Special report: Brazil
29 October 2012 | By Ruth Green
30 January 2012
3 December 2012
29 October 2012
3 December 2012
28 March 2011
The 2014 World Cup and 2016 Olympics are a springboard for sports-related legal projects, but the potential doesn’t end there
Brazil’s lawyers have plenty of work to do. They are living and working in a country attracting immense investment, and with the FIFA World Cup and the Olympic Games on the horizon, have lots of projects on the go.
As the sun set on the London 2012 event much of the world was already looking forward to the next Olympic Games, which will take place in Rio de Janeiro in 2016. This, combined with the fact that Rio has also won the bid to host the FIFA World Cup in 2014, has helped remind the world of Brazil’s selling points and is keeping lawyers on the ground extremely busy.
“Brazil has not been a country in which the UK has invested in a big way, but many of the UK’s biggest companies have always been there, and now there is much more interest in Brazil across all sorts of sectors,” notes Vera Helena de Moraes Dantas, a partner at Noronha Advogados’ London office. “Prime Minister David Cameron has just come back from Brazil, which shows how much importance the UK is placing on it right now.”
Moreover, she adds, the Brazilian government’s recent announcement that it is launching the long-awaited next bidding round for offshore oil and gas concessions in May 2013 has already attracted much interest from foreign companies, particularly from the UK.
“I’ve just been to Aberdeen where I’ve been doing work in this area for some time, and Aberdeen has what we need in Brazil,” she says. “Although [Brazilian energy corporation] Petrobras is big and will be the operator in the next bidding round, it needs technological expertise and a number of Scottish companies have already gone to Brazil.”
Other changes locally are also paving the way for projects to get off the ground in Rio. At the end of August a series of measures to expand the country’s transportation network were introduced by the government, which also announced that it would transfer existing and future rail networks to private companies by agreeing a number of public-private partnership contracts (PPPs).
These changes have coincided with several legislative changes, including amendments to make the country’s PPP laws more flexible.
“Under the old PPP law private partners could receive public funding only after services or utilities were made available to the public,” says Pedro Aguiar de Freitas, managing partner of Veirano Advogados. “One of the most important changes is the possibility of the public partner transferring funds to the private partner at the start of the project. Initial funding would have to be provided by the private partner, thereby increasing the costs and risks, and making private participation more difficult.”
In the running
In terms of work, there’s no doubting that the sporting events have already generated a large amount for a number of law firms. Machado Meyer Sendacz Opice is one firm that has benefited from the influx of project finance, infrastructure and real estate work. It is advising on the construction work on four of the 12 stadia either being rebuilt or upgraded for 2014.
Ivandro Sanchez, who leads the firm’s sports and entertainment department, also stresses the longer term benefits of the work he and his team are doing for Brazil.
“We’re working on a number of other infrastructure projects that will help our country in terms of transport and mobility,” he says.
For example, the firm is heavily involved in the Porto Maravilha project which, although geared towards being ready in time for the two sporting events, will lead to the long overdue renovation and regeneration of Rio’s port district.
Veirano Advogados corporate and energy partner Roberta Bassegio agrees the projects generated by the sporting events are the start of Brazil’s longer term growth.
“We’ve seen a considerable increase in infrastructure projects in recent years, but the 2014 World Cup and the 2016 Olympics represent only a small part of this,” she stresses. “The infrastructure development the country is seeing is much greater than that, reflecting long-term economic growth that demands investment in logistics, transportation, energy, oil and gas, mining, water and sewage, and many other areas.”
Firms are reacting to the increased demand for expertise in the infrastructure, real estate and project finance sector, and making hires. For example, Veirano Advogados recently hired a six-strong real estate team from Campos Mello Advogados, including commercial real estate partner Rodrigo Castro.
Siquiera Castro also hired real estate partner Rossana Fernandes Duarte from Tozzini Freire earlier this year to spearhead a new team to work on the firm’s sports-related projects. This includes partners from the real estate, regulatory and infrastructure, tax arbitration, med-iation and litigation departments.
For Fernandes Duarte, these projects signify exciting times.
“With the hope of better airports, roads and transport systems, we’re not only working towards the Games but also towards a better country,” she enthuses.
Benefits for Brazil
We all know that hosting the FIFA World Cup and the Olympics in the space of the next four years is an exciting prospect and challenging for Brazil, but what will be the short and long-term impact on the country?
“The major benefit of the World Cup for football clubs will be the new arenas,” says Eduardo Carlezzo, managing partner of sports boutique Carlezzo Advogados. “It will make a big impact on the club’s managements and revenue in the long term and will separate the club in the two “series”: the ones playing in new arenas and the others playing in old arenas.”
As for transport, as with London 2012, there are considerable concerns that certain projects will simply not be completed in time.
“In terms of infrastructure, airports have been a huge problem for years in Brazil since they are not modern or even capable to support the current number of travellers,” adds Carlezzo. “The constructions and reforms have already started, with three major airports being assigned through a public bid to private companies for a period of 20 years, however, not all the important airports will be fully ready for the World Cup. Projects regarding the improvement of local transportation such as metro, VLT and BLT are currently running in the host cities, with some delays being detected.”
As well as amendments to the PPP law and other sectors such as power, the Brazilian government is also making the move to address certain issues to help boost the economy’s growth.
“The government has [also] announced some changes to the tax laws that benefit certain industries considered key to the economy’s continued growth, as well as discussions in Congress about modernising the country’s outdated labour laws, which have made it difficult for companies to be efficient and competitive,” remarks Carolyn Ann Knox, a foreign legal consultant at Veirano Advogados.
“Another good example is the increase in BNDES financing for infrastructure projects in the recent years and the introduction of alternative financing mechanisms such as project bonds,” she adds.
More generally, the sporting events have motivated various organisations to establish social projects in Rio to help the local community. One such project involves the US Consulate in Brazil supporting teaching children in the favelas (shanty towns) English and how to use computers. These kinds of programmes are of utmost importance to the country, notes Pedro Aguiar de Freitas, managing partner of Veirano Advogados.
“We happen to work for a number of clients who are involved in these kinds of projects, such as Construtora Norberto Odebrecht which is developing popular housing programs for affordable housing in Rio de Janeiro. We believe such projects are of great value to Brazil’s mid and long-term sustainable development, which cannot happen without social inclusion or improved quality of life for the general population,” he says.
One controversy which looked set to pose many problems for Brazil hosting the World Cup in 2014 was finally brushed aside in January this year when the government finally agreed to allow the sale of alcoholic beverages in stadiums during the World Cup.
The sale of beer or other alcoholic beverages at football matches was originally banned in 2003 in a bid to tackle violence and football hooliganism, but after FIFA demanded the legislation was overturned, the government bowed to pressure and Brazilian President Dilma Rousseff signed the new law.
For Eduardo Carlezzo, managing partner of Carlezzo Abogados, the whole ordeal was embarrassing for Brazil. “The discussion held by Congress regarding the World Cup General Act and, mainly, allowing the sale of beer and other alcoholic drinks in the stadium was a big mess and, unfortunately, the government have contributed to that,” he says.
“There was a big opposition from congressman linked to different religions. In the end, the solution achieved was not to formally and federally release the sale of the alcohol beverage during the World Cup, but only suspend a federal law that forbid selling alcohol in stadiums during football matches.”
Moreover, the new law does not cover all of the stadiums that are hosting football matches, with cities such as Fortaleza, Porto Alegre, Recife, Rio de Janeiro and São Paulo all having their own specific laws preventing the sale of alcohol.
“This means that FIFA will have to address this discussion again with these five cities in order to suspend these laws during the World Cup,” notes Carlezzo. “I don’t think there will be problems with that but the government should have decided it on the World Cup General Act, ending any further discussion. I personally think that much noise and debate was created for something that is not relevant considering the huge challenges faced for hosting the event.”