Against a backdrop of global stressors from conflict to trade friction and drivers for change such as global warming and the emergence of AI, Latin America presents a complex socio-political mosaic, currently, impacting both investor confidence and legal service provision.
From Argentina to Venezuela, the region has rarely seen so many elections or so much change. Here Legal 500 Latin America editor Tim Girven and Brazil editor Daniela Costa take a look at the politics framing the region’s legal markets.
Argentina: back on the map?
‘Milei is a game changer,’ says Santiago Carregal, chair of Argentina’s largest law firm, Marval O’Farrell Mairal, of the eruption onto the political landscape of radical populist Javier Milei, who won the country’s November 2023 elections with some 56% of the vote – ‘a clear mandate to change and shake things up’.
He inherited a country living with 30% annual inflation, a poverty rate above 50% and a fiscal deficit equivalent to 15 points of the country’s GDP, all driven by excessive public spending and aggravated by a drought that reduced 2023-export earnings by US$30bn.
Milei’s stabilisation plan has four pillars: a zero deficit policy to eliminate inflation; abandoning the peso in favour of the US dollar; far-reaching deregulation; and a relative price realignment of the economy. To this end he issued a presidential decree and sent an omnibus Bill to Congress, both pieces of legislation including reforms across multiple areas (most notably labour and tax) and the privatisation of state-owned companies. After only a few months in office he has liberalised prices and drastically reduced public spending, achieving a month of zero deficit in January; the first in two decades. Nevertheless, the economic situation is critical: while inflation is going down, it remains at disruptive levels, with real wages at record lows, poverty levels at record highs and economic growth remaining stubbornly absent.
‘The legal market in Argentina enjoyed a far better 2023 than expected.’
Hugo Bruzone, Bruchou & Funes de Rioja
Predictably, such radical steps have provoked a furious backlash, both in the street – in the form of huge demonstrations in Buenos Aires and other cities; and from provincial governors angered by the reduction of central government funding. Milei’s mantra: ‘No hay plata’ (‘there’s no money’) is still popular, but the question is: for how long? And while the market and investment community are supportive of the administration’s direction and purpose (the former head of Marval’s capital markets’ practice, Roberto Silva, has joined the administration as president of the Argentine National Securities Commission, for example), after the experience of the Macri administration (2015-19), many are adopting a ‘wait and see’ attitude until inflation is reduced and social unrest subsides.
If Argentines have the patience and Milei has the political savvy to build the congressional alliances and consensus required for his reform package, a new dawn may beckon for the resource-rich country that has remained mired in cycles of debt default and chronic inflation for almost 25 years.
Despite the political upheaval, ‘the legal market enjoyed a far better 2023 than expected’, comments Hugo Bruzone, managing partner of the full-service Bruchou & Funes de Rioja. Despite capital controls and foreign exchange restrictions, the M&A market was active, if not buoyant, ‘typically with foreign investors selling to local investors’, and there was some capital markets activity. Elsewhere international trade, tax, and hydrocarbon and mining activity all picked up.
Horacio E Beccar Varela, managing partner of Estudio Beccar Varela, foresees ‘at least three more months of considerable political conflict ahead’ – others though more pessimistically argue that 2024 will be a write-off in its entirety. For now though the country is back on the map and under the magnifying glass as it attempts one of the most radical economic realignments in the region’s history.
Bolivia: dollar blues and ‘white gold’
Eighteen months out from Bolivia’s planned October 2025 presidential elections it is an internal governing-party dispute that is both electrifying the political stage and damaging the country’s economy. The confrontation between current president Luis Arce and former president Evo Morales as to who will stand as the official Movimiento al Socialismo (MAS) candidate, has opened a profound rift in the formerly monolithic party that has governed Bolivia since 2006.
Though both presidents and vice presidents can only serve two terms by law – a quota Morales has already completed – all indications suggest he remains committed to standing again, leading to suggestions that Arce may be forced from the party. For his part, Arce is determined to stand his ground and remain the MAS candidate.
The scenario is particularly significant given the country’s precarious economic situation. The economic boom of the 2000s and 2010s, driven by gas exports (primarily to Argentina and Brazil) is just a memory, with both production and sales falling significantly for the last eight years. In the face of declining revenues, consecutive administrations have turned to the country’s international reserves to cover public expenditure, bankroll projects and maintain heavily subsidised petrol and diesel importation. The resulting drop in reserves – from around $15bn to barely $2.5bn – over the course of the last decade has seen the country’s credit rating downgraded by the key international credit-rating agencies, driving inflation and increasing costs for importers.
‘We had a remarkable 2023 and saw billing grow 20% but while I’m enthusiastic about that for the firm, it also pains me since it is work derived from the crisis.’
Carlos Pinto, PPO
Foreseeing the impact of these falling reserves, the Arce administration has sought to develop a number of mining projects, many of which involve lithium (Bolivia has the world’s largest proven reserves of this ‘white gold’), to replace dwindling gas export revenues.
However, with any revenues unlikely to come on stream until a year after the election, should the Boliviano – which has been pegged to the dollar for 15 years – not remain steady, the odds of Arce retaining the presidency look increasingly small.
Commenting on the market, Carlos Pinto of PPO, notes: ‘We had a remarkable 2023 and saw billing grow 20% but while I’m enthusiastic about that for the firm, it also pains me since it is work derived from the crisis. The restructuring, tax and labour practices have all been very busy, financings and refinancings have been steady, and we’ve also had plenty of M&A transactions – unfortunately, again, arising from distressed scenarios as the crisis opens opportunities for the acquisition of assets at reduced prices.’
In a bid to move with Arce’s plans, the firm is considering opening an office in San Luis Potosí to further serve its growing mining clientele, including those in the lithium sector.
Chile: exhaustion vs hope
Chile has endured a torrid five years since the eruption of the ‘estallido social’ protests in 2019. Although that social uprising gave way to the pandemic, it also obliged Garbiel Boric’s Frente Amplio administration to oversee not one but two attempts to rewrite the country’s constitution – both subsequently rejected by the electorate at large.
It is not an overstatement to say that the country is scarred – not just as a result of the devastating forest fires that left 132 dead and thousands homeless earlier this year, or indeed, the death of former president Sebastián Piñera in February, but primarily as a result of the years of renewed socio-political polarisation.
‘To move forward, Chile needs broad agreement in both the political sphere and as regards the economic model.’
Jorge Carey, Carey Abogados
Economic recuperation will not be easy, however. The country, long accustomed to the lowest interest rates in the region, endured high interest rates in 2022-23. On the upside, the Central Bank’s efforts to redress the problem have opened the way to limited growth in 2024 – forecast at 1.8% by the World Bank in the wake of zero growth in 2023.
Jorge Carey – chair of leading full-service firm, Carey Abogados – comments: ‘To move forward, the country needs broad agreement in both the political sphere and as regards the economic model. Only in that way can Chile return to the path of development and turn its back once-and-for-all on the so called “lost decade” of 2014-24, which was characterised by declining indicators and economic stagnation.’
For the country’s legal market – undoubtedly the region’s deepest (excluding Brazil) and arguably its most sophisticated – with political interruptions (barring municipal elections in October) likely to take more of a backseat, there are hopes of further recuperation in the M&A market. With investors in the sector more attuned to longer-term stability issues, infrastructure M&A has seen a significant uptick, while mining transactions have exceeded expectations, with copper performing steadily (despite weakening global demand factors) and lithium continuing to outstrip forecasts.
Indeed, investor-state relations have gradually improved since the administration’s launch of a lithium strategy in April 2023, with Codelco and SQM establishing a private-public association to exploit reserves in Atacama until 2060. Elsewhere, the agribusiness sector has also performed well and, in the wake of the impressive performance of the Santiago Stock Exchange during 2023 and into 2024, it is hoped there will be an increased taste for public M&A deals.
If the transactional outlook is cautiously positive, it is tempered slightly by the more limited manner in which clients are seeking private practice advice, especially as regards due diligence requirements, where in-house teams are playing a far greater role, becoming less reliant on external counsel.
This decline is, in turn, offset by additional specialist requirements – most notably compliance (including cyber security and data protection) – which have steadily been gaining importance, particularly with respect to deals involving international operations buying into the Chilean market.
Colombia: the jury’s out…
‘Back in 1904, a Colombian president was elected under the phrase of “Less politics and more administration” (‘Menos política y más administracion’) – it seems that after 120 years we are still in the same place.’ So comments Carlos Umaña, a senior partner at the country’s leading law firm, Brigard Urrutia, with regard to the current political administration of Gustavo Petro.
Inaugurated in August 2022, Petro became the first left-wing president in Colombia’s recent history, assuming power in a scenario characterised by anger at corruption in the political classes, ongoing economic recession, increasing political polarisation and the social impact of both the Covid-19 pandemic and rising (violent) crime levels.
Sadly, his administration has all too quickly become bogged down in its own political scandals (not least those surrounding his son), and more significantly successive failures to pass new healthcare, pensions and labour legislation. While the government does have a tepid tax reform to its credit, the administration has increasingly lost the support of much of Congress, with Petro making his Cabinet more left wing, further reducing his chances of passing new legislation and losing public support.
‘The general opinion is that Colombia remains an attractive destination for investment.’
Martín Acero, PPU
Relations with the Supreme Court have become particularly sensitive: on the one hand, the institution has vacillated for months over Petro’s choice to replace outgoing attorney general Francisco Barbosa (when the process usually takes just a few weeks), leading to complaints of ‘lawfare’ against the administration. On the other, Petro has called on supporters to defend his administration in the streets. February this year saw a demonstration and march on the Supreme Court, not only raising accusations that the administration is seeking to pressure the judiciary, but also stirring memories of an infamous 1985 attack on the Supreme Court by M-19 (the group of which Petro was a member), which resulted in a military siege and the death of more than 100 civilians, including 11 court justices.
In this complex scenario, economic activity levels are mixed. Certain industries – most notably tourism and renewable energy – look set to benefit from the pro-environmental position adopted by the government. Nevertheless it remains difficult to see how these will offset the negative impact of the administration’s policy regarding two key sectors; hydrocarbons, long a key hard-currency earning export for the country; and road infrastructure, which has also acted as a key economic driver and additionally gone some way in recent years to resolving some of the logistic and governance issues presented by the country’s complex topography.
PPU Colombia managing partner Martín Acero notes: ‘At the end of 2023 and the beginning of 2024, there has been a reactivation in the interest of investors to continue with their projects.’ Indeed, he suggests ‘this combination of factors makes Colombia a buyer-friendly market in terms of M&A. Although there is still some caution, the general opinion is that the country remains an attractive destination for investment. As such, it is likely that transactional activity will continue over the next two years and that a moderate upward trend will eventually be seen, especially in key industries, including logistics, renewable energy and retail.’
On the contentious front, Acero highlights that ‘the private sector is very attentive to ensure that its acquired rights are respected in the face of decisions made by the national government’, with the market seeing a corresponding growth in arbitration activity, along with an upturn in claims before administrative courts.
Ecuador: a phoenix in the making?
In January this year Ecuador endured a wave of criminal violence that culminated in the armed storming of a television studio while the station was live on air. The shock attack catapulted the (apparently) peaceful nation into global notoriety.
In reality, a crisis had been developing steadily since 2017, when a combination of the departure of former president Rafael Correa (2007-17), whose authoritarian style had stifled social discontent; the austerity measures of his successor, LenÍn Moreno; and Ecuador becoming increasingly significant as a cocaine trafficking route; resulted in a steady growth of organised criminality and violence. Demonstrations in 2019 ultimately saw Moreno’s successor, Guillermo Lasso forced out of office and the calling of early presidential elections in late 2023. Some 11 days before the polls, however, the assassination of candidate Fernando Villavicencio upset all polling expectations and ushered in a period of criminal, gang-related violence that would culminate – at least in a mediatic sense, with the takeover of the TV station.
‘There has been a notable increase in Ecuador’s judicial effectiveness index, fostering greater confidence in the current legal framework and judicial authorities.’
Javier Robalino, Robalino
The October elections defied all expectations, with political novice Daniel Noboa (the heir to a banana trading fortune), defeating former frontrunner, lawyer and Correa-ally, Luisa González.
Forced to pivot towards a security focus, Noboa – whose current term runs through to May 2025, has demonstrated a degree of political savvy that defies his youth, moving to establish a state of emergency, and subsequently an internal war that has allowed him to deploy military resources against narcotrafficking and violence. As a result his political support has surged to more than 80%.
He has also managed to pass a number of relevant reforms to assist with the country’s finances, and given clear and coherent pro-business signals.
Overall, the early signs suggest a remarkable political turnaround for the country: violence has dropped precipitously giving way to a cautious wave of optimism and a growing belief in the possibility that the country can turn a socio-political and economic corner and return to growth.
While it remains early to talk of recovery (Noboa will have to win a second election in some 15 months time to obtain a full mandate), signals are promising.
As FBPH Abogados’ partner, Mario Flor, notes ‘the legal services market is already showing signs of recovery compared to 2023, when numerous projects were deferred or suspended due to the political crisis that culminated with the change of government. One senses greater optimism this year, with a dynamism that suggests firms are already beginning to feel this reactivation.’
The market has seen the return of both banking and finance and M&A transactions, along with increased activity in the energy and natural resources sector –particularly mining and public infrastructure – with the ESG segment also trending, especially in terms of debt swaps. Indeed, FBPH, a mid-sized but growing firm of 26 fee-earners has recently hired a new real estate practice head – Mauricio Bustamante – as well as making internal promotions to the partnership.
While the country’s twin challenges of insecurity and a significant fiscal deficit remain, there are a number of additional indicators that suggest a phoenix-like recovery – unimaginable even months ago – may indeed be possible.
As Robalino managing partner, Javier Robalino notes, Noboa’s actions have seen the country’s risk index drop below 1,500 points ‘instilling further confidence in international market actors watching Ecuador’, especially given the anticipation of a new financing agreement with the IMF; ‘moreover, there has been a notable increase in the country’s judicial effectiveness index, fostering greater confidence in the current legal framework and judicial authorities’. While there remains much to be done, ‘these developments signal positive signs of political and economic advancement for the country’.
Mexico: green-lit for growth?
A quiet optimism stalks the Mexican legal market. The end of Andres Manuel López Obrador’s damaging MORENA-alliance administration is in sight. While his successor will likely be his hand-picked replacement, Claudia Sheinbaum, there is a strong sense that a combination of practical economic necessity and her different political weight and profile will combine to provide a less ideological administration more attuned to Mexico’s needs.
One key indicator will be the make-up of Congress: if MORENA ’s outright dominance is broken, the next president will be obliged to negotiate policy in a manner absent during the current administration, prioritising pragmatism over ideology.
Indeed there is a sense that market players are comfortable with both leading candidates (MORENA ’s Sheinbaum and the PAN’s Xóchitl Gálvez), because if Mexico is to capitalise on the opportunity presented by the ‘near-shoring’ phenomena, it will have to facilitate increased power generation, which will require a return to private-sector investment in the energy sector. The scale of investment required after a six-year presidential period in which both the energy and infrastructure sectors have been starved of private funds, means there is the possibility that the return of such investment can drive the growth of the Mexican economy as a whole.
In Mexico, however, domestic issues are only ever half the equation. Tied to the US by virtue of the USMCA (formerly: NAFTA) agreement, and constituting the United States’ primary commercial partner, the country has benefited from the US/China trade war and the resulting desire of businesses to restructure and strengthen their supply chains for the key US market.
Leading firm Galicia Abogados’ experience of market conditions included a steady growth of corporate M&A and financing transactions, particularly in the second half of 2023, accompanied by an uptick in litigation, and both labour and tax consultancy.
The firm’s performance was further underpinned by its strength in regulatory matters across the competition, international trade, life sciences, environmental and compliance areas. Notably, in the face of the expected return of energy mandates, the firm has also retained its depth in that sector (where it fields a five-partner team), as well as in projects and infrastructure, another segment that has seen very limited activity during the López Obrador administration.
The firm added two new partners in January 2024, promoting M&A and mining specialist, Florent Patoret, and hiring contentious tax specialist Paola Yaber. It has also hired Xavier Careaga – formerly the GC of Meta Latin America – as a counsel for TMT and AI. With more than 20 legal initiatives related to AI and cyber security currently pending, the firm foresees a cascade of regulatory and litigious work in the sector in a Mexican market with little experience in the subject.
The broader economic optimism is also – arguably – driving market developments: March 2024 saw three partners from the former Ibarra del Paso Gallego, two from Creel Abogados, and one from Norton Rose Fulbright’s Mexico City office establish a new firm – the now 20-strong Assembla Law. The same month also saw a ten-strong group – including four partners and two counsel – leave Gonzalez Calvillo to join Sainz Abogados; the former has since announced its merger into Spain’s Pérez-Llorca.
Peru becalmed?
In a certain sense, Peru finds itself becalmed. The country’s emergence from the pandemic coincided with the disastrous and short-lived presidency of Pedro Castillo, who secured a narrow run-off win against three-time candidate Keiko Fujimori in June 2021, only to be removed from office and arrested on charges of ‘rebellion and conspiracy’ in December 2022. With former vice-president Dina Boluarte becoming the country’s first female president in his place, she endured a torrid first year in office with the country ending 2023 with negative economic growth.
The damage was largely done during the Castillo administration, with both foreign and local investors leaving the country to seek investments in more stable economies. 2024 has, nevertheless, begun on a more positive note following the president’s appointment of a number of new ministers to key posts (most notably, economist José Arista at the Ministry of Economy and Finance; and RÓmulo Mucho at the Ministry of Energy and Mines), a step which has been interpreted as signalling a willingness to seek to restore investor-confidence moving forward.
While Boluarte’s popularity continues to languish at around 10%, according to Miranda & Amado’s Juan Luis Avendaño she’s likely to stay in power until the end of her mandate in 2026, bringing some stability to the nation – ‘which is what Peru needs most right now following a number of years of abrupt change’.
2023’s poor economic indicators notwithstanding, the country registered some 140 M&A deals over the course of the year – primarily in the mining, energy and agribusiness sectors – and there is optimism that deal flow will increase slightly, given that the country’s inflation rate remains manageable; indeed, the World Bank has predicted growth of 2.5%.
Market strictures have been such that firms have largely remained cautious, with standout developments being Estudio Hernandez’s absorption of a dispute resolution team from Baker McKenzie member firm, Estudio Echecopar, in May 2023; and the more recent strategic swoop by Payet Rey Cauvi Abogados (PRC) for a seven-strong mining team (including three partners) formally with CMS Grau in October that year.
While the latter, with its long history in the sector, has already begun to rebuild its capabilities, the move was an undoubted coup for PRC, positioning it as a key player in this sector, along with national powerhouse Estudio Rodrigo and Estudio Hernández.
More generally, the lack of investment during Castillo’s administration and the subsequent political turmoil has impacted the local legal community more-or-less across the board. While firms with a broad offering, particularly leading players such as Estudio Rodrigo, Miranda & Amado, PRC, Garrigues and Rebaza, Alcázar & De las Casas and – increasingly – Estudio Hernández have proved able to offset the decline in transactional mandates with counter-cyclical work, less diversified firms have struggled, leading to price-dumping and even redundancies.
Uruguay: between a rock and a hard place
The coalition government led by president Luis Lacalle of the centre-right Partido Nacional (PN), has proved admirably durable as the country navigated its emergence from the pandemic. The administration has passed a number of modest, pro-business reforms, while dealing with a series of events that have hit the country’s gross domestic product – from the severe drought Uruguay’s predominantly agro-industrial economy endured in 2023, to the impact of the Argentine crisis, which saw hundreds of thousands of Uruguayans crossing the Rio Plata to spend their disposable income due to the huge difference in the costs of goods and services. Such was the scale of this flow that it negatively impacted the country’s GDP.
‘The Mercosur agreement does not even secure Uruguayan companies access to Argentina and Brazil’s internal markets.’
Nicolás Piaggio, Guyer & Regules
The administration’s success partly reflects a political maturity that has seen the country’s democratic framework respected regardless of the government in office: the judiciary is independent, the rule of law respected, and foreign investment is promoted and protected. Significantly, the country has enjoyed investment-grade status for over a decade. Inflation too, is under control – although at the expense of a significant appreciation of the Uruguayan peso vis-à-vis the US dollar, compromising the competitiveness of companies in the export sector.
Uruguay’s location between neighbouring Brazil and Argentina has long-defined the country’s economic policy options, a reality embodied by its membership of the Mercosur trade bloc. Of late, however, frustration with the agreement – which as Guyer & Regules’ Nicolás Piaggio notes ‘does not even secure Uruguayan companies access to Argentina and Brazil’s internal markets’, has grown, with the current administration seeking to establish trade agreements with the US, the EU and even China, only to be held back by its neighbours. Arguably, the Milei administration – with its radical agenda – could provide an opportunity to break out of this deadlock, although Brazilian opposition remains strong and a considerable brake on any modification of the Mercosur agreement.
The country will hold a general election in October 2024, with Lacalle’s term ending in March 2025. With his alliance and the opposing Frente Amplio more-or-less neck-and-neck in the polls, it is uncertain which party will be taking the country forward. What is more certain is that with an ageing population (one of the region’s oldest) and a relatively generous array of social benefits that are an increasing weight on the national purse, there are difficult policy decisions ahead.
Despite its small size, the Uruguayan legal market has remained very stable. It has long been dominated by a leading duopoly consisting of Ferrere and Guyer & Regules, with the arrival of Dentons (in conjunction with local firm Jiménez de Aréchaga, Viana & Brause) perhaps the only major development in the
last few years.
Venezuela: surviving ground zero
In October 2023, the Biden administration approved the Barbados Accord, temporarily lifting US sanctions on Venezuela’s hydrocarbons’ sector as a response to an electoral agreement between the Maduro administration and the country’s opposition coalition in the run up to the country’s July 2024 presidential elections.
This easing of restrictions potentially added some US$500m in export revenues to Venezuela’s depleted coffers, opening the way to moderate growth in the economy and the likelihood of increased M&A activity in the sector.
However, with political tension mounting, there is likely to be a rethinking of this policy when it comes up for review and renewal in October this year, impacting the already tenuous business environment again.
Despite the difficulties, the legal market’s most agile players continue to find and generate work. In the case of Palacios Torres y Korody (PTCK), name partner Juan Korody highlights the key role played by the firm’s corporate M&A and tax practices. On the M&A front, the firm enjoyed an integral role in the year-long negotiation of the sale of a prominent baseball franchise; while the team also secured significant tax relief for TotalEnergies in a dispute with the municipality of Anzoátegui in the country’s Monagas state. Outperforming its own financial goals and revenue forecast despite the national economic downturn impacting the service industry allowed the firm to launch a labour practice in 2023, thereby broadening its multi-service offering and consolidating its market position in otherwise difficult circumstances. LB