OF THE CORPORATE AGENDA secure international arbitration support gives clients OVER THE PAST COUPLE OF YEARS, comfort. Camilo Martinez IS THAT EVIDENT IN COLOMBIA We also see clients use Colombian arbitration; we Colombia is a developing economy have had a regime in place for 20 years. In fact, and the government is consistently working hard to Colombia was the first Latin American country to ensure that it is robustly regulated. create an arbitration center in the late 1980s. It is a The government has created a space to discuss respected and efficient system and most cases receive every potential regulation with the relevant industry. a decision in around one to two years. Cases that go through the court system can take around five to ten years so we always encourage our foreign investors to use arbitration over litigation. Most in-house counsels choose to HOW IMPORTANT IS IT TO INSTRUCT A LOCAL FIRM WHEN use local firms and there are strong HANDLING A TRANSACTION IN THIS FIELD It is very important. Most in-house counsels choose to reasons for this preference; it is not use local firms and there are strong reasons for this preference; it is not just knowledge of the local law just knowledge of the local law that we can offer clients but also knowledge of the cultural differences and the institutions, government that we can offer clients but also and political system of the country. Martínez Neira Abogados takes pride in its ability to provide knowledge of the cultural international standard advice and also to translate local systems into language that foreign clients differences and the institutions, understand. ■ government and political system of the country.

Communication is a key component of that strategy and it has allowed the government to issue guidelines that are welcomed by the business community.

WHAT ARE THE MOST IMPORTANT CONSIDERATIONS INTERNATIONAL CLIENTS SHOULD BE MADE AWARE OF Author: BEFORE CONDUCTING THEIR FIRST DEAL IN THE Camilo Martinez COUNTRY? Email: [email protected] It is essential that clients understand Colombia and the cultural ways of doing business. Martínez Neira Abogados It is also important for clients to research into the Cra. 7 No. 71-21 Torre B Oficina 602, track record of the investor that is sitting across the Bogotá, table from them. This is very easy to verify as we have Capital District reliable databases that allow us to do background Colombia checks. Foreign investors that do not undertake this procedure can get caught out. Tel +57 1 317 4720 Also the new tax statute is still being regulated by Fax +57 1 317 3032 the Colombian tax authority so we need to wait and see how exactly that will be interpreted. Website : www.martinezneira.com

JUNE 2013 | FOCUS LATIN AMERICA

Martinez.indd 49 5/3/13 10:31 AM COSTA RICA BataBBaatattaalalllllaa ABOGADOS

CORPORATE LITIGATION IN COSTA RICA

WHAT ARE THE MAIN CHALLENGES FOR FOREIGN CLIENTS WHEN A BUSINESS RELATIONSHIP TURNS SOUR, WHAT IS SEEKING CORPORATE LAW ADVICE IN COSTA RICA? THE BEST WAY TO GO ABOUT RESOLVING A DISPUTE? OSTA RICA is very open to foreign investment in all Once a dispute arises, we always advise our clients to areas of economic life. Our constitution, along with explore possible alternatives to resolve it through a large number of free trade agreements and negotiation. If a settlement is not possible and the bilateral investment agreements, guarantee the fair parties are not previously bound by an arbitration Ctreatment of foreign investors who are deemed as equals clause, we strongly recommend negotiating an to Costa Rican citizens under the law. There are no arbitration agreement specifically for the dispute. restrictions to the foreign ownership of local companies or Although Costa Rica has a highly regarded judicial businesses. Ownership limitations are few and very system, the least desirable alternative is to go to local specific, for example in the private generation of energy or courts, mainly because of lengthy procedures and the the holding of concessions over coastal lands. Therefore, varying quality of judges at lower courts. establishing a legal presence in Costa Rica through local subsidiaries and branch offices is very straightforward. WHAT IS THE MOST COMMON TYPE OF LITIGATION THAT That being said, the red tape required to start FOREIGN CLIENTS INSTRUCT YOU TO ADVISE ON? operations may sometimes seem daunting and Everyday commercial conflicts in Costa Rica have confusing. Our government is deeply concerned with evolved and are now more complex and usually have this, since it is a drag on competitiveness, and is actively cross-border and multi-jurisdictional aspects to them. working to streamline authorization and license For example, our firm has an active international trade processes. Furthermore, Costa Rica has very high practice and we are continually engaged in the design environmental standards. When establishing a business and implementation of regional sales and distribution that requires environmental authorizations, these may structures in Central America. These processes may be subject to judicial review based on differing criteria. result in difficult negotiations with existing distributors The resulting uncertainty is always a challenge unless and agents and, eventually, complex litigation across adequate precautions are taken when obtaining the several jurisdictions with very different laws on the licenses. The same applies to establishing a new matter. venture in a regulated industry, for instance financial Another area where we are very active is product intermediation, telecommunications, insurance and liability, particularly litigation relating to tobacco energy. regulations and liability. We anticipate that what we Another common challenge arises while establishing have seen in tobacco will spread to other industries. local joint ventures. Generally, statutory protections to Costa Rica has experienced significant growth in the minority shareholders are limited, poorly understood mass consumer market, which has brought new and enjoy little established judicial precedent. challenges such as the protection of collective interests Additionally, our company laws lack flexibility, especially and class action rights. in relation to shareholder representation in the board, Regulated industries, such as telecommunications reserved and majority requirements for shareholder and insurance, as well as strategic State efforts like and board resolutions and general governance issues. public works and government procurement are also To accommodate the terms bargained by joint ventures, experiencing increased risk of litigation. This is a two-tiered corporate structures are normally adopted, situation akin to regulation through litigation. Courts in which the local operating company is wholly-owned have allowed labor unions, associations of consumers by a foreign corporation, usually Panama or British and environmental defense to file suits against Virgin Islands corporations or Delaware limited liability regulatory agencies and private companies relating to companies. market issues that should have been resolved

JUNE 2013 | FOCUS LATIN AMERICA

Batalla.indd 50 5/3/13 10:33 AM COSTA RICA

administratively. For instance, arbitration is strongly promoted as a faster alternative our firm is representing to judicial proceedings. the telecommunications An addition benefit to arbitration is that experts in a regulatory agency in a suit particular area of the law or with relevant experience brought by the labor unions of may be selected by the parties to adjudicate a dispute. the incumbent State-owned Local judges may have little experience with complex telecommunications company business transactions or transnational business and this against the determination of can affect the quality of their judgments. interconnection charges among carriers. DO YOU HAVE INTERNATIONAL REFERRAL NETWORKS IN Alejandro Batalla, Finally, coastal real estate PLACE TO FACILITATE MULTI-JURISDICTIONAL Senior Partner at development came to a screeching LITIGATION? Batalla Abogados halt after the financial crisis of We have close relationships with many top level 2008. Abandoned or low quality litigation practices in the U.S. and Europe. We have real estate projects have brought a worked with them mainly in product liability, new form of large-scale, complex international trade and FCPA matters. Additionally, our real estate litigation. We have firm belongs to Lawyers Associated Worldwide, a law successfully represented banks firm network with presence in more than a hundred and other financial investors sued main cities across five continents. by developers or individual purchasers that sought some sort IS THERE ANY LEGISLATION BEING PLANNED IN THIS AREA of recovery from failed projects. THAT CLIENTS SHOULD BE AWARE OF? Costa Rica is becoming a Reforms to procedural laws are currently under dispute resolution society. consideration by our legislative branch. Orality and the Rodrigo Zelaya, creation of civil group or class action procedures for the Partner at Batalla HOW MATURE IS THE ALTERNATIVE protection of supra-individual rights (a specific Abogados DISPUTE RESOLUTION REGIME IN procedure for group actions, similar to class actions in COSTA RICA; WHAT ADR the United States, but adapted and modified by the MECHANISMS ARE MOST UTILIZED? influence of experiences in other Latin American Conciliation and arbitration are very mature and are countries), are among the reforms more prominent new widely used for the resolution of business disputes in features. These trends bring great challenges to Costa Costa Rica. There are several conciliation and Rican law firms, which have to adapt to a more arbitration centers, normally in the seat of chambers of sophisticated environment for dispute resolution. commerce and professional bodies. Costa Rica has two We consider that these are only the first waves of special laws that regulate alternative methods of deeper changes. Local litigation practices have their dispute resolution: the Law on Alternative Dispute of work cut out for them and are being strongly and Conflicts and the Promotion of Peace of 1998 that distinctively pushed toward the adoption of governs domestic arbitration, conciliation and international best standards in efficiency, service and mediation and the recently approved Law on thoroughness. ■ International Commercial Arbitration, based on the Model Law of the United Nations Commission on International Trade Law of 2011. The latter specifically aims to create an international arbitration venue in Costa Rica and allows the participation of foreign The authors: arbitrators and counsel. This prospect is of great Alejandro Batalla, Senior Partner benefit to local practitioners because of transnational Rodrigo Zelaya, Partner nature of many corporate structures. Batalla Abogados WHAT ARE THE ADVANTAGES OF USING ARBITRATION TO Edificio Batalla SOLVE CONFLICTS RATHER THAN LITIGATING THROUGH Calle 35, Avenidas 9 y 11 COSTA RICA’S COURT SYSTEM? Barrio Escalante Judicial proceedings have traditionally involved high San José, Costa Rica costs and lengthy periods of time to be concluded. Our civil procedures are based on strict rules of formality T. +506 2280 8880 and are carried out in writing rather than orally. F. +506 2280 7543 Procedural formalities may paralyze a case even if it is Email: [email protected] ready to be resolved on its merits. Therefore, Website: www.batalla.cr

JUNE 2013 | FOCUS LATIN AMERICA

Batalla.indd 51 5/3/13 10:35 AM PANAMA | FOCUS LATIN AMERICA

Clear Water Few economies in the world have managed to sustain the astonishing growth rates recorded by Panama; how have its new business opportunities translated into growth for law firms?

BY MARIA JACKSON

Any quick glance through a history book will show you that mand. The same is true for our projects, real estate and liti- Panama’s fortunes have seemed almost inextricably linked to gation practices.’ its famous canal. So it makes sense that as Panama caps its second year of double-digit growth, its canal is looking strong HOME AND AWAY thanks to a $5.25bn facelift. International trade is a cornerstone of Panama’s economy and The country’s services sector represents nearly 80% of its this is reflected in foreign direct investment (FDI) figures that gross domestic product (GDP) and the Panama Canal is a show that the country has received FDI receipts of over $1bn crucial component of that; the canal transports about 5% of since 2006 – notably it received $2.1m in the first nine months world trade and accounts for around 7% of Panama's of 2011, according to a report by the US Bureau of Economic economic output. and Business Affairs. FDI is driven by the government’s com- The Panama Canal expansion project is due for comple- mitment to providing attractive investment incentives, Ation by 2014 and should more than double the canal’s capac- through free zones, tax and income exemptions and other ity. The project has already done its bit in expanding the benefits. country’s economic growth; Panama’s GDP swelled by 10.7% Arias & Muñoz is a Central American law firm with of- in 2012 largely driven by the boost in government spending. fices in Guatemala, El Salvador, Honduras, Nicaragua, Costa Aleman, Cordero, Galindo & Lee is one of Panama’s lead- Rica and Panama. Its extensive Latin American network ing law firms and recently advised Vinci Construction awards the firm with a unique platform to view Panama’s Grands Projets in its successful bid for the $360m construc- growing importance in the region. tion contract issued by the Panama Canal Authority for a four ‘Panama is the connection between North and South lane suspension bridge over the Panama Canal. The firm con- America and has become a financial hub,’ says Gisela de Por- tinues to see the country’s boom reflected in deal flow and ras managing partner of the firm’s Panama office. ‘Also the says that work is coming in across all of its departments. canal is the busiest trade and commercial way between Asia, ‘Over the past year, our main areas of practice have con- Europe and the Americas, so a lot of business passes through. tinued to see a steady stream of important instructions and All these factors have made Panama the go-to country in high demand overall,’ says Eloy Alfaro Boyd, corporate, bank- Central America. Many regional businesses are also coming ing and real estate partner at Aleman, Cordero, Galindo & to Panama to get a piece of the action, and regional firms like Lee. ‘As most people are aware, Panama continues to grow, Arias & Muñoz can help out in these matters.’ and that has meant that the business trends driving our prac- There is no doubt that the canal is a major global gateway tice have remained steady. Our strong offshore services, and currently the US and China are the top users of the wa- M&A, and banking practice areas continue to be in high de- terway. The expansion project will allow for larger ships to

52 JUNE 2013 | FOCUS LATIN AMERICA

Panama.indd 52 5/3/13 10:38 AM PANAMA CITY

Panama.indd 53 5/3/13 10:39 AM Your Clients are talking and the Competition is listening. are You?

RivalEdge, the only listening platform built specifically for law firms, is powered by advanced search technology that uses sophisticated algorithms in order to locate and parse news and information that is of interest to professionals across your firm.

Get news and information updates, specific to your firm, related to:

n Clients and Prospects n Speaking and Sponsorship Opportunities n Competitors n Law Firm Headcount n Industry and Competitor Events

ContaCt rivaledge todaY to set up a demo and start listening.

RivalEdge.com | 866-866-8677 | [email protected]

54pFLA0613.indd 54 5/2/13 1:02 PM PANAMA | FOCUS LATIN AMERICA

pass through and increase its international prominence. According versify its economy, but there is another road that is just as lucrative, to Panama Finance Minister Frank de Lima, the project will see gov- if far more unexpected. ernment revenue from the canal quadruple from about $1bn per year to $4bn annually. GOLD MINE ‘Panama’s geographic position continues to be a driving force in the Before 2010, Panama was not recognized for its mineral exports. amount of foreign investment into Panama. This is true for the usual Then, seemingly from nowhere, 2011 saw gold become the country’s commercial advantages such as the Panama Canal, the Colón Free number one export, accounting for 14% of exports during that year. Zone and the ports, but this has expanded to include the expansion of However, it is copper that is set to seal the success of the Pana- Tocumen International Airport which goes hand in hand with the con- manian mining industry, following First Quantum Minerals’ acqui- tinued success and growth of COPA Airlines,’ says Alfaro Boyd. sition of Inmet Mining Corporation in a C$5.1bn deal – the largest The Colón Free Zone is a free port and stands as one of the most private investment made in the history of Panama. The deal, which successful free zones globally; it is the largest free port in the Amer- completed in early 2013, makes the Canada-based mining giant the icas and the second largest in the world. new owner of the Cobre Panama mine. One of the largest undevel- The Tocumen International Airport stands as another pillar of oped copper mines in the world, Cobre Panama will cost approxi- Panama’s accomplishments. In 2006 the airport underwent a signif- mately $6.2bn to develop and is projected to produce 270,000 metric icant expansion and modernization program and is now the only tons of copper annually. Aleman, Cordero, Galindo & Lee advised airport in Central America with two runways – it is also the busiest First Quantum Minerals on the deal and suggests that it will be a airport in Central America by passenger traffic. Unlike many fast- major game-changer for the country going forward. growing economies that register growth and decide to worry about ‘In a country without major mining projects (and with only a nas- infrastructure later, Panama has been dedicated to improving its cent mining culture), a project of the size and visibility of Cobre structures and facilities. Significantly, it is not just physical infra- Panama will inevitably serve as a trendsetter for any future mining structure that it is investing in to increase its attractiveness to foreign projects,’ says Alejandro Ferrer, partner at Aleman, Cordero, Galindo investors; Panama has also concentrated on improving its corporate & Lee. ‘In my view, the success of this project will dictate the future regime for foreign entities. of the mining industry in Panama. First Quantum brings a wealth of experience, a sterling track record and reputation, and the resources SETTING UP SHOP to make Cobre Panama into a world-class mining development.’ Panama’s commitment to stimulating growth has seen it focus on And of course, it is not just the mine itself that will help secure drawing the world’s biggest companies to the country. Panama’s economic success story. The related infrastructure and ‘An important component of this phenomenon is the continued service demands that the mine will require should also create growth success of the law regarding the establishment in Panama of regional for the country – and Panama’s law firms. headquarters for multinational companies,’ says Alfaro Boyd. ‘This ‘As has been the case in other countries with developed mining has attracted numerous multinational companies to set up their industries, we expect to see an “ecosystem” develop around the Cobre headquarters in Panama in light of the specific benefits granted by Panama project; a combination of foreign players and local service the law and also because of Panama’s geographical position.’ providers will sprout up to service the various needs of a project of Panama’s enviable geographic location and its status as a service this size,’ explains Ferrer. ‘For cities in the periphery of this project economy were already useful benefits for multinational corpora- this will represent important investments in basic infrastructure (i.e., tions, but in August 2007 the government added a few more incen- roads, utilities, basic sanitation, etc.), residential and commercial real tives through Law 41 to ensure that global companies took the bait estate, energy, airports, ports and other ancillary investments.’ and moved in. Law 41 provides numerous tax exemptions to en- As Ferrer also suggests, the mine will go some way to distribute courage the flow of foreign businesses on to its shores including an the growing wealth of the country into more regional areas, follow- exemption from income tax for as long as services are provided to ing extensive but localized investment into Panama City and subsidiaries or affiliates outside of Panama and exemption on im- Panama Canal. port duty – among other exemptions. It is a savvy move; in April Certainly the government deserves praise for its commitment to 2013, the Panamanian government announced that 58 multinational securing the economic future of the country, with infrastructure de- companies had set up shop in Panama during the last two years and velopment and corporate incentives combining to create an excellent their revenues had contributed around $40m. More are expected to climate for investment. follow but among the many multinationals that have already estab- Panama has a long history of international trade but only now lished in the country are: Adidas, Caterpillar, Maersk, Mars, Nestlé has it been able to focus on bringing solid capital onto its shores and Western Union. It is just one path that Panama is taking to di- rather than watching it sail by. ■

JUNE 2013 | FOCUS LATIN AMERICA 55

Panama.indd 55 5/3/13 10:39 AM PANAMA

Q&A: PANAMA’S MINING INDUSTRY

BEFORE 2010 PANAMA WAS NOT KNOWN FOR MINERAL activity rebounded strongly, with two multi-billion dollar EXPORTS BUT IN 2011 GOLD BECAME ITS NUMBER ONE transactions in the pipeline (e.g., Cobre Panama and EXPORT; HOW DID THIS DRAMATIC REVERSAL COME ABOUT? Bancolombia’s acquisition of HSBC Panama). ANAMA has a predominantly service-based economy (representing approximately three fourths WHAT DOES THE COBRE PANAMA PROJECT MEAN FOR of Panama’s gross domestic product) and the PANAMA’S MINING INDUSTRY GOING FORWARD? country has historically been a net importer. In a country without major mining projects (and with PPanama’s agricultural and industrial sectors are only a nascent mining culture), a project of the size and underdeveloped (vis-à-vis its services sector) and are visibility of Cobre Panama will inevitably serve as a oriented primarily to servicing the domestic market. It also trendsetter for any future mining projects. In my view, lacks critical natural resources (such as crude oil), making the success of this project will dictate the future of the it susceptible to fluctuations in global prices/production. mining industry in Panama. Fortunately, First Quantum Therefor even a modest gold project like Petaquilla, with brings a wealth of experience, a sterling track record around US$100m in exports, has had a tremendous impact and reputation, and the resources to make Cobre in Panama’s trade balances. Panama into a world-class mining development. The Cobre Panama’s projected production will dwarf relevant government agencies’ level of sophistication Petaquilla’s production within a few years, at which will grow throughout this development process, as will point copper will rank as Panama’s main export. The the collective skill set of the Panamanian workforce. development of the Panamanian mining sector will have Within the next five to ten years, several mid-sized a tremendous impact on Panama’s economy as a whole cities in the periphery of the project are going to feel its and could help reduce its historic trade deficit. benefits: significant job growth and wealth creation in these areas of the country that had previously lagged IN MARCH 2013, FIRST QUANTUM ACQUIRED CONTROL OF behind other high growth urban centers (primarily INMET MINING CORPORATION AND WILL BE THE NEW Panama City) is expected. The Panama Canal Expansion OWNER OF COBRE PANAMA; WHY IS THIS PROJECT SUCH A Project, expected to be completed in the latter half of HEADLINE ACQUISITION FOR FIRST QUANTUM? 2015, and the massive investment into Cobre Panama First Quantum’s Inmet acquisition was the second- are two of many infrastructure projects that will largest mining transaction in the world announced in contribute to GDP growth in the short to medium term. 2012 (behind Glencore International’s acquisition of Xstrata). The Cobre Panama mine was one of several ALEMAN, CORDERO, GALINDO & LEE ADVISED FIRST quality assets acquired through the Inmet acquisition QUANTUM ON THE INMET DEAL; HOW DID THE FIRM’S and it is a particularly important one; it is one of the EXPERIENCE DISTINGUISH IT FROM ITS COMPETITORS TO largest undeveloped copper mines in the world. WIN THIS LANDMARK MANDATE? Cobre Panama will cost approximately US$6.2bn to Aleman, Cordero, Galindo & Lee is widely hailed by develop and is expected to produce an average of leading financial and legal publications as one of 270,000 metric tons of copper annually, according to Panama’s premier full service law firms. Our footprint can Inmet’s website. With targeted annual copper output be seen in some of the largest transactions realized to (consolidated) of approximately 1.3 million tons a year date, ranging from the Panama Canal Expansion Project by 2017, this acquisition will catapult First Quantum to to telecommunications to energy to ports and banking. the ranks of the largest copper producers in the world. We always strive to provide more than just legal advice to In addition to being a global headline, the Cobre our multinational clients doing business in Panama, which Panama acquisition now ranks amongst the largest is our core competency. Our partners have an intricate M&A transactions in Panamanian history. After high understanding of our clients’ businesses, which allows us levels of M&A activity in the period between 2006 and to provide strategic as well as legal advice. With respect 2008, Panama experienced a slowdown in M&A activity to the mining industry, we have a deep understanding not for a few years. However, in 2012 Panama’s M&A only of the regulatory framework but also of the

JUNE 2013 | FOCUS LATIN AMERICA

Adelman.indd 56 5/3/13 10:40 AM PANAMA

composition of the sector and its is currently near full employment, which has lead to policies as a whole. I recently had inflationary pressures on wages and high levels of the honor, as the Panamanian employee turnover. As such, foreign clients should Minister of Commerce and thoroughly assess any potential key person risks, and Industries (2004-2008), to be in the availability of skilled local labor to readily replace charge of the oversight and key personnel. Given Panama’s nascent mining industry, regulation of the mining sector and foreign clients will inevitably be required to bring skilled had the unique opportunity to labor from abroad. As a direct result, foreign clients develop a clear understanding of should carefully analyze Panamanian immigration and the sector and the policies behind it. labor laws, given the lead times required to bring in Alejandro Ferrer at expats. Aleman, Cordero, HOW HAS THE GROWTH OF PANAMA’S Galindo & Lee MINING INDUSTRY BEEN WHAT ARE THE OTHER MAJOR TRENDS OR DEVELOPMENTS ENCOURAGED BY THE GOVERNMENT’S DRIVING PANAMA’S MINING INDUSTRY? WILLINGNESS TO MODERNIZE MINING LEGISLATION? The Cobre Panama project will be the undisputed The National Assembly enacted a comprehensive trendsetter for the industry for the foreseeable future. reform of the mining code pursuant to Law 13 of April 3, As has been the case in other countries with developed 2012. These reforms introduced a greater degree of mining industries, we expect to see an “ecosystem” flexibility into the mining sector, allowing for develop around the Cobre Panama project; a investments from companies in which a foreign combination of foreign players and local service government has ownership, which was previously providers will sprout up to service the various needs of prohibited. The reforms also established (i) more a project of this size. For cities in the periphery of this stringent requirements from concession holders for the project, this will represent important investments in posting of bonds and guarantees (ii) higher levels of taxes, rights, royalties and other related fees/charges to be levied in connection to mining activities (payable Panama is a relatively new to the national government and the relevant municipalities) (iii) more robust supervision of the player in the mining sector and as concession holders by the relevant government agencies for compliance with the law and its such, a mutual familiarization commitments, including the environmental ones and (iv) process between our foreign some institutional provisions to allow for the coordination between the Ministry of Commerce and clients and the country as a whole Industry and The National Environmental Authority (ANAM), among others. is to be expected.

WHAT DO FOREIGN CLIENTS NEED TO KNOW ABOUT THE EXPLORATION AND EXPLOITATION SPECIAL REGIME IN basic infrastructure (i.e., roads, utilities, basic sanitation, PANAMA BEFORE THEY LOOK TO DO A DEAL IN THE COUNTRY? etc.), residential and commercial real estate, energy, Panama is a relatively new player in the mining sector airports, ports and other ancillary investments. After and as such, a mutual familiarization process between several years of an expansionary government fiscal our foreign clients and the country as a whole is to be policy (primarily geared towards infrastructure projects expected. In addition, I foresee there to be a degree of in Panama City and the Canal), the development of the institutional weaknesses (due primarily to inexperience mining industry will generate much needed growth in this industry) among the relevant government towards that part of the country. ■ agencies involved, such as the Ministry of Commerce and Industry and the highly relevant National Environmental Authority (ANAM). We advise our clients Author: to conduct a thorough due diligence of the concession Dr. Alejandro Ferrer rights to be acquired/granted and the status of any Tel: (507)269-2620 filings or applications. A look at the specific regime to Fax: (507)264-3257 be applied is a must. For example, some major projects E-mail: [email protected] such as Cobre Panama enjoy a special regimen called a contract law (contrato ley), which contains terms and ALEMAN, CORDERO, GALINDO & LEE conditions that are only applicable and to an extent, East 53rd Street, Marbella tailor made to a specific concession holder. MMG Tower, 2nd Floor Another important factor to consider is that Panama Panama

JUNE 2013 | FOCUS LATIN AMERICA

Adelman.indd 57 5/3/13 10:41 AM MINING | FOCUS LATIN AMERICA

Gold Mine Canadian mining companies are flocking to Latin America and their law firms are right behind them.

BY MARIA JACKSON

The value of overseas investments made by Canadian mining already considered a hotbed of rapid growth, and Ecuador.’ companies increased from $30bn in 2002 to $210bn in 2011, Mining accounted for around 60% of Peru’s exports in according to the Canadian Mining Journal, and nowhere is 2012, while Chile has seen its mining sector’s contribution to this international strategy more evident than in Latin America. gross domestic product (GDP) triple in the last decade and it According to estimates made by the Canadian International now stands at 15% of GDP. According to figures from consul- Development Platform (CIDP), total revenue invested by tancy PricewaterhouseCoopers (PwC), Brazilian mineral pro- Canadian mining companies in the region is around $18.7bn, duction reached a new record of $50bn in 2011, while mining and around $16.5bn of that cash is concentrated in just five represents around 3% of Argentina’s GDP and around 1.6% of countries: Chile, Mexico, Argentina, Peru and Brazil. Mexico GDP. Importantly, Canadian companies are controlling some of The potential for mining in the region is set to swell further the region’s biggest projects: Kinross Gold Corp is awaiting as countries are lining up to attract investments into their Tlegislative reforms so it can get on with developing the Fruta country’s deposits. Panama’s mining industry is ready to ex- del Norte gold project in Ecuador; in 2013 First Quantum plode following First Quantum Mineral’s C$5.1bn acquisition Minerals gained control of Cobre Panama – one of the largest of Inmet Mining Corporation, which represented the largest undeveloped copper mines in the world; and Barrick Gold private investment made in the history of Panama. The deal Corp sources 37% of its proven and probable gold reserves gives First Quantum control of the Cobre Panama mine, from its South American mining operations. which is expected to cost around $6.2bn to develop and is pro- ‘Canadian companies are the spearhead of mining invest- jected to produce 270,000 metric tons of copper annually. ment around the world. Where there is potential, Canadians Fasken Martineau acted as Canadian counsel to First Quan- are first in,’ says Jorge Neher, natural resources and infrastruc- tum Minerals’ on the headline Inmet deal, alongside Weil, ture partner in the Caracas and Bogotá offices of Norton Rose. Gotshal & Manges and Alemán Cordero Galindo & Lee, who ‘Logically, Canadian service providers soon follow. Canada has advised as US counsel and Panamanian counsel respectively. a long history of mining, which has fostered a very specialized As Bourassa suggests, Colombia’s government is also mak- legal community.’ ing a real play in this area. In 2010 Canadian firm Macleod Despite few Canadian firms fielding offices on the ground Dixon, now part of the Norton Rose Group, responded to the (Norton Rose is a rare exception to that rule) mining mandates new opportunities in Colombia by launching in Bogotá; the are flooding in for Canadian players with a track record in firm is probably the most internationally ambitious of the providing that specialized advice. Canadian stalwarts, it also opened in Venezuela in 1997. ‘Countries like Peru, Chile, Mexico and Colombia promote ON THE MAP private mining investment and have institutional frameworks Increasing demand for precious metals has been a spur to providing guarantees for investment,’ says Neher. ‘Chile, Peru mining across the Latin America region. The UN Economic and Mexico have an old and consolidated tradition of industrial Commission for Latin America and the Caribbean (ECLAC) mining, but Colombia is relatively new to the international in- estimates that mining represented 6.1% of the region’s GDP in vestment community and thus provides for more unexplored 2011, up from 4.3% in 2001 – that is a rise of $90.1bn to ground, more blue-sky opportunities for investors and a more $305.8bn in a decade. attractive risk-cost-reward ratio for projects.’ ‘Chile, Peru, Brazil, Argentina and Mexico have been, and continue to be, active regions in Latin America,’ says Michael EXPORTING SKILLS Bourassa, partner in the mining team at Fasken Martineau. Canada’s mining industry is perfectly place to take advantage ‘In addition, we are now seeing a significant increase in activity of the opening up of Latin America’s mining markets. It is a and interest by our mining clients in Colombia, a jurisdiction resource rich country with a long track record in mining proj-

58 JUNE 2013 | FOCUS LATIN AMERICA

Mining.indd 58 5/3/13 10:43 AM OPENCAST COPPER MINING

Mining.indd 59 5/3/13 10:44 AM MINING | FOCUS LATIN AMERICA

ects and that has enabled Canadian companies to successfully export ing companies are listed or located in Canada, so a Canadian lawyer their specialist experience abroad. knows how to deal with them in acquiring their projects.’ ‘Simply put Canada knows how to do mining deals, and with the exception of Australia and China, most mining deals are done the TAKING POSITION way Canadian companies do them,’ says Darrell Podowski, chair of As Canada’s relationship with Latin America’s mining industry the mining group at McMillan. ‘Therefore we are greatly suited to strengthens, the country’s law firms are repositioning service lines export our skills to those in other countries that need to negotiate a to take part in the potential windfalls. It seems everyone is now a mining transaction.’ mining lawyer. Also, Canada provides an established platform for mining fi- ‘There is a clear correlation between the mining boom and the nance, as well as other necessary mining infrastructure. number of lawyers and law firms which seek to be viewed as mining ‘Our capital markets are particularly mining friendly. In 2012, players. In the early and mid-1990s, there were very few lawyers hold- 70% of the equity capital raised globally for mining companies was ing themselves out as specializing in mining and even fewer firms mar- raised on the TSX or TSXV. The availability of capital, a talented keting themselves as mining firms,’ says Ian Arellano. ‘In fact, if you workforce and a welcoming immigration system has all helped foster look at the Canadian mining BAR, there is a demographic gap that re- a self-sustaining mining eco-system consisting of entrepreneurs, en- flects the reality that for many years very few young lawyers sought ca- gineers, geologists, accountants, lawyers, investment bankers and reers in mining law. There was just not the work opportunity.’ mining analysts,’ says Ian Arellano, corporate and capital markets However, following the most recent commodity boom, the value partner at Toronto-headquartered law firm Torys. ‘Furthermore, this of legal work in capital markets, M&A and associated mining trans- critical mass, based primarily in Toronto and Vancouver has created actions skyrocketed and this has been a force for change in the Cana- the platform to export mining skills and capital abroad. Just to give dian legal market. you an idea of the scope of the Toronto mining hub, its 2013 Annual ‘Virtually all major Canadian law firms took note of this growth PDAC (Prospectors and Developers Association of Canada) confer- and devoted resources to build their mining teams and capabilities,’ ence drew over 30,000 delegates from 124 countries in the middle of Arellano adds. ‘You now have some good size Canadian law firms a Canadian winter.’ that primarily define themselves or their market niche in terms of The sharing of know-how goes both ways of course; firms that the mining industry. However, if the current lower commodity price are involved in Latin America need to adapt to the particular outlook continues at length, there will undoubtedly be some law firm business peculiarities of doing business in a region with a much retrenchment in this area.’ more substantial risk profile. Norton Rose’s offices in Venezuela, Indeed, growth in mining M&A activity has stalled. According to Brazil and Colombia, awards the firm a useful local perspective PwC, deal value dropped to $6.8bn in the first quarter of 2013 com- on these issues. pared to the first quarter of 2012 while deal volume slipped by 45%. ‘The firm is now able, not only to apply its special mining skills At the end of 2012, Darrell Podowski led McMillan’s advice to Batero abroad, but also to learn and develop skills on how to deal with a Gold (a Vancouver-based company focused on its 100% owned Batero- wide variety of issues not commonly present in Canada, such as Quinchia project in Colombia) on its strategic alliance and $20m private country risks, currency exchange and taxation issues, different title placement with a Peruvian private group. It was a challenging deal. and security regimes, local idiosyncrasies, and so on,’ says Neher. ‘It was done in a very weak mining market and to raise that type ‘This international project expertise has allowed us to better serve of investment in such a market was almost a miracle,’ he says. ‘Gen- our Canadian and international clients in acquiring, developing fi- erally the mining industry has slowed down worldwide, and com- nancing and operating mining projects all over the world.’ munity and aboriginal relations has also made investing in Latin A deeper awareness and understanding of Latin American mar- America more difficult.’ kets is becoming increasingly important as regional companies look Despite the current tough economic background, firms remain to expand outside of their home markets. Canadian law firms will be optimistic that the region’s mining potential will provide a fair flow waiting to guide them through their outbound deals. of instructions for some time yet. ‘Large successful Latin America companies that built mines in ‘Latin America has positioned itself over the years as a prime destina- Latin America are now expanding beyond their own borders and tion for mining investment,’ says Neher. ‘It has huge unexplored geological looking for deposits internationally, and with that globalization they potential, more stable economic and legal conditions and its increasingly require English speaking lawyers to assist them in negotiating and investor-friendly regimes are quite appealing for the industry.’ acquiring projects,’ says Darrell Podowski. ‘ Canadian law firms are Mining deals may have stalled, but as the region continues to well positioned to take advantage of that trend as Canadian lawyers invest in exploration firms should not have long to wait for the are very familiar with mining transactions, and the majority of min- next gold rush. ■

60 JUNE 2013 | FOCUS LATIN AMERICA

Mining.indd 60 5/3/13 10:45 AM Official Sponsor Of

Every 7 years The National Law Journal Celebrates Lawyers Who are Changing the Legal World. WILL YOU JOIN US?

The National Law Journal cordially invites you to our 100 Most Influential Lawyers in America dinner on June 13th, where we’ll celebrate the major accomplishments and progress of legal leaders, movers, and shakers.

These exceptional individuals have shaped the legal world through a myriad of accomplishments— from taking on major legal battles and tackling unpopular causes to orchestrating massive corporate deals and helping to run giant corporations.

Thursday, June 13, 2013 | 6:00 p.m. Gotham Hall | New York, NY

RESERVE YOUR SEAT TODAY!

For more information please visit: at.law.com/NLJ100

Sponsored in part by:

61pFLA0613.indd 61 5/2/13 5:31 PM firms | fOCUs LATiN AmEriCA

A Gateway Opens Wider As economies and deals heat up in Latin America, Miami lawyers jockey for a piece of the action

by Carlos Harrison

On April 1, the miami law practice of Abadin Cook joined “We do an awful lot of work in the financial services area the international litigation and business firm of sedgwick. and a great deal of cross-border work in Latin America,” he in doing so, the boutique florida firm, with just two lawyers said. His firm has handled a series of power plant develop- and three associates, became the latest and southernmost ment projects, “one in Argentina that involved $80 million, U.s. outpost of a 370-lawyer operation with 16 offices, in- one in Peru that involved $40 million, one in Ecuador that cluding ones in London and Paris. involved $60 million, and one in Uruguay that involved $120 in announcing their union, sedgwick chairman michael million.” A. Tanenbaum said the goal was “to open a gateway to Central At the same time, there’s been a noticeable change in both and south Americas.” the size of transactions, and the direction. They’re hardly the first to view the booming economies “Years ago, you had U.s. companies investing in Latin of Latin America as fertile and increasingly important terri- America. Now you have Latin American companies invest- tory, and miami as the logical location for a Latin American ing outside of their countries, and even outside of the re- practice. And, if rumors are to be believed, they’re surely not gion,” said Xavier ruiz, a partner at K&L Gates. He special- Othe last. izes in cross-border mergers and acquisitions, joint ventures, “rule No. 1 of moose hunting,” said ramon Abadin, “go finance transactions, and privatizations. “Almost half of the where the moose are.” m&A activity in the region is interregional. Companies from Part of it is basic economics, Latin American economics. Chile buying companies in Brazil, or Colombia and Peru, or “Latin America is still doing a lot better than the global vice versa.” economies,” said francisco Cerezo, head of foley & Lard- The Great recession also gave Latin American compa- ner’s Latin America Practice Group. nies a chance to invest in the U.s. at bargain rates. Yosbel And that’s producing a lot of construction, investment, ibarra, a Greenberg Traurig shareholder focusing on cross- mergers and acquisitions. it’s no longer just American com- border financings in Latin America, said his firm helped a panies looking to buy up what they can cheaply in Latin Brazilian family group looking to integrate its supply chain America. Nowadays, there are transactions of all kinds, in to buy one of its suppliers in Kentucky. all directions. “You get into the crisis here in the United states, and firms are dealing with everything from pre-immigration suddenly asset prices here drop significantly,” he said. “The tax planning for wealthy individuals to mergers and acquisi- United states becomes a very attractive place to invest.” tions between companies whose only connection to the U.s. is the law firm’s location and the desire to be ruled by U.s. law. POLITICAL CLIMATE Political uncertainty spurs many to look for investments in POWER PLANT DEALS the U.s. Bowman Brown, chairman of shutts & Bowen’s financial ser- “Every time there’s a political climate change in one of vices practice group, was a driving force in getting florida’s the Latin American countries you see a huge influx, wheth- international banking industry off the ground. Today, he er it’s dollars or actual people coming into florida,” said says, a significant amount of the firm’s work involves trans- richman Greer managing shareholder manuel Garcia-Li- actions based entirely outside the U.s. nares. “We dealt with the Venezuelans who were all mov-

PHOTOGrAPHY BY j. ALBErT diAz

62 JUNE 2013 | FOCUS LATIN AMERICA

LATAM_Firms_June2013.indd 62 4/30/13 6:41 PM ShuttS & Bowen’S Bowman Brown SayS it would Be “a horriBle miStake” not to look to latin america for work.

JUNE 2013 | FOCUS LATIN AMERICA 63

LATAM_Firms_June2013.indd 63 4/30/13 6:42 PM firms | fOCUs LATiN AmEriCA

ing up and helping them buy properties here in the United States.” When the political climate changes in places like And, he added, some want to get more than just their money out. Venezuela, people and money floW north. richman “We had a client several years ago, when things started chang- greer’s manuel garcia-linares is ready to help. ing in Venezuela,” he said. “They had a school in Venezuela. They wanted to get the family here, so they purchased a school here. We independent, forging working relationships with Latin American helped them purchase the school. And by purchasing the school, firms as circumstances demand and, when necessary, flying their now you have an employer for the family and with that you go get a lawyers to other countries. B-1 visa and you get to get your family into the country.” “It’s not one-size-fits-all,” Rodriguez said. Opening an overseas That’s only one aspect of the forces encouraging the northward office, “in some cases makes sense. Sometimes it doesn’t. If you flow of dollars. Increasingly, said Cerezo, “It’s not so much running have a narrow corporate practice you want to offer, it may not make away from something, but actually in pursuit of interesting oppor- sense to open there.” tunities. And that is something that is a lot more recent.” Alliances, too, have pros and cons. Exclusivity could cause a The fact that a company as American as Burger King is now loss of referrals. “You could lose referrals or you have to examine controlled by Brazilian interests stands as undeniable evidence of whether the branding and relationship is to your benefit.” the shift. But they have the advantage of providing an established and “There’s a lot of inbound U.S. investment. Large companies vetted group of professionals with experience in their respective from Brazil are investing here (and) high net worth individuals,” countries. said Raquel Rodriguez, managing partner of McDonald Hopkins’ “You can go country by country and try to establish networks, Miami office. “It’s not just flight capital, although that may be a part but it takes a long time,” Rodriguez said. of it. Now, more and more, businesses are looking to diversify. So One of the biggest considerations, naturally, is whether an over- are individuals.” seas office would generate sufficient revenue. Foley & Lardner has offices in Tokyo, Shanghai and Brussels. Not in Latin America. basic MODELs “Except for perhaps Mexico and Brazil you would be hard- There are basically three business models for firms with Latin pressed to find an economy in Latin America, or I certainly don’t America practices. Some establish offices there. Others keep their think so, that has enough deal flow to necessarily justify your open- offices in the U.S. and join alliances such as Meritas, the Interna- ing an office in that country,” Cerezo said. “And that would be so tional Lawyers Network or Multilaw, working together in what are significant that it won’t somehow hurt you if you are then compet- effectively intercontinental referral groups with varying degrees ing with people you have a very good relationship with. You kind of of exclusivity. Still others keep their offices in the U.S. and remain have to do the math.”

64 JUNE 2013 | FOCUS LATIN AMERICA

LATAM_Firms_June2013.indd 64 4/30/13 6:42 PM firms | fOCUs LATiN AmEriCA

Several firms have opted to open offices in Latin America. In The other critical factor was recognizing the challenges of trying Mexico, for example, White & Case, Baker & McKenzie, Haynes to set up shop in another country. and Boone, Chadbourne Parke, Curtis Mallet, Jones Day, and Hol- “We don’t think we can compete with Peruvian lawyers in Peru. land & Knight, DLA Piper and Greenberg Traurig all have offices; Or with lawyers in São Paulo. But we know there are great lawyers in some, more than one. Peru and great lawyers and São Paulo. We want them on our team.” Offices outside of Brazil or Mexico are rare. Holland and Knight Still, even firms with offices in South and Central America, or and DLA Piper have offices in Colombia. Baker & McKenzie has an those allied with established firms, maintain offices in Miami. office in Peru. Others are reportedly considering the possibilities. No one really keeps track of how many firms have Latin Ameri- The advantage, said K&L Gates’ Ruiz, is “by having a local office, can practices. That makes it hard to say how many have opened now you have access to companies that are now becoming global practices there recently. However, Abadin, whose firm just joined players or regional players at the very least.” Sedgwick, said it’s clear Miami is fast becoming the center for Latin That’s especially true in Brazil, he said, where the size and American legal affairs. strength of its economy have made it a global player. “Everyone While he can’t quantify the change, Abadin said, “anecdotally, wants to open an office there.” in the last 10 years, there has been a noticeable shift of large firms While international firms in Mexico operate under the same coming to Miami.” rules as native firms, the Brazilian bar limits the activities of non- Cerezo may be an example of what’s happening. He started in Brazilian firms. They have to deal with international work and U.S. New York with White & Case, and spent time at Steel Hector Da- law, mostly outbound work. vis and Greenberg Traurig before Foley hired him to head its Latin Still, K&L Gates opened a São Paulo office two years ago. A key America practice. reason, said Marc Veilleux, managing partner of the São Paulo of- “Through the ’80s and the ’90s, the bulk of the more interesting fice, is proximity. and sophisticated Latin America work was really being done out of “We can work better with them as partners in growing their en- the New York offices of the major firms,” he said. terprise,” he said. “While we cannot advise on Brazilian legal mat- Some of the strong Florida-based firms, like Greenberg Traurig, ters, per se, given the restrictions on that imposed by the Brazilian had Latin American practices. But global firms like White & Case Bar Association, we can certainly ... guide our international clients started using Miami as the hub for their Latin America practices in on managing their legal exposures and risks.” the mid- to late ’90s,” Cerezo said. That establishes an important foundation for the firm in a booming economy. “The trend that we notice most and we think resonates most with K&L Gates and our international platform, is this real activity, this real interest and move of companies to reach out globally in terms of capital raising, ideas, investments and growth. We think, for us, it’s what’s most attractive, it’s what’s most exciting about being in Brazil.”

THE ALLIANCE MODEL Jerry Brodsky, the Latin America area director at Peckar & Abramson, may be the picture of the model Latin practice lawyer. He was born in Peru, educated in the U.S. and married a Brazilian. He speaks Portuguese, Spanish,and English. His company’s preferred strategic model is an alliance of its own making. Motivated by an explosion in infrastructure and energy development, along with the growth of public-private partnerships, Peckar created Construlegal two years ago. “In a way we’re just following and adapting to the changing business environment,” Brodsky said. “Business is going to follow the path of least resistance.” The idea for Construlegal came about from recognizing that despite working across borders in a variety of countries, the projects they were involved with — energy plants, transportation, plants for U.S. companies setting up manufacturing in the region — shared universal themes. “We speak the same language with our partners in terms of construction law,” he said. “The rules that apply or the laws that apply may be different, but the principles are going to be the same.”

Peckar & abramson’s Jerry brodsky. His firm set uP construlegal, an alliance of construction law firms in tHe americas.

JUNE 2013 | FOCUS LATIN AMERICA 65

LATAM_Firms_June2013.indd 65 4/30/13 6:42 PM firms | fOCUs LATiN AmEriCA

And as Latin American economies continue to grow, more firms are feeling the pressure to follow. “The rumor mill is always running at full speed about other big international firms coming to miami to basically make a Latin America play,” said ibarra. international law firm Hunton & Williams, with 800 lawyers globally, opened its miami office in 1999, largely to break into the Latin American market. The firm has no Latin American offices and no plans to open any. “miami is our Latin American office,” said fernando Alonso, chair of the firm’s Latin America practice. “We don’t want to practice local law in any of these jurisdictions. We feel we don’t have to have an office there.” The 50 lawyers Hunton has in that practice group work on cross-border financing, mergers and acquisitions and major contractual work. They represent some of the most prominent families in the region as well as U.s. companies investing there. A recent milestone: Hunton was chosen outside counsel for the inter-American Development Bank, beating out 48 other law firms. DLA Piper opened a miami office two years ago, strictly to develop Latin American business. The office has grown from four to 30 lawyers and is now handling major treaty-based arbitrations in Venezuela and Ecuador, as well as transactional work. “DLA Piper did not come here to chase after the local business,” U.S. aSSetS became a bargain dUring the receSSion, said Pedro martinez fraga, coordinator of international disputes giving Latin american companieS prime inveStment for Latin America and florida for the firm. “We came here because opportUnitieS, according to greenberg traUrig’S of south America, the Caribbean Basin, Central America and YoSbeL ibarra. North America, meaning mexico.” Unlike other New York firms that have developed Latin Ameri- Another international law firm, Baker & mcKenzie, has a dif- can practices without having miami offices, DLA Piper believes it is ferent model for establishing Latin American practices. While the crucial to have a physical office in the city. firm has a miami office, it doesn’t use it as a gateway or jumping-off “i don’t think you can break into the Latin American market point to Latin America. rather, the firm goes straight to the source, meaningfully without an office in miami,” he said. “All the cap- targeting and gobbling up established law firms in Latin America and using local lawyers in these countries. The strategy appears to be successful. Baker, which opened its first Latin American office 57 years ago in Venezuela, now has lo- • • • cations in seven countries. The Latin America practice consists of 500 attorneys. As Latin American economies grow, “Our approach is substantially different than some of the other more firms are feeling pressure big law firms,” said raymundo Enriquez, chairman of the firm’s to follow the lead of White & Case and Latin America regional Council, who is based in mexico. “They are more interested in outbound work and they send two or three Greenberg Traurig and look south. lawyers from New York to set up a Latin American practice. None of our offices have foreign lawyers, they all have local lawyers with deep roots in and knowledge of the country.” Baker’s latest Latin American outpost opened last November tains of industry and significant leaders come to miami. The lo- in Peru. gistics of being in miami and being able to access key parts of the “Our main focus is following our clients,” Enriquez added. Caribbean Basin and Latin America has become indispensable to “Where they tell us they need us we go.” the practice.” Akerman senterfitt has adopted the “no office” model for its squire sanders & Dempsey broke into the miami-Latin Ameri- Latin American practice group. The firm has no offices in Latin can market not by organic growth but by acquisition. in 2005, the American countries, but instead partners with local law firms there firm acquired steel Hector & Davis and its offices in Venezuela, the through various alliances. Dominican republic and other Latin American cities. “i think it’s not in our best interest to have an office in any -ju since then, the 1,300-lawyer firm has picked up affiliates in Bolivia, risdiction other than the United states,” said Luis Perez, co-chair Colombia, Panama and Peru. its work includes general transactions, of the miami-based Latin America and Caribbean practice group. mergers and acquisitions, financial services, infrastructure develop- “The moment you open an office in a foreign jurisdiction, you be- ment, energy and arbitration. “Latin America is an area of high prior- come not a best friend but a competitor. We don’t want to be viewed ity for us,” said Paul O’Hop, leader of squire sander’s Latin American as competitors; we much prefer to have best friend relationships group. “We are always looking for new opportunities there.” through alliances.”

66 june 2013 | FOCuS LATIn AMeRICA

LATAM_Firms_June2013.indd 66 4/30/13 6:43 PM firms | fOCUs LATiN AmEriCA

Akerman hired Perez three years ago to ramp up and formalize Another big selling point for miami is that it’s cheap — or, at its 10-year-old Latin American practice. Now, the practice consists least, cheaper than New York. Partners making $500 an hour in mi- of some 25 lawyers and consultants. ami would likely charge $700 an hour there. That’s still a lot more Akerman’s clients are broken down equally, with 50 percent in- than they’re likely to receive in south or Central America, but the volving transactional work and 50 percent involving dispute resolu- sticker-shock is less than if they went to the Big Apple. tion. The clients are both inbound and outbound, and from other The most important reason miami attracts Latin American legal regions, he said. work is trust in the U.s. legal system, especially in New York and miami. it gives them what ruiz called “certainty” in the process and THE LURE OF MIAMI in the fairness of the outcome. it’s also neutral ground. Attorneys give five reasons for opening Latin American practices About 10 years ago, Cerezo said he handled a transaction involv- in miami: geography, familiarity, diversity, economy and certainty. ing two of Ecuador’s largest firms. “They chose to both lawyer up with The first, geography, “is a gimme,” foley & Lardner’s Cerezo U.s.-based large law firms and to do the deal under New York law and said. “it’s a lot easier to get to Latin America from here.” submit disputes to arbitration in miami because they both acknowl- familiarity comes on two levels, many Latin Americans have edged that in Ecuador, depending on which party or which govern- second (or third or fourth) homes in miami. Even those who don’t, ment was in power, one group would have leverage over the other.” travel to florida frequently. They know the area and they feel com- There’s also a lot of precedent in the U.s., and a lot of experience fortable in miami, in part, because of the number and diversity of that, in some cases, other legal systems have yet to encounter. ibarra south and Central Americans who call the area home. said he once worked on a tender offer in El salvador. That’s a com- Then, of course, there’s the language. so many south floridians mon U.s. matter, he said, but “it was like the third tender offer that are bilingual or trilingual — including lawyers and judges. had ever been done in El salvador.” Abadin gives the example of commercial mediation involving a The combination of factors makes miami not only a logical gate- Venezuelan firm. way for Latin American business, but, as more firms are recogniz- “The formal part of the mediation, there was not a word spo- ing, a vital one. ken in English,” he said. “The judge speaks spanish. The mediator As shutts & Bowen’s Brown puts it: “it would be a horrible mis- speaks spanish. The lawyers all speak spanish and the clients speak take to try to focus your practice domestically, i think, if you’re try- spanish. The documents in the courtroom are all translated because ing to diversify and want an interesting practice.” ■ we are in an American system. But we showed them to the judge in English, and the judge picks up and reads them in spanish — be- Julie Kay, staff writer for ALM’s Daily Business Review, contributed cause spanish is his native language.” to this report.

Focus Latin america www.almreprints.com Turn your good press into great marketing! Order your reprints as published in Focus Latin America today. Contact 877-257-3382 or [email protected].

In PrInt DIgItIntroducingAl IntEgrAtED mEDIA

Introducing

tion The Power Profile Introducing • Ecuador’s Evolu Agenda Mexico’s Reform h Pad • A Latin Launc ® South Florida: Martindale-Hubbell + The Power Profile JUNE 2013 lution ® • Ecuador’s Evo The Power Profile m Agenda Pad • Mexico’s Refor FOCUS : A Latin Launch Martindale-Hubbell + South Florida: A Latin Launch Pad • Mexico’s Reform Agenda • Ecuador’s Evolution South Florida: A Latin Launch Pad • Mexico’s Reform Agenda • Ecuador’s Evolution South Florida ® ATE COUNSEL YER & CORPOR Martindale-Hubbell + T TO THE AMERICAN LAW FOCUS FOCUS FOCUS A SUPPLEMEN LATIN AMERICA JUNE 2013

LATINA SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSEL AMERICA A SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSEL JUNE 2013 LATINA SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSELAMERICA JUNE 2013 LATIN AMERICA LATIN AMERICA South Florida: A Latin Launch Pad • Mexico’s Reform Agenda • Ecuador’s Evolution SOUTHERN South Florida: A Latin Launch Pad • Mexico’s Reform Agenda • Ecuador’s Evolution FOCUS eiro to Miami,ival of legal FOCUS SOUTHERN EXPOSURE carn SOUTHERN From Rio de Jan ica SOUTHERN firms are finding a EXPOSURE work in Latin Amer ro to Miami, al PLUS: EXPOSURE From Rio de Janei carnival of leg LATINA SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSELAMERICA JUNE 2013 EXPOSURE firms are finding a From Rio de Janeiro to Miami, From Rio de Janeiro to Miami, Brazil’s Big merica firms are finding a carnival of legal work in Latin A firms are finding a carnival of legal Score: How the LATINA SUPPLEMENT TO THE AMERICAN LAWYER & CORPORATE COUNSELAMERICA JUNE 2013 work in Latin America work in Latin America World Cup and the government SOUTHERN are driving a PLUS: building boom Brazil’s Big Score: How the EXPOSURE From Rio de Janeiro to Miami, SOUTHERN World Cup and firms are finding a carnival of legal PLUS: the government work in Latin America PLUS: Brazil’s Big are driving a Brazil’s Big Score: How the EXPOSURE building boom Score: How the World Cup and World Cup and the government From Rio de Janeiro to Miami, the government are driving a firms are finding a carnival of legal are driving a building boom work in Latin America PLUS: building boom Brazil’s Big Score: How the World Cup and the government are driving a building boom

PLUS: Brazil’s Big

12:54 PM 5/1/13 Score: How the World Cup and Add to your Martindale-Hubbell profile on martindale.com. Add to your Martindale-Hubbell profile on martindale.com. the government

M Highlight your strengths and capabilities. Bring a powerful new perspective Highlight your strengths and capabilities. Bring a powerful new perspective are driving a 5/1/13 12:54 P building boom to the way existing clients and prospective clients see your firm. to the way existing clients and prospective clients see your firm.

_June2013.indd 1 LATAM_cover1 013.indd 1 cover1_June2 LATAM_ Make your firm’s profile come to life. Make it a Power Profile. Make your firm’s profile come to life. Make it a Power Profile. LATAM_cover1_June2013.indd 1 5/1/13 12:54 PM

LATAM_cover1_June2013.indd 1 5/1/13 12:54 PM Call 877-257-3382 or email: [email protected] Call 877-257-3382 or email: [email protected] LATAM_cover1_June2013.indd 1 5/1/13 12:54 PM Add to your Martindale-Hubbell profile on martindale.com.

Highlight your strengths and capabilities. Bring a powerful new perspective Martindale Ad.indd 1 3/3/10 9:26:31 AM Martindale Ad.indd 1 3/3/10 9:26:31 AM to the way existing clients and prospective clients see your firm. • Include hyperlinks Make yourE-Print, firm’s profile come PDFto life. Make itw/ a Power Profile. Volume reprints 100 or more A Plaque distributionLATAM_cover1_June2013.inddCall 1 877-257-3382 or email: [email protected] license5/1/13 12:54 PM • Embed footage in your E-Print and/or Url on your Martindale Ad.indd 1 3/3/10 9:26:31 AM printed collatoral • repurpose as an advertorial

Scan barcode to get a quote.

LATAM_Firms_June2013.indd 67 5/2/13 12:50 PM REAL ESTATE | FOCUS LATIN AMERICA

Navigating Miami’s Unfamiliar Waters Whether they’re expanding their operations to the U.S. or want a safe place to invest their wealth, Latin American developers are turning to Florida attorneys for help

by Paola IusPa-abbott

The Melo family is now one of the most prolific residential Miami attorney Rebekah Poston, a Squire Sanders partner developers in Miami. But when patriarch Jose Luis and sons in Miami who specializes in non-U.S. white collar criminal Carlos and Martin moved their families and business from cases and corporate compliance. The firm, which in 2005 ac- Argentina to South Florida several years ago, they had no quired Steel Hector & Davis in Miami, maintains an office idea how the real estate industry worked in Miami. in Santo Domingo, Dominican Republic and relationships To help them learn, they turned to land-use attorney with independent firms in Colombia, Argentina, Venezuela, Vicky Garcia-Toledo. Bolivia, Peru, Chile and Panama. “It is important for a client to understand the difference between what they are accustomed to in terms of purchasing and developing land in their country and what needs to oc- Wealthy Developers cur here,” said Garcia-Toledo, a partner with Bilzin Sumberg Neisen Kasdin, another Miami land use attorney, works Baena Price & Axelrod in Miami. closely with Latin American condo developers. His wealthy Another key issue is for her foreign developer clients, clients are among the few developers in Miami who have Tmostly from Argentina, Brazil and Mexico, to understand projects under way, as their U.S. counterparts continue to the time the planning and development of a project may struggle to obtain construction financing. He advises them take. on buying land and often helps them with other aspects of “In real estate, time is money,” she said. “It is critical that development, including the equity. they understand what each of the steps is going to represent “Typically, the sponsor-investor will have a significant in terms of time.” amount of cash and would bring in other deep-pocket Latin Garcia-Toledo, who is fluent in Spanish, represents a American investors,” said Kasdin, managing shareholder of group of Miami attorneys catering to a growing number of Akerman Senterfitt. “We will structure that partnership and Latin American developers, investors, high net-worth indi- prepare the offering documents to go out to other investors viduals and executives relocating to Miami. a s w e l l .” Many, like the Melo family, are playing a key role in the Some of his clients include Argentine developers Con- revival of a Florida housing market that was comatose dur- sultatio Inc.’s Eduardo Constantini, Faena Group’s Adam ing the recession. Latin Americans’ voracious appetite for Faena and Chateau Group LLC’s Manuel Grosskopt. homes and condos in the Miami area has driven the housing Kasdin said Latin American developers who entered Mi- inventory to low levels not seen in decades, helping property ami during the recession are a lot more “sophisticated” than values to slowly edge up. They are also creating new busi- their predecessors, who often sought inexpensive legal advice. nesses and injecting money into the Miami’s economy. “The reputation is that Latin American investors are fee Some bring their money to Miami because their home sensitive,” he said. “But the difference today is that they re- economies, like Brazil, are flourishing and they have cash ally seek out the expertise … and are willing to pay for it. to invest. Others are looking for a safer place to raise their There is too much at stake.” families or shield capital from shaky economies such as Ar- gentina’s or unpalatable political climates such as the one in Venezuela. Central and South ameriCanS are Snapping up “It is very sad because people are fleeing countries like miami’S new waterfront CondoS, many built Argentina and Venezuela out of necessity, not desire,” said by their CompatriotS.

68 june 2013 | FOCuS LATIn AMeRICA

LATAM_RE1_June2013.indd 68 4/30/13 6:48 PM LATAM_RE1_June2013.indd 69

Eliot J. SchEchtEr/GEtty imaGES J unE 2013 | F ocuS latin amE rica 4/30/13 6:49 PM 69 REAL ESTATE | FOCUS LATIN AMERICA

Brazilian investors The EB-5 visa has a downside, though. Some Brazilians aren’t interested in living ForeiGn aiD “The con is the capital is tied up for five to in Florida but want to invest in the state How Florida lawyers help six years,” said Sidlosca. “And the return on to diversify their holdings. Miami attorney Latin American clients the capital investment is usually minimum. Robert Macaulay often helps them apply for It can be anywhere from a half percent to a “portfolio interest exemption.” That allows • Guide developers through local three percent per year.” them to earn tax-free interest on loans to permitting process Also, if the developer doesn’t fulfill job- U.S. companies. He has been working with a • Help wealthy individuals find creation promises to the government and fails group of Brazilian investors who are provid- potential investments, including to meet certain criteria, the EB-5 investor may ing loans to a U.S. partner to acquire apart- providing construction financing lose the money and permanent residency. ment buildings across Florida. to U.S. developers “Quite often in deals like this, it is best for the foreign investor to not be equity owners • Assist in forming business relation- assistinG With visas but to be lenders,” said Macaulay, a share- ships with bankers, accountants Some of Sidlosca’s Mexican clients are able holder with Carlton Fields. “Typically, in and other financial professionals to relocate by obtaining an E-1 treaty trader projects like this you can pay an interest rate • Help navigate numerous U.S. visa visa. That’s a non-immigrant visa that al- that is very attractive — 13, 15 percent a year. programs lows foreigners from a country with which So the foreign investor gets a very nice return the U.S. maintains a treaty of commerce and without being U.S.-taxed at all.” • Resolve tax issues navigation to enter the U.S. and open a cor- His firm also helps pair Brazilian investors porate subsidiary. with U.S. partners, said Macaulay, who is flu- “We are seeing that happen more and ent in Portuguese and has been doing business with Brazilians for more,” Sidlosca said. “An upcoming country for this type of trans- nearly three decades. fer is going to be Argentina. All of the sudden, it has shown a great “We help develop those relationships,” he said. “As corporate interest in opening subsidiaries in the U.S.” lawyers, we try to connect clients where we think it makes sense But opening a subsidiary requires capital and some offshore for them.” investors have a hard time moving money offshore. But Macaulay’s services go beyond real estate. He also helps Bra- The solution: an E-2 visa, which allows those with dual citizen- zilian entrepreneurs obtain L-1 visas to work and live part-time in ship in treaty counties to invest at least $100,000 in a new or existing the U.S. Those visas allow foreign companies to open a subsidiary U.S. business, like a restaurant. in the U.S. and their executives to work in the U.S. part-time for E-1 and E-2 visas don’t offer paths to citizenship but can be re- up to seven years. The executives could apply for a green card dur- newed repeatedly, he said. ing that period if the subsidiary complies with certain requirements like creating jobs. If they become a permanent resident they would be taxed on tax issues their global income, Macaulay added. Wealthy Latin Americans must do tax planning prior to moving to the U.S., said Miami attorney Seth Entin, a shareholder with Greenberg Traurig, which has an office in Mexico City. ‘one-stop shop’ For tax purposes, Entin helps foreigners sell their companies, Miami attorney Randall Sidlosca often represents wealthy Mexi- stocks and other financial instruments in their native countries so can and Venezuelan families and executives who want to make capital gains on those assets won’t be taxed by the U.S. Miami their new home. Besides providing legal advice, he often “The biggest problem that we see is people who try to do plan- finds himself talking about Miami’s best neighborhoods, where ning after they are already residents from a tax point of view,” he the best schools are located or where to do banking. said. “Then, we have a problem because sometimes, it is either too “We try to guide the client with personal advice,” said Sidlosca, late to do anything or too late to do a lot of the planning that we a partner in Arnstein & Lehr’s Miami office. “We also make intro- can do.” ductions to certified public accountants, physicians … we provide He also helps Latin Americans avoid paying estate taxes by a one-stop shop for foreigners who want to transition their families transferring their assets to “a properly structured trust.” to the U.S.” “Uncle Sam could tax 40 percent of the value of the assets,” Sidlosca, an immigration lawyer, recently helped a “high net- Entin said. worth individual from Venezuela” apply for an EB-5 visa so he At a time when Latin Americans are buying some of Miami’s could move his parents, sisters and brothers to Miami. most expensive condos, he often helps buyers structure the deal in Under the EB-5 program a foreigner must invest at least ways to minimize taxes on future capital gain. $500,000 in a U.S.-approved business or development project that “We can help them with a structure that will get them capital would create or preserve a certain number of jobs in the country. gains rates and that sort of thing,” he said. “But they can’t really The visa grants temporary U.S. residency to the investors and their avoid paying taxes.” families and can open a path to citizenship. Many South Florida developers are increasingly registering their projects with the U.S. government to be able to raise money The Melos: MarTin, Jose luis, and Carlos. through the EB-5 program. They are trying to fill a void left by the They’re playing a key role in The revival banks’ reluctance to make construction loans. of MiaMi’s housing MarkeT.

70 june 2013 | FOCuS LATIn AMeRICA

LATAM_RE1_June2013.indd 70 4/30/13 6:49 PM LATAM_RE1_June2013.indd 71

JOHN LOOMIS J u N e 2013 | FOCu S LATIN AMe RICA 4/30/13 6:49 PM 71 REAL ESTATE | FOCUS LATIN AMERICA

Another aspect of his practice has to do with Latin Americans who were born in the U.S. but never lived here. Many are realizing they are responsible for declaring and paying taxes on their income abroad. “The United States is one of the only countries that taxes people purely based on their citizenship,” Entin said. “So U.S. citizens are subject to worldwide U.S. tax.” Now, they are calling his office to find ways to avoid “severe penalties” by the IRS, he said. “People are concerned with their compliance obligations and we help them straighten those things out,” Entin said. VicKy GaRcia-toledo NeiseN KasdiN RobeRt Macaulay

FREQUENT FLYER Many South Florida lawyers see their offshore clients in their home Some clients that faced expropriation were able to resort to in- offices. Others, like Miami attorney Alfredo Anzola, spend hours ternational arbitration under bilateral investment treaties to resolve on planes traveling to see clients in such locations as Bolivia, Chile, the challenge, he said. Colombia and Ecuador. For years, his firm had offices in Brazil. But the country recently Anzola, a partner with Squire Sanders, helps multinational com- changed the rules, banning foreign lawyers from practicing Brazil- panies renegotiate distribution agreements in Central and South ian law. So Anzola practices international litigation and arbitration America and in the Caribbean. in Brazil. “In many Latin American countries, the laws favor the local dis- Meanwhile, his Miami colleagues work with clients from Latin tributors,” he said. America who are in danger of overstaying their welcome, according He also helps corporations protect their investments against ex- to Squire Sanders’ Poston. propriation or nationalization by leftist governments. “Once they are here a certain number of days in the calendar “That has been the case particularly in Venezuela, Ecuador and year they are taxable in their worldwide income and many of them Nicaragua,” Anzola added. have substantial income,” she said. ■

Your Best Source for Online CLE NEW! Just Got Better

Access on-demand programs from the ABA at CLECenter.com

ALM’s CLECenter.com now offers accredited online CLE from the American Bar Association. Choose from 100+ timely ABA programs plus hundreds more from CLECenter.com on a wide range of topics.

CLECenter.com 120 Broadway, 5th Floor, New York, NY 10271 | 1-800-348-0466 | [email protected]

LATAM_RE1_June2013.indd 72 5/2/13 2:07 PM ALM EVENTS CALENDAR

LegalTech West Coast Law Firm Marketing & May 21-22, 2013 Business Development The Westin Bonaventure | Los Angeles, CA Leadership Summit September 24-25, 2013 General Counsel Conference The Harvard Club | New York, NY June 5-6, 2013 Marriott Marquis | New York, NY Virtual LegalTech September 26, 2013 | Online Virtual LegalTech June 20, 2013 | Online Hedge Fund General Counsel Summit September 30-October 1, 2013 Virtual Corporate Counsel Forum The University Club | New York, NY July 18, 2013 | Online IP Trademark, Patent, Copyright & Cross-Border M&A and Licensing Counsel Forum Litigation Forum October 22-23, 2013 September 18, 2013 The University Club | New York, NY The Harvard Club | New York, NY

Earn CLE Credits!

Call: 212-457-7905 For sponsorship information contact Email: [email protected] Al Liberty, at 212-457-9486 www.almevents.com [email protected]

From the Publishers of:

73pFLA0613.indd 73 5/2/13 2:52 PM ARBITRATION | FOCUS LATIN AMERICA

Bringing Peace to Trade Disputes Arbitration takes on critical role as cross-border deals surge and many nations claim trade agreements governing conflicts are unfair

by SuSAn PoStlewAite

The arbitration business is gaining strength as a result of Like many Miami-based attorneys, Astigarraga Davis the modernization of the legal framework in many Latin prepared for arbitration at the outset of the foreign invest- American countries during the past two decades. ment boom in Latin America, knowing that while most Many investment contracts for international deals in the deals would never wind up in court, a certain percentage 1990s included arbitration clauses. If a deal soured, the par- would end in conflict. “We foresaw this coming in the early ties would have an alternative to possibly spending years ’90s, and we positioned ourselves,” he said. arguing in a foreign court under the constraints of foreign Now the arbitration arena is heating up. law. On Nov. 3-5 the International Court of Arbitration of Now, with the ever-shifting politics of Latin America, the International Chamber of Commerce will host its In- some powerful countries like Venezuela and Argentina are ternational Arbitration in Latin America conference at the balking at recognizing awards made in investor-state arbi- Mandarin Oriental in Miami. The conference draws 300 to tration — the type of case that depends on bilateral invest- 400 participants and will offer panels on cross-border in- ment treaties. vestment, the potential for another real state bubble and TArbitration lawyers say that, while a country’s politics emerging opportunities in Latin America, and advanced may swing to the left or right, commercial dispute arbitra- arbitration training. tion is gaining strength and is here to stay. “The beauty of arbitration is you have a familiar setting For business-to-business disputes, “it is inexorable,” said and rules no matter where you are,” said Jose Ferrer, an in- Jose Astigarraga, a partner with Astigarraga Davis in Miami ternational arbitration partner with Bilzin Sumberg Baena who focuses his practice on international arbitration and Price & Axelrod in Miami. He handles numerous cross- litigation. “I can tell you the forces are all in the direction border disputes involving firms doing business in Latin of having arbitration continue to be a significant method of America. “It is very much a profession in Latin America resolving disputes among private companies, and I don’t see now. When you go to Latin America the professionalism is that tide reversing itself.” expected. It is a smaller circle of very, very good attorneys. Peru, Colombia and Chile are a few of the countries vy- “Arbitration is largely a creature of the contract,” added ing to make a name for themselves as regional centers for Ferrer, who recently represented a party in the arbitration arbitration in South America. They’ve modernized their of a mining dispute in Chile. “We arbitrated over a two- laws to embrace international arbitration, and their capital week period in Santiago, and four to five months later we cities of Lima, Bogota and Santiago are attracting interna- got a reasoned award.” tional arbitration conferences. Other Latin American coun- Total time to resolution: 20 months. tries promoting themselves as regional venues are Brazil, “Had we litigated in Chilean courts or even in the Unit- Mexico, Costa Rica and Panama. ed States it would have taken years,” he said.

See related commentary by JAMS mediator Juan Ramirez Jr. on page 81

74 JUNE 2013 | FOCUS LATIN AMERICA

LATAM_arbitration_June2013.indd 74 5/1/13 12:53 PM Hugo CHavez, tHe late venezuelan president, vowed last year His Country would not reCognize rulings made by a world bank arbitration body in His nation’s dispute witH exxonmobil. n I/Ge TT y I MAG e S AL ej A n DRO PAG

june 2013 | FOCuS LATIn AMeRICA 75

LATAM_arbitration_June2013.indd 75 5/1/13 12:53 PM ARBITRATION | FOCUS LATIN AMERICA

‘Not So Simple’ Arbitration requires the parties to agree to numerous details in the initial contract: The number of arbitrators and witnesses, the complexity of discovery documents, the venues, what language will be used to conduct negotiations. In arbitration, “there’s no actual court,” said Asti- garraga. “An arbitration is held in a conference room. We just did one in a Panama hotel. You typically have three arbitrators and an orderly set of rules.” Hogan Lovells counsel Maria Eugenia Ramirez in Miami said: “Sometimes it is not so simple. We have to interpret the contract clause to figure out what did the parties really mean when they said, ‘We want the JoSe aSTigaRRaga JoSe FeRReR daniel gonzalez international rules of 1998 to apply.’ ” Luis O’Naghten, chair of the international litigation and arbitration practice at Akerman Senterfitt in Miami, de- that Venezuela would not recognize such decisions of the Inter- scribed a recent arbitration where a Fortune 500 company sued national Centre for Settlement of Investment Disputes, part of a Venezuelan government entity for $150 million over a failed the World Bank, in the country’s multibillion-dollar dispute with investment deal. One side wanted the arbitration in Venezuela, ExxonMobil. In that case Exxon and other foreign companies filed but the International Court of Arbitration wanted a neutral forum about 20 claims after Chavez seized U.S. oil company assets. The and picked Madrid. The arbitration was conducted in Spanish in arbitration case is pending. two phases on jurisdiction and merits. The arbitration resulted in In Argentina, a treasury official announced in January 2013 a small award to the company, but the case illustrated an impor- that Argentina will withdraw from ICSID. Argentina faces mul-

• • • International arbitration in Latin America will largely depend on whether countries in the region will respect the awards that are issued, according to Hogan and Lovells Miami lawyer Daniel Gonzalez. .

tant issue: The Venezuelan court has not yet enforced the award. tiple investor-state arbitration cases valued at tens of billions of “The question is are they going to recognize the arbitration dollars. Spanish oil company Repsol is seeking compensation from award? It would be a terrible sign for Venezuela if they start not Argentina over president Cristina Fernandez’s 2012 move to ex- recognizing arbitral awards,” said O’Naghten. propriate Repsol’s 51 percent stake in her country’s Yacimientos Petrolíferos Fiscales energy company. Repsol filed a complaint against Argentina, and ICSID arbitration proceedings began last iNveStor-State arbitratioN December. “All of Latin America has signed international treaties, primar- Bolivia and Ecuador also claim arbitration standards now in ily the New York Convention and the Panama Convention,” place favor foreign investors over their countries. said Daniel Gonzalez, co-leader of arbitration practice at Hogan Lovells in Miami. “But ultimately it comes to the courts in Latin America to enforce the awards. International arbitration in Lat- political WiNdS in America will depend very much on if the countries in Latin In Ecuador, President Rafael Correa announced March 11 that Ec- America will respect the awards that are issued.” uador intends to establish its own commission to audit bilateral Judith Freedberg, at the University of Miami School of Law and investment treaties. Two major oil companies, Chevron Corp. and a director of the Miami International Arbitration Society, said what Occidental Petroleum Corp., are pursuing arbitration against Ec- countries like Venezuela and others will do to recognize awards uador. Correa said lawsuits from the oil companies could plunge resulting from investor-state arbitration is “a hot-button item for the country into bankruptcy. Latin American arbitration.” U.S. arbitration specialists say it’s too early to tell where these Unlike commercial contract arbitration, investor-state arbitra- countries’ disputes are headed. tion stems from provisions in bilateral or multilateral agreements, “A lot of it depends on what is going to happen in the politics of such as the North American Free Trade Agreement, that grant in- Latin America,” said Astigarraga. “Is Venezuela going to turn right? vestors the right to pursue arbitration proceedings against foreign Is it going to turn left? I don’t know because if you have more coun- governments’ international law. tries turn left and against arbitration, they may say ‘no, sue us in our The late Venezuelan president Hugo Chavez declared in 2012 courts,’ or in a domestic arbitration or some other forum.” ■

76 JUNE 2013 | FOCUS LATIN AMERICA

LATAM_arbitration_June2013.indd 76 5/3/13 11:02 AM Turn Your Expertise into a Masterpiece

Enjoy the ALM Advantage Services: 5 Market Intelligence With a unique combination of creative 5 Premium Database Access marketing solutions, authoritative 5 Content Creation content, and unparalleled exposure to 5 Online Services legal industry leaders, ALM Marketing 5 Lead Generation Services helps you reach your target 5 Video Production audience with precision, creativity and 5 Custom Events 5 Creative Services distinction.

For more information, contact us via [email protected] or 212-457-9534

It’s time to give your business the ALM advantage.

www.alm.com/services

77pFLA0613.indd 77 5/2/13 2:54 PM GENERAL COUNSEL | FOCUS LATIN AMERICA

Hemispheric Headaches Compliance, labor, tax issues among ‘hot buttons’ for multinational GCs in Latin America

Special to FocUS latiN aMeRica

A thorough due diligence process is vital for multinationals wide LAC Region, is seeing an increase in regulatory activ- dealing with distributors, partners and other third parties in ity across the region. “Financial payments have been an area Latin America, according to Jurg Zundel, Caterpillar Inc.’s of increased focus for regulators all over the world, and Latin Miami counsel for Latin America and the Caribbean. America is no exception,” she said. “The intermediary principles applicable under the Federal But Longoria adds that many governments also see the Corrupt Practices Act (FCPA) are being enforced to a greater financial services sector as an engine for economic develop- degree, particularly in Latin America. We have a very good ment. “There are tremendous opportunities to advance elec- compliance program and expect our suppliers to uphold those tronic payments, particularly in areas without bank branch- principles as well.” es, just as mobile phones can reach a population without Compliance with corruption and bribery standards set by access to landlines.” the U.S. and the United Kingdom is just one of the issues fac- Compliance, licensing and intellectual property (IP) ing general counsel of multinationals with regional headquar- rights are other issues facing multinationals, said Longoria. Aters offices in South Florida. There are also concerns about “We own the MasterCard mark and license it to institutions increased government regulation and the level of security in that use our brand to develop business,” she said. “In general, some Latin American countries. there are fewer trademark than patent-related issues in Latin “We are seeing a trend toward increased protectionism, America, particularly for pharmaceutical companies facing nationalism and localism,” said José Sariego, senior vice presi- pressure from governments that want to put their patents in dent and general counsel, HBO Latin America Group. “The the public domain.” pendulum is swinging in that direction, and some markets are Zundel points to data privacy as another regulatory trend being closed or restricted. When there is not a level playing in the region. “Mexico recently passed a new data privacy law field, U.S. multinationals can be at a disadvantage and that including a safe harbor agreement with Europe,” Zundel said. concerns me.” “The trend in Latin America is to follow the European model, Labor and employment laws, tax matters, data privacy rather than the U.S.,where online information can be used to and social media in the workplace are other top-of-mind is- profile consumer activities and target them with offers.” sues for GCs, according to Salvador J. Juncadella, partner, Morgan Lewis & Bockius in Miami, and chairman of the South Florida Group of Regional Counsel, a group of 250 labor and employment in-house counsel. “These are among the important topics Mark Zelek, partner at Morgan Lewis, says Latin America’s we expect to address at our eighth annual conference for in- protectionist labor and employment laws continue to keep house regional counsel on Sept. 20,” he said. “We will also multinational GCs awake at night. “In the U.S., employ- look at the practical side of dealing with outside local coun- ment at will is the rule, but in every Latin American counsel and developing the legal team.” try, the principle is job stability,” he said. “The assumption is that employees will keep their job unless terminated for Greater reGulatory activity just cause, which is often laid out by statute. That’s a high Like other South Florida GCs, Malvina Longoria, senior vice standard for employers to prove.” president and managing region counsel, MasterCard World- With those labor laws, legal departments must be care-

ILLUSTRATION BY BRIAN STAUFFER

78 june 2013 | FOCuS LATIn AMeRICA

LATAM_GC_June2013.indd 78 4/30/13 6:47 PM june 2013 | FOCuS LATIn AMeRICA 79

LATAM_GC_June2013.indd 79 4/30/13 6:47 PM GENERAL COUNSEL | FOCUS LATIN AMERICA

HBO’s JOsé sariegO fears rising prOtectiOnism, natiOnalism and lOcalism.

ful when drafting employment contracts for executives working in the region. “Unless they are drawn up appropriately, the employee will win any litigation over dismissal,” Zelek said. In addition, an employer may be responsible for back pay through the dismissal proceedings. “There is no duty to mitigate damages, so an employee can really drag things out,” he added. “Mexico recently capped the back-pay requirement at one year, and added harassment and bullying to the list of unjustifiable causes for termination, which we consider to be a significant step forward.” Multinational GCs must also wrestle with differing definitions of workforce diversity definitions, added Zelek. “Diversity may mean one thing in the U.S. and another in Brazil, Argentina or Chile,” he said. “It’s important to understand both the law and the culture-related issues.”

of a multinational’s operations, the GC and the tax group should A TAx PersPecTive participate side by side,” Leiman said. “My suggestion is to build a Tax issues are a perennial headache for GCs, who typically must team that includes local country counsel, a local country tax pro- address the planning, compliance and controversy phases, accord- fessional, home office counsel and home office tax group. That’s the ing to Jose Leiman, international tax partner, Latin American Tax best way to respond to a local revenue or tax authority.” Group, PricewaterhouseCoopers, the global accounting firm. Leiman adds that Latin American jurisdictions are traditionally GCs may get involved in tax planning when a multinational de- form driven, unlike the U.S. system, which places more weight on cides to enter into a new Latin American jurisdiction or expanding, the substance of the tax issue. “We are seeing a gradual change to merge or sell its operations, said Leiman. “A major customer might substance in Latin America,” he said. request to have a purchase or sale done in a certain way, and that Another ongoing trend is the move toward electronic filing transaction would come to the GC’s desk,” he said. In the compli- in countries like Brazil. “There is also more information being ance phase, the multinational’s tax group would usually fill out the exchanged among tax authorities in different jurisdictions. That returns with little need for guidance from the GC. makes it even more important for multinationals to analyze the tax But if there is a tax controversy, the GC should get involved as implications of a cross-border transaction and make appropriate soon as possible, Leiman said. “Whether it’s a letter from the local compliance plans in advance,” Leiman said. tax authority asking for an explanation of an item or a full audit Addressing The issues Understanding the differences in Latin American laws and cultures is the first step toward addressing these issues, says Jessica Carval- ho Morris, director, International and Foreign Graduate Programs, University of Miami School of Law. The second step is often to engage local counsel, tax experts or financial professionals who can assist the in-house legal team. “A GC in the U.S. should look for outside counsel who understand the laws, the cultural nuances and how business is conducted in that jurisdiction,” she said. “It’s not always the big things that cause problems.” For example, lunch meetings in Brazil are usually scheduled for 1 or 1:30 pm and the business day in Sao Paulo ends around 6 p.m., Morris said. But in Mexico, lunch might be set for 3 p.m. and business meetings may stretch into the evening. Morris notes that multinational GCs must also understand the importance of building relationships with potential partners, suppliers and customers in the region, rather than rushing ahead with a transaction. “At a meeting in Latin America, you might spend half an hour talking about your children, before you get down to business,” she said. “It’s all about knowing and trusting your partner. Understanding that relationship-oriented culture will pay big dividends for GCs and their multinational legal teams.” ■ j. albert diaz j. albert

salvadOr J. Juncadella says cOrpOrate lawyers Have aBundant issues tO cOnfrOnt.

80 june 2013 | FOCuS LATIn AMeRICA

LATAM_GC_June2013.indd 80 5/2/13 12:23 PM COMMENTARY | FOCUS LATIN AMERICA

by Juan RamiRez JR.

Trade Forum Under Fire World Bank group renounced by Latin American powers, faces competition from new regional alliances

The InTernaTIonal CenTre for Settlement of Investment Disputes is an autonomous institution created by convention as an impartial international forum to help resolve legal disputes between eligible parties. The ICSID was established in 1965 by the World Bank and is based at the bank’s Washington headquarters. It has more than 140 member states, including argentina, Chile, Colombia, Costa rica, el Salvador, Guatemala, honduras, nicaragua, Panama and Uruguay. The ICSID was designed to resolve “investment disputes” by providing facilities for conciliation and arbitration between contracting states and nationals of other contracting states. Most of its case load consists of arbitrations and its awards are directly enforceable in the signatory states, without any method of ment treaties have opted for international Ecuador PrEsidEnt rafaEl corrEa review in national courts. The only recourse arbitration because domestic courts are has vowEd to dEEPEn thE “citizEns’ to the losing party is to request the ICSID viewed as biased against foreign investors, rEvolution” whErE “thE citizEns arE provide its own internal appellate procedure. especially when the dispute involves acts of in chargE, not caPital.” In contrast, arbitration awards sought to be their own governments. further, domestic enforced pursuant to the new York Conven- courts are seen as lacking in legal expertise a group of academics also recently is- tion can be vacated by local courts. and experience. sued a public statement declaring: “awards The ICSID’s case load has been en- This accusation of bias leveled against issued by international arbitrators against hanced by the proliferation of bilateral domestic courts has recently been directed states have in numerous cases incorporated investment treaties, known as BITs, or in- at the ICSID. The legitimacy of any arbitra- overly expansive interpretations of lan- vestment protection agreements. The IC- tion provider rests on the perception that guage in investment treaties. These inter- SID’s website lists 167 pending cases, with it can deliver independent and impartial pretations have prioritized the protection billions of dollars at stake. It is undeniably decisions. Just as the courts of the host of the property and economic interests of a vital institution for the resolution of in- country have been viewed as biased in fa- transnational corporations over the right vestment disputes and is growing in impor- vor or their own country, the ICSID has to regulate of states and the right to self- tance as global trade increases. as noted in been charged with favoring the investor. determination of peoples.” the Chicago Journal of International law although it did not mention the ICSID by by Charles n. Brower, a judge of the Iran- name, a new York Times editorial stated, calvo DoctRine U.S. Claims Tribunal, and lee a. Steven of “The arbitration process itself is often one- The countries of latin america were slow White & Case’s Washington office, regard- sided, favoring well-heeled corporations to sign on to the ICSID Convention. The ing the north american free Trade agree- over poor countries, and must be made only South american country to sign the ment, other alternatives to investor-state fairer than it is today.” convention in the 1980s was Paraguay. In arbitrations have been unsatisfactory. Thef inancial Times wrote that criticism Central america, Costa rica, el Salvador of the ICSID should “serve as a reminder and honduras also signed in the ’80s. The bias claims that the system remains a fragile one whose rest joined in the 1990s. according to the Investor confidence “is not furthered by authority depends on the consent of those late Paul Szasz, a former secretary-general

Ed U L E ó N /G ETT y I MAGES requiring domestic litigation.” Most invest- it governs.” of the ICSID, latin american countries

JUNE 2013 | FOCUS LATIN AMERICA 81

LATAM_Commentary_June2013.indd 81 4/30/13 6:37 PM COMMENTARY | FOCUS LATIN AMERICA

feared adopting the convention would ing into any agreement that would subject It is simply accomplished by submitting a run counter to the Calvo Doctrine, which Ecuador to any international arbitration written notice, which becomes effective six was advanced by the Argentine diplomat tribunal. months later. and legal scholar Carlos Calvo. It stated In Venezuela, the late Hugo Chavez led that foreigners who held property in Latin the country into voiding agreements with DenunCiation notiCe American countries and who had claims companies and replacing them with ones This raises the issue of the consequences of against their governments should apply to that eliminated international arbitral clauses. denunciation. On a practical level, it should the courts within those nations for redress Bolivia not only denounced the ICSID, have the effect of discouraging potential in- instead of seeking diplomatic intervention. but nationalized its natural gas and oil vestors from risking their capital in coun- It is therefore not surprising that left- fields. It recently expropriated the Spain- tries where their only recourse is to sue in leaning countries should criticize the IC- owned SABSA, which ran its three main the courts of the host state. SID, given its affiliation with the World airports. It was the third expropriation of a Other issues involve what becomes of Bank. In fact, the World Bank was in the Spanish company in 10 months. the rights and obligation that were viable at the time that denunciation becomes effective. Pursuant to Article 72, the notice of denunciation would not affect the obliga- • • • tions arising out of consent given before the Latin American investments should be encouraged notice is received by the ICSID. But consent to its jurisdiction does not arise solely from with assurances the risks will be minimal, but many being a contracting state to the convention. countries view foreign investments with suspicion. Consent to the jurisdiction of the ICSID may be established where a BIT contains an investor-state dispute resolution clause through an ICSID arbitration. Other alter- news recently when the BRIC countries Argentina’s grumblings date back to its natives to ICSID arbitration are also viable, of Brazil, Russia, India, China along with stunning financial collapse a dozen years such as a United Nations Commission on South Africa met in Durban, South Africa, ago. Although still a member of the ICSID, International Trade Law arbitration. in March. They expressed their frustration attorneys have already started planning for The denunciations of the ICSID Con- by announcing the creation of their own its withdrawal from the convention and vention by several Latin American coun- development bank was “feasible and viable.” have analyzed the implications for foreign tries should be viewed with concern. It is Countries that are ideologically antago- investors. in everyone’s interest that investments in nistic to the World Bank and threatened to A bilateral investment treaty may con- Latin America be encouraged by assur- denounce the convention include Argen- tain a pre-condition to instituting pro- ances that the risks will be minimized, but tina, Venezuela, Bolivia, Nicaragua and ceedings that investors provide the state these countries view foreign investments Ecuador. In April 2007, Bolivia, Venezu- with notice of their claim, as a cooling-off with suspicion. ela, Nicaragua and Cuba announced their period, and only at the end of the waiting In Latin America, examples of “gunboat intention to form Alternativa Bolivariana period can they file their case. This could diplomacy” have not been totally forgot- para la America Latina y El Caribe, or mean that Argentina could effectively with- ten. Those include the Venezuelan Crisis ALBA. Cuba never signed the ICSID Con- draw from the ICSID before the expiration of 1902 when British and other European vention, but Bolivia promptly submitted of the cooling-off period. warships blockaded and bombarded the its notice of denunciation on May 2, 2007. When viewed against this background, South American country’s ports to force Ecuador followed on July 6, 2009, and Ven- it becomes clear that the denunciations of it to pay foreign debts. Even though more ezuela on Jan. 24, 2012. Argentina and Ni- ICSID are not necessarily emblematic of a than a century has passed, politicians like caragua are still listed as ICSID members, problem with the arbitral tribunal, but are Hugo Chavez and Rafael Correa can still but Argentina continues to threaten its instead just a component of a larger anti- invoke those memories. imminent denunciation. It is signaling its investor climate. In fact, an analysis per- The perception that ICSID is biased in support for a rival arbitration organization formed by law professor Susan Franck of favor of the investor may not be empiri- under the auspices of the Union of South Washington and Lee University found no cally accurate, but it remains to be seen American Nations. evidence to support the proposition that if the recent renunciations prove to be ICSID arbitration awards were substan- an aberration or the wave of the future, ‘Citizens’ Revolution’ tially different from other arbitral forums. especially if Brazil decides to join regional These developments are not unique to the Further, despite concerns of a potential alliances like UNASUR or the BRIC coun- arbitration arena. In Ecuador, president bias against Latin American respondents, tries decide to form their own develop- Rafael Correa just won re-election for there was no statistically significant differ- ment bank. ■ a third term by winning with more than ence in outcomes, regardless of whether the twice the percentage of his next closest dispute was resolved at the ICSID or some Juan Ramirez Jr., a former state trial and challenger. He vowed to deepen the “citi- other forum. appellate court judge, joined the JAMS zens’ revolution” where “the citizens are in The ICSID anticipated a contracting mediation firm in Miami after serving as charge, not capital.” A constitution adopt- state denouncing the convention, and Arti- chief judge of Florida’s Third District Court ed in 2008 forbids the country from enter- cle 71 contains its denunciation provision. of Appeal.

82 june 2013 | FOCuS LATIn AMeRICA

LATAM_Commentary_June2013.indd 82 4/30/13 6:37 PM Big Deals

Special to FocUS latiN aMeRica

VENEZUELA pUErTo riCo plex transactions with multiple creditors TypE of dEAL: New financing TypE of dEAL: Bond sale without forcing the cement company into CLiENT: Petroleos de Venezuela CLiENT: Puerto Rico Public Finance Corp., bankruptcy. Following completion of the CoUNsEL: Jose Valdivia, Hogan Lovells a subsidiary of Puerto Rico’s Government restructuring last June, all the debt has been LENdEr: Credit Suisse Development Bank consolidated as a “joint and several obliga- VALUE: $1 billion CoUNsEL: Albert del Castillo and Pedro tion” of Trinidad Cement Ltd. and 11 sub- sUmmAry: PDVSA was seeking $3 billion Hernandez, Squire Sanders. sidiaries. in financing to modify and expand refin- VALUE: $410 million ing facilities in Puerto La Cruz, Venezuela, sUmmAry: The 2012 Series A bonds were • • • • • • • • through a consortium comprised of Korea- issued to refund portions of five separate based Hyundai engineering and construc- series of bonds issued at different times to tion group and China’s Wison Engineering. support various government entities. All GUATEmALA The first tranche was a $1 billion loan from bonds were issued at par, with interest rates TypE of dEAL: New financing Credit Suisse last September with two other ranging from 3.1 percent to 5.35 percent CLiENT: Comcel Guatemala, owned by tranches to follow to fund the ongoing con- based on maturities. The refinancing saved Luxembourg-based Millicom International struction work. In recent years, the law firm $6.6 million in interest payments, accord- Cellular has helped PDVSA raise about $30 billion, ing to the government bank. The bonds CoUNsEL: Emil R. Infante and Carlos according to Valdivia. themselves were marketed only to Puerto Abarca, Infante Zumpano Rico residents. Since the deal, del Castillo LENdEr: Citibank-led syndicate • • • • • • • • has moved to Greenberg Traurig. VALUE: $300 million sUmmAry: The two Miami attorneys ne- • • • • • • • • gotiated the seven-year, $300 million loan ECUAdor syndication for Guatemala’s largest tele- TypE of dEAL: New loan communications company despite tight CLiENT: Corporacion Electrica del Ecuador TriNidAd ANd ToBAGo global credit markets. The telecom com- CoUNsEL: Miguel Zaldivar, Hogan Lovells TypE of dEAL: Debt restructuring pany, also known as Tigo, used the loan to LENdEr: Export-Import Bank of China CLiENT: Trinidad Cement Ltd. expand its operations, make acquisitions VALUE: $570 million CoUNsEL: John L. Murphy, Foley & Lardner and upgrade its facilities. Millicom, which sUmmAry: Attorney Miguel Zaldivar led CrEdiTors: Citibank, International Fi- provides mobile services to developing na- an international team of Hogan Lovells at- nance Corp., part of World Bank and nu- tions in Latin America and Africa, said it torneys representing Celec. Among their merous other parties had 5.3 million subscribers in Guatemala. challenges: a legislative change govern- CrEdiTors’ AdVisors: FTI Consulting, ing Ecuador’s sovereign debt that meant Broadspan • • • • • • • • revising the loan structure. Despite those VALUE: $310 million issues, the loan transaction closed success- sUmmAry: A multijurisdictional, multi- fully last October within nine months of class group of creditors needed to be sat- ECUAdor negotiating the terms. isfied with the financial restructuring, TypE of dEAL: New financing which rewrote the terms of the company’s CLiENT: Empresa Pública Municipal Metro • • • • • • • • obligations. Murphy negotiated the com- de Quito

Jose Valdivia Miguel Zaldivar Pedro Hernandez Alberto del Castillo John L. Murphy Emil R. Infante Carlos Abarca Hogan Lovells Hogan Lovells Squire Sanders Squire Sanders / Foley & Lardner Infante Zumpano Infante Zumpano Greenberg Traurig

june 2013 | FOCuS LATIn AMeRICA 83

LATAM_BigDeals_June2013.indd 83 4/30/13 6:36 PM BIG DEALS | FOCUS LATIN AMERICA

Counsel: Miguel Zaldivar and Gaston Fernandez, Hogan Lovells lender: European Investment Bank Value: $260 million summary: The new loan facility — EIB’s first with the government of Ecuador — will finance the construction of a 14-mile metro line in Quito, along with 15 stations and a maintenance depot as well as the acquisition and assembly of the rolling stock.

New Book! • • • A loan facility put together Directors and Officers Liability by Miguel Zaldivar Insurance Forms Annotated and Gaston Fernandez of Hogan Lovells will by Peter K. Rosen help build a metro line in Quito, Ecuador. It will move 360,000 riders Find the clauses and expert guidance you need a day when it begins to protect clients in any situation. operation in 2017.

Special Offer The new line, expected to transport 360,000 Save 30% people a day, is to start operating in 2017. Print and Online OR In a separate transaction, a Hogan Lovells Online Only team led by Zaldivar also arranged a $127 million financing protocol from France for a 6.7-mile line in Cuenca, the nation’s third-largest city.

• • • • • • • •

CenTral amerICa Type of deal: Franchise rights agreement ClIenT: Burger King franchisee BEBOCA Ltd. Counsel: John L. Murphy, Foley & Lardner Issue: Master franchise rights in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, and a revolving AvAilABle iN priNt ANd oNliNe editioNs. line of bank credit from LAFISE, Miami Value: $50+ million For more information or to order this book summary: Murphy negotiated a master franchise and joint venture agreement that visit lawcatalog.com or call (877) 807-8076. put his client in charge of existing Burger Use Promo Code 504172 when ordering to King restaurants and opened the door to develop new stores throughout Central receive your discount. America. He also obtained a bank financing commitment from LAFISE, a bank with a Miami holding company, for future ac-

LATAM_BigDeals_June2013.indd 84 5/2/13 12:22 PM ™ international legal leaders

A SpeciAl AdvertiSing Section

BritishBrazil ColumSão PAULBoia VAnCoUVER

™ JRohnogéR R.io e Smilioingleton de and,R Q.C.ade international legal leaders ogériort Kutzer Emilio is thede Andrade managing is a partnerBrazil- ARianof attorneySenter Goldfarbspecialized & in Rice, regulatory and hasmatters been related with tothe infrastructure, firm since founder1986. He hasand partnerbeen awarded of law boutique the AV Karin Preeminent Klempp & Rogério Emilio de Andrade KKREA-Law. ratingHe holds by a Martindale PhD in Philosophy Hubbell, of Law its athigh - estUniversidade level, has de been São Paulonamed - USP a Colorado and was germany Supera visiting Lawyer scholar and at Center named for to Iberian Best and latin america LawyersLatin American in America. Studies -He CILAS has fromhandled Uni- thousandversity of California, of lawsuits San involving Diego – UCSD. most He his section features attorneys, based internationally, typesadds a ofsolid civil academic claims andeducation advises to aclients vast howlegal toexperience avoid litigation. gained in theMr. publicKutzer’s and re - who have chosen to reach out to potential clients and law T centprivate focus sector. of Hepractice has published has been articles in the and areasbooks ofon complexsubjects related personal to Public injury, Law, fleet firms across north America in order to let them know of their Competition Law, Regulatory Agencies, vehiclePublic Procurement, accidents, insurancePublic-Private coverage Partnerships, Government Contracts skills and experience in maneuvering the legal process within disputesand Enforcement and bad of faith.Judgments He has and handled Awards against numerous State casesParties. in He these has areasthe ability at every and experience level of both to provide the Colorado elements Statefor decision-making and Federal bycourts their home country by listing their services with lexisnexis® (includingagents that thework U.S. in the Supreme sectors of Court). infrastructure He regularly and regulated provides markets. training ™ seminarsMr. Andrade for also attorneys, assists private insurance parties companies in dealing with and public their policiesadjusters re- Martindale-Hubbell® on Martindale.com®. Martindale-Hub- gardingthat guide handling the process Colorado of administrative claims, anddecision has ofacted the regulators as an arbiter and isand expertexperienced witness. in the He use has of tools lectured and mechanisms to the Colorado of the rulemakingClaims Associa process.- bell, the company that has long set the standard for lawyer- tion, Colorado Bar Association and for Continuing Legal Education programs for lawyers and paralegals. international lto-lawyeregal referrals leaders and ratings, has supplied AlM with a list of internationally-based legal leaders enabling you to find Singleton URQUhaRt llP qualified legal help internationally. Attorneys shown do not Karin1200 Klempp – 925 & WestRogério Georgia Emilio Street,de Andrade Vancouver, Advogados BC –V6C KKREA-Law 3L2 p: +55(11)3384-1330 constitute the full list of International Legal Leaders. p: 604 682 7474, f: 604-682-1283, c: 604.377.7557 [email protected]@singleton.com www.kkrea-law.com.br

Top RaTed LawyeRs in Canada

BritishColomB Columia BoGBoiaTÁ D.C.VAn CoUVER BritishCosta ri ColumCa SABnia JoSVéAnCoUVER JlohnUiS F eR.Rnando Singleton VaRgaS R, Q.C.odRígUez JSohnantiago R. SSoleingletonR Bonilla, Q.C. uisrt Fernando Kutzer is Vargas the managing Rodríguez, partner director antiagort Kutzer has is specialized the managing knowledge partner in ALandof partnerSenter ofGoldfarb Vargas & & Vargas Rice, Abo and- ASRealof Senter Estate Goldfarbinvestments & Rice,in Costa and Rica, gados,has been Colombian with the Lawyer firm fromsince El 1986. Rosario He haswith beena distinctive with the career firm in since assuring 1986. real He Universityhas been specialized awarded thein criminal AV Preeminent law and hasestate been businesses awarded to the minimize AV Preeminent risks and criminology at Externado University and rating by Martindale Hubbell, its high- ratingachieve by clients` Martindale objectives. Hubbell, He has its beenhigh- graduate in legal structuring and direc- involved in attracting foreign investment tionest level,of oil industryhas been projects named at Javerianaa Colorado est level, has been named a Colorado Super Lawyer and named to Best Superinto the Lawyer country and and named has supported to Best cli- University. International observer in legal ents in numerous real estate transactions, processesLawyers in for America. the International He has Bar handled Associa - Lawyers in America. He has handled through the application of legal mecha- tionthousand - Human of Rightslawsuits Institute involving (IBAHRI) most and thousand of lawsuits involving most the British Colombian Lawyers Association nisms which help the investor secure his types of civil claims and advises clients typesinvestment of civil and claims obtain and greater advises profit. clients (BRIChow tooL), avoid amongst litigation. which are Mr. the Kutzer’s most re- how to avoid litigation. Mr. Kutzer’s re- important political processes in Venezuela. Santiago has been a strategic busi- cent focus of practice has been in the centness partnerfocus of to practice investors has interested been in inthe areasHe of has complex been involved personal in the injury, private fleet areas of complex personal injury, fleet practice of areas such as criminal law, hu- exploiting the true potential of land manvehicle rights, accidents, energy, mining insurance and hydrocarbonscoverage regulation, corporate law and vehiclethrough accidents,experienced insurance legal assessments coverage and the identification of opera- foreigndisputes investment. and bad Hefaith. is advisor, He has litigant handled and consultantnumerous in cases these inmatters. these disputestional risks and in land bad developments. faith. He has handledHe has vast numerous experience cases in structuring in these areasCo-founder at every levelof the of firm both Vargas the Colorado& Vargas Abogados State and with Federal main head courts- areasland development at every level projects, of both working the Colorado hand in State hand andwith Federalthe investor, courts quarters(including in Bogotáthe U.S. and Supreme representation Court). in LondonHe regularly UK. The provides firm offers training a wide (includingand is trained the in U.S. specific Supreme matters Court). to ensure He regularly the success provides of the trainingproject. portfolioseminars of for services attorneys, in criminal, insurance civil, corporate, companies administrative, and their adjusters taxation and re- seminarsSantiago’s for attorneys, success is insurancebased on the companies understanding and their of complex adjusters legal re- laborgarding law, handlingarbitrage, Coloradotransport, mining, claims, insurance and has andacted foreign as an investment arbiter and gardingand finance handling structures Colorado and specific claims, expertise,and has acted which ashave an resultedarbiter andin regulation,expert witness. amongst He others, has lectured services providedto the Colorado by highly Claimsqualified Associa and - expertmaximizing witness. profit He and has client lectured satisfaction to the throughColorado a deepClaims understanding Associa- recognizedtion, Colorado professionals. Bar Association and for Continuing Legal Education tion,of the Colorado business andBar theAssociation financial andaspects for Continuingof a real estate Legal development. Education The firm specializes in consultancy and litigations before several na- tionalprograms and international for lawyers jurisdictionaland paralegals. bodies. programs for lawyers and paralegals.

Singleton URQUhaRt llP Singleton URQUhaRt llP

Calle1200 13 n –o. 925 9 – 33,West office Georgia 311, EdificioStreet, Vancouver,Sabanas, Bogotá BC D.C. V6C – 3L2Colombia Terraforte1200 – Building, 925 West 1st. Georgia Floor, San Street, Rafael Vancouver,de Escazú, San BC José V6C Costa 3L2 Rica p: +571 6104401p: 604 - +57 682 3212052688 7474, f: 604-682-1283, • [email protected] c: 604.377.7557 ph.p: +(506)604 682 2201-6089 7474, f: ext 604-682-1283, 207, ph. +(506) c: 2201-6090 604.377.7557 ext. 207 [email protected]@singleton.com • www.vargasvargasabogados.com Cel. +(506) [email protected], Fax. +(506) 4030-4041 www.istmolaw.com

TRL Focus Latin America FINAL.indd 85 5/3/13 10:52 AM A SpeciAl AdvertiSing Section

CORPORATE COUNSEL, THE AMERICAN LAWYER, THE NATIONAL LAW JOURNAL

ISSUE SECTION SPACE RESERVATION CALENDAR

January 2013 Top Ranked Law Firms in the U.S. 11/14/13 International Legal Leaders: Asia / Europe Women Leaders in the Law February 2013 Top Rated Lawyers: Health Care 12/18/13 Top Rated Lawyers: Labor and Employment March 2013 Top Rated Lawyers: Intellectual Property -- Top Verdicts 1/17/13 Top Rated Lawyers: Land Use & Zoning Top Rated Lawyers: Corporate Restructuring & Bankruptcy April 2013 Go-To Law Firms: Labor & Employment 2/14/13 Top Rated Lawyers: Energy/Environmental/Natural Resources May 2013 International Legal Leaders: Germany 3/21/13 International Legal Leaders: Canada June 2013 Top Rated Lawyers: Technology Law 4/18/13 Top Rated Lawyers: Transportation Law July 2013 Top Rated Lawyers: Mass Torts (The American Lawyer) 5/21/13 Top Rated Lawyers: Trusts & Estates (The American Lawyer) August 2013 Top Rated Lawyers: Insurance Law & Coverage (Corporate Counsel) 6/18/13 Top Rated Lawyers: Appellate Law (Corporate Counsel) Top Rated Lawyers: Taxation Law (Corporate Counsel) September 2013 Top Rated Lawyers: Securities Law 7/16/13 Top Rated Lawyers: Banking & Finance Law Top Rated Lawyers: Personal Injury - Defense October 2013 International Legal Leaders: Carribean & Africa /Global 100- 8/15/13 Top Rated Lawyers: Mergers & Acquisitions Top Rated Lawyers: Aerospace/Military/Government Law November 2013 Top Rated Lawyers: Construction Law 9/17/13 Top Rated Lawyers: Labor & Employment Top Rated Lawyers: Canada December 2013 Top Rated Lawyers: Managing Partners 10/17/13 Top Rated Lawyers: Corporate Restructuring & Bankruptcy January 2014 Top Ranked Law Firms at the Top 500 Companies 11/14/13 Diversity Leaders in the Law

ISSUE SECTION SPACE RESERVATION

Spring 2013 Intellectual Property: Go-To Firms 2/8/13 Spring 2013 Litigation: Go-To Firms 3/14/13 Spring 2013 Focus Latin America: International Legal Leaders 3/14/13 Summer 2013 The Asian Lawyer: Top Rated Lawyers 4/18/13 Summer 2013 Focus Europe: Top Rated Lawyers 5/10/13 Fall 2013 Intellectual Property: Top Rated Lawyers 7/11/13 Fall 2013 Litigation: Top Rated Lawyers 9/10/13 Winter 2013 The Asian Lawyer: International Legal Leaders 10/8/13 Winter 2013 Focus Europe: International Legal Leaders 11/8/13 Winter 2013 Focus Latin America: International Legal Leaders 11/8/13

For more information, contact Legal Leaders at 347-227-3277 or [email protected]. Schedule is subject to change. Please confirm with your ALM Sales Representative www.alm.com

TRL Focus Latin America FINAL.indd 86 5/3/13 10:52 AM law firms THE how to GuidE f O r lEGal markET inTElliGEncE

Competitive intelligence, career development, client information…the ALM Legal Intelligence Database connects you to the market data and legal industry insights you need to achieve your most aggressive business goals.

the aLM LeGaL InteLLIGence databaSe advantaGe

Clarify your market position Benchmark financials and Create unlimited customized, and gain a comprehensive staffing ratios, and refine detailed reports with your view into the business of operations with more than most important data points law using more than 80 300 Law Firm Reports that and download to Excel® Surveys, Lists & Rankings provide in-depth specifics on format, using the dynamic and Special Reports the highest grossing firms search tool

Get Started today Attend a Demo or Learn More at almlegalintel.com/ALI/database

C3pFLA0613.indd 87 5/2/13 12:59 PM Lookingforasustainable investmentenvironment?

CometoBrazilandpartnerwith experiencedlocallegalconsultants.

SãoPaulo RiodeJaneiro Brasília PortoAlegre Campinas NewYork

C4pFLA0613.indd 88 5/2/13 2:56 PM