New focus
things ‘by the book,’ as creativity
in competitive processes is not
welcomed”.
Meira identifies communication
as one of the major challenges
in dealing with Chinese
clients. “Experience shows that
communication tends to be a big
obstacle,” he says. “The younger
generations are more fluent in
English, but the actual decision
makers, who tend to be older,
have greater difficulties, and
we often host meetings with
translators.” Meira adds: “The
cultural differences also play an
important role in how negotiations
are carried out. Culturally,
Chinese people tend to listen more
and talk less and are also very
formal. But over time I think that
cultural barriers will be softened
and the gaps will be narrowed.”
Chinese investors are pumping
money into a wider range of
industry sectors in Latin America.
Alberto Cardemil, partner at
Chilean law firm Carey, says:
“China has invested some $10
trillion in the region, and while
at the beginning investment
was concentrated in traditional
sectors of the economy such as
mining, energy and infrastructure,
now we are seeing it move
into agro-industry, food and
beverages, banking and finance,
telecommunications, renewable
energy and automotive, among
others.” Cardemil adds that,
while around 80 per cent of
the investment has so far come
from state-owned firms, there
is growing interest from private
companies.”
However, the issue for Chinese
investors, and their legal advisers,
is that they tend to take more time
to make investment decisions and
as a result that they can ultimately
lose out to other international
investors, some lawyers argue.
Meanwhile, a number of lawyers
also bemoan the fact that they
often find themselves providing
advice for free at the outset, and
this means firms may be inclined
to prefer to work with clients
from other jurisdictions. “Another
challenge is the use of alternative
communications mechanisms,
such as WeChat, which makes
www.thelatinamericanlawyer.com
counselling the client difficult
- coupled with a sudden loss
of communication prior to or
during the counselling process, a
lack of knowledge of the market,
and less sophistication on behalf
of the client, this can lead to
misunderstandings,” says Ignacio
Tornero, associate at Carey in
Chile.
Juan Paulo Bambach, partner
at Philippi Prietocarrizosa Ferrero
DU & Uría (PPU) in Santiago
argues that Chinese investors
should investment in projects at
an earlier stage, particularly when
it comes to natural resources,
which is a sector that has proved
particularly attractive to Chinese
investors, along with agro-
industry and raw materials.
“Chinese investors have
traditionally snubbed investment
in the early stages of projects, but
there is a big opportunity, and
economic benefits, in entering
at an early stage and actively
contributing to development,
especially in mining, where
Chinese capital, as well as
their experience in exploration,
prospection and pre-feasibility
phases, would be welcome,” he
says. “Getting in early, despite
the greater risk, improves their
access to greater opportunities,
and would allow for a greater
Chinese contribution to
technology, technical services
and consultation, suppliers
and physical assets, as well as
financing,” Bambach says.
Mitigating the impact of Brexit
In addition to opportunities
in mining, infrastructure, and
energy, Chinese investors are
also looking to Latin America to
mitigate the impact of Brexit, the
renegotiated North American Free
Trade Agreement, and the US’
imposition of tariffs on Chinese
goods, on their supply chains
or manufacturing operations,
says Sergio Moreno, manager
for indirect tax and global trade
at Ernst & Young in Miami. “In
the face of these recent events,
the main challenge traders and
investors face is the uncertainty
of not knowing what will disrupt
their planning,” he says. However,
the signing of the US-Mexico-
Canada Agreement (USMCA)
and the continued expansion of
free trade agreement networks
throughout Latin America could
bring confidence to Chinese
investors, Moreno adds. “There
are many opportunities in the
region that can provide benefits
to trade operators and investors,
including the use of special
programmes such as free trade
zones in Mexico, and this may
help limit the impact of US
tariffs,” he says.
Chinese investment in Latin
America is growing despite
significant obstacles, such as
distance, cultural differences,
legal uncertainty in some markets,
and exchange rate fluctuations,
according to Adolfo Pineda,
a partner at law firm BLP in
Honduras. That said, Pineda says
events in Venezuela has deterred
Chinese investors from doing
deals in the country.
There are some clouds on
the horizon. Pineda says Latin
American governments do not
offer sufficient incentives for
Chinese companies to invest in
their economies, while returns on
investment are generally slower
in Latin America than in China,
He adds that, with reference to
sectors such as renewable energy,
the lower cost of components in
China, coupled with the fact that
Chinese manufacturers can benefit
from lower labour costs at home,
means domestic investment is
often a more attractive option.
Yet there are also reasons for
optimism. Pineda points out that
Beijing is seeking to create a new
‘silk road’ by investing more in
Latin America to allow for China’s
worldwide trade expansion. And
herein lies a massive opportunity
for legal advisers. Pineda says:
“One of the biggest attractions
of Latin America for Chinese
investors is Panama, as it allows
for the distribution of Chinese
products to Europe, the US and
Latin America.” Those firms
that effectively adapt to the
unique requirements of Chinese
investors are sure to experience
ever-increasing demand for their
services.
December 2018 • THE LATIN AMERICAN LAWYER • 15