New focus
Handle with care
Chinese investors have ploughed $10 trillion into
the Latin American economy, and the flow of
money is set to continue, but law firms must learn
how best to serve clients from the Far East if they
want to capitalise on this opportunity
With Chinese investment pouring
into Latin America, there is
plenty of work available for the
savviest lawyers who are able to
sniff out a business opportunity.
However, making the most
of such opportunities is not
always straightforward. Lawyers
have learnt from experience
that the best strategy often
involves engaging with Chinese
investors’ lawyers, rather than
communicating directly with
Chinese executives, for example.
Meanwhile, some lawyers argue
that it is in Chinese investors’
best interests to hire the best local
lawyers in Latin America, rather
than the cheapest, because as one
partner succinctly puts it “cheap
turns out to be expensive”.
China is now one of the major
cogs in the Latin America’s
economy, with the region now
being the second-largest regional
recipient of Chinese investment,
according to China’s foreign
minister Wang Yi. Indeed, China
is now the largest trading partner
of Brazil, Chile and Peru. Major
Chinese investments made in
Latin America this year included
Chinalco’s $1.3 billion expansion
of the Toromocho copper mine
in Peru, Three Gorges Group’s
$240 million acquisition of
Chilean company Atiaia Energía
(which is responsible for the
Rucalhue hydroelectric project)
from Brazil’s Cornélio Brennand
Group, and Three Gorges’ $1.4
billion purchase of concessions
to operate two of Brazil’s largest
hydroelectric dams.
Meanwhile, other major deals in
2018 have seen China’s Southern
Power Grid buy a 27.7 per cent
stake in Chile’s largest electricity
transmission system, Transelec,
for $1.3 billion, and Chinese
ride-hailing service Didi Shuxing
buy its Brazilian counterpart 99
Taxis for an undisclosed amount,
following a $100
million investment
in the company in
2017.
However,
while Chinese
investment and
loans will help a
region that consists
of many countries
striving to procure
financing and build
infrastructure to
meet the demands
of their growing
populations, while
also increasing exploitation of
resources such as minerals and
oil, such investment is creating a
number of significant challenges
for law firms. “China is currently
Brazil’s largest foreign trade
partner, and in recent years,
China-based companies have
invested massively in acquiring
brownfield and greenfield projects
in Brazil, taking advantage of the
severe recession and economic
downturn experienced by the
country and therefore benefiting
from less competition and more
attractive investment conditions,”
says Fernando Meira, a partner at
Pinheiro Neto Advogados in São
Paulo. “In terms of opportunities
for law firms, Chinese clients have
demonstrated they are long-term
investors, rather than short-term
speculators, and they are therefore
generally interested in pursuing
opportunities that are not yet
matured, and which require
significant further investment,” he
says. It means Chinese investors
tend to be more resilient to
the natural ups and downs of
economic cycles and political
risks, according to Meira. “This
long-term view, coupled with
the fact that they have virtually
unlimited access to liquidity,
makes them very active players.”
Chinese clients may not
14 • THE LATIN AMERICAN LAWYER • December 2018
necessarily have much experience
of investing in Brazil, and this
gives lawyers the opportunity to
earn the role of “trusted adviser”,
Meira argues.
“The cultural differences trigger
a need for them to invest time
in understanding the nuances
and learning how to do business
in Brazil, which in some areas,
like labour and tax, is still
very complex, and sometimes
dysfunctional,” he says. “For
instance, the vast number of tax
and labour lawsuits that Brazilian
companies are generally involved
in requires time for one to
understand the underlying reason
– this education process represents
a great opportunity for law firms
to develop a trusted adviser
relationship.”
Sergio Díez, partner and head
of the Asia-Pacific desk at Chilean
law firm Cariola Díez Pérez-
Cotapos, recommends that local
lawyers in Latin America engage
with the lawyers of Chinese
investors, rather than directly with
Chinese executives, “to make the
process simpler for everybody”.
He also recommends that Chinese
investors hire the best local
lawyers in Latin America, and not
simply the cheapest, “because the
cheap turns out to be expensive”.
In addition, Díez also suggests
that Chinese investors need to “do
www.thelatinamericanlawyer.com