15 October 2012 | By Ruth Green
31 January 2013
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9 December 2013
Mexico is becoming a land of opportunity and lawyers from all over the world are looking at ways to get a piece of the action
Mexico, like its neighbours in South America, is an economy where lawyers are still seeing opportunities. Foreign direct investment work and tourism are two booming sectors which are attracting firms from the US and further afield to this jurisdiction.
Mexico bore much of the brunt of the slump in US consumer spending in 2008/09, but three years on the country is experiencing an impressive turnaround and investment from abroad seems better than ever.
“Foreign direct investment is definitely one of the main drivers of the Mexican economy, both in terms of creating jobs and maintaining growth,” highlights Yves Hayaux du Tilly, a partner at Nader Hayaux & Goebel. “The trend started back in 1994 with NAFTA (the North American Free Trade Agreement). Then, in 1995 Mexico became the first Latin American member of the OECD and in 2000 it entered into a Free Trade Agreement with the EU. These agreements have not only reduced the tariffs to export and trade with Mexico and increased trade between those countries and Mexico, but also increased the flows of foreign investment into the country.”
Carlos Valencia, a partner at DLA Piper in Mexico City, also points to growth in certain areas of the local economy.
“Both direct and indirect foreign investment into Mexico are continuing to grow,” he says. “The most popular sectors in this respect are industrial and general services, infrastructure, telecoms and, most recently, real estate.”
Jorge de la Garza, a partner at White & Case in Monterrey, adds: “Now China is losing emphasis, the Mexican workforce and the country’s tourism sector are both attractive, and there are significant opportunities for companies to invest in beaches and resort areas.”
Valencia draws particular attention to Fibra UNO, which became the first real estate investment trust (REIT) to be listed on Mexico’s stock exchange in April last year. Fellow DLA Piper partner Guillermo Uribe acted for Fibra Uno on the deal, when he and Valencia were still at their former firm Thompson & Knight, but Uribe has since retained the REIT as a client and continued to represent it on offerings and acquisitions.
But away from tourism and real estate, why is there a sudden surge of interest in Mexico?
“It’s a good moment to come and invest in Mexico since the US crisis is starting to recede and the Mexican economy is seeing perhaps its best numbers in history - the macroeconomics in the country are making it an attractive place to work,” enthuses de la Garza.
Mexico’s potential as a global car manufacturer, in particular, is huge, with household names like Volkswagen, Nissan, Renault, Toyota and most recently Audi all flocking to the country in the past five years to make the most of what Mexico has to offer.
“Several automobile companies are already in the process of or seriously considering opening plants to build cars in Mexico as they have realised that it wasn’t as efficient to manufacture them in other jurisdictions as they thought,” comments Julián Garza, a partner at Nader Hayaux Goebbels.
As Mexico continues to attract attention from abroad, it’s not surprising that international law firms are showing signs of having a base in Latin America’s second-largest economy.
Mexico should be core to any firm serious about making it in Latin America, according to De la Garza.
“If you want to be a player in Latin America you must be in Mexico and Brazil, and you definitely need New York access,” he stresses.
It was for this reason that between October 2011 and February 2012, Greenberg Traurig, Littler Mendelson and DLA Piper all set up shop in Mexico.
For Valencia, who was one of four partners who left Thompson & Knight for DLA in February 2012, the decision to tap into the Mexican market was a logical move for his new firm.
“In our opinion the Mexican market is attractive for international firms, but the decision to establish your own office in Mexico requires in-depth analysis of the market,” he says. “For DLA Piper, the decision was easy.”
“There’s definitely interest from law firms and the reason behind that is no secret,” stresses Garza. “The financial condition of Mexico and its strategic role in the emerging markets will bring a lot of opportunities for companies, and many firms are looking into the possibility of opening an office as they have clients with businesses in Mexico that require legal services. It’s also an opportunity to serve new clients.”
As Mexico prepares for the return of the Institutional Revolutionary Party to power in December, following July’s elections it is hoped things will continue to improve.
“There’s been a lot of speculation about reform, particularly around labour, energy and tax,” says de la Garza. “Although those topics have been on the legislative agenda for many years nothing has happened. There are better expectations this time.”
Brit takes two
Hayaux du Tilly, who splits his time between Nader Hayaux & Goebel’s offices in Mexico City and London, also stresses the significant role the UK can play in ensuring Mexico’s economic wellbeing.
“A top priority for the coalition government in the UK is to double investment in Mexico,” he says. “Our countries’ futures are very much aligned and Mexico wants to divest of its dependence on the US economy - the UK will be an important aspect of this.”
Top three investments in Mexico, 2007-12
1 In 2012 Sullivan & Cromwell, Freshfields Bruckhaus Deringer, Skadden Arps Slate Meagher & Flom, Alston & Bird and Clifford Chance advised Anheuser-Busch Inbev on its $20.1bn (£12.4bn) acquisition of Grupo Modelo, which was advised by Greenberg Traurig, Cravath, Swaine & Moore,
2 In 2010 Allen & Overy and Gibson Dunn & Crutcher advised an investor group comprising Heineken NV and Heineken Holding NV on its $7.3bn acquisition of FEMSA’s Mexican and Brazilian beer operations. FEMSA was advised by Cleary Gottlieb Steen & Hamilton, Freshfields, Pinheiro Neto Advogados and Tozzini Freire Teixeira e Silva.
3 In 2007 Ternium acquired Grupo Imsa for $1.7bn. Sullivan & Cromwell acted for Grupo Imsa.
Mexico: key figures
GDP (2011) $1.15tr
Annual inflation 3.41%
Population (2011) 114.8m
Life expectancy at birth 77
Unemployment rate (2011) 4.9%
Source: World Bank, Mexico’s National Institute of Statistics Geography and Informatics