There’s a saying among US lawyers: “Brazil is the China next door.” It might help explain why US firms continue to pour into the region.
The latest firm to join the rush is Chadbourne & Parke. The New York firm is in the final stages of obtaining its licence to practise as a foreign legal consultancy and will open its São Paulo office later this month.
“The office will initially focus on cross-border finance and M&A, but we plan to extend it to mirror our core practices across other offices,” says Latin America co-head Allen Miller. “Our approach has always been to be multidisciplinary and we don’t want to over-emphasise a particular practice.
“We have a significant practice in the region and have been heavily focused in Latin America for the past 15-20 years, so we already have a significant client base.”
Alongside Miller, the practice will be launched by Latin America co-head Talbert Navia, capital markets partners Marc Rossell and Carlos Albarracín, and litigation partner Oliver Armas.
It is easy to see why Brazil – whose economy is expected to grow by about 6-8 per cent in 2010 – is such a lucrative prospect for law firms. In terms of corporate activity the contrast with the US and Europe is staggering.
According to Thompson Reuters, Latin America saw a 171 per cent increase in M&A activity in the second quarter of 2010 – and it’s not only Brazil that has benefited. While it remains the dominant player in the market, with $3.1bn (£2.1bn) in completed deals in the second quarter, countries such as Colombia, which saw $2.7bn in completed deals, are also performing well.
Another recent entrant into the market is Milbank Tweed Hadley McCloy, which opened its office in São Paulo two months ago. Like many firms in the region, the firm uses its Mexico office to secure work throughout Central America, while the Brazil office offers penetration into countries such as Peru and Argentina.
“Most US firms with a strong international practice have either opened, or are considering opening [offices in Latin America], though not all have made the dramatic impact we have,” says Latin America head Michael Fitzpatrick.
“If you look at international capital flows over the past five or so years, the real growth has obviously been in BRIC (Brazil, Russia, India and China) countries. For US firms there are strong historical links to the region, and Brazil is a natural centre to access the rest of Latin America,” he says.
Simpson Thacher & Bartlett is another relative newcomer. Its Brazil office officially opened in December 2009 but it has been active in the region since the capital markets’ boom began six years ago.
“We were doing a lot of work from New York and realised that in terms of clients, competitiveness and our long-term position, opening an office was the right thing to do,” says Todd Crider, co-head of the São Paulo office.
“We’re a newcomer in terms of establishing an office, but one of the leaders in the market. We don’t just see it as the latest boom country in which to get involved. There are a couple of newcomers trying to enter the market now and I think they might have a hard time. It’s difficult to go in without an established book of business.”
Crider also believes that, at some point, the number of US firms looking to move into Brazil will slow down. “It’s a growing market and there are opportunities, but the question is how many firms will be needed, and how many will have a winning formula?”
But Dick Aldrich, who joined Skadden Arps Slate Meagher & Flom from Shearman & Sterling last year, and has worked in Brazil since 1987, rejects claims that
the legal market is becoming oversaturated. “I think it’s understandable that people are coming to Brazil,” says Aldrich. “I don’t think of it terms of oversaturation: competition is a good thing.”
With no signs of the Brazilian economy slowing down soon, expect competition to get fiercer.