Friday,
16 January 2015 - Alison O′Connell - Survey - Analysis
Our
analysis of the law firms used by the region′s largest companies takes a look
at Brazil.
In
2014, President Dilma Rousseff narrowly won re-election as president, signalling a
fourth consecutive victory for her Worker′s Party (PT) after a bitterly fought
campaign with business-friendly opposition leader Aécio Neves. All eyes will
now be fixed on whether she can restore confidence in the economy and maintain
political support in a sharply divided nation.
Despite
Brazil′1s economy growing at a negligible 0.1 per cent in the third quarter of
2014, and with inflation still running high, Latin America′s largest country
remains a pillar of strength, with over one-third of the region′s 100 largest
companies headquartered there.
Almost
half of the top 10 companies in the region are Brazilian. Petrobras, the
country′s state-owned oil and gas giant, remains the region′s highest-earner
for the third consecutive year. The company had a difficult financial year,
which saw its main stock index drop by 18 per cent. However, the region still
has some of the largest hydrocarbon reserves in the world, and Petrobras
continues to boast great production potential by exploring the vast deep-water
deposits in the Santos and Campos fields. 2015 is also set to be a trying yearas the company faces falling oil prices and the ongoing
corruption investigation that hit the global headlines last year continues to
widen.
Other
home-grown multinationals to make it to the top 10 included mining company
Vale, food processing company JBS and construction conglomerate Odebrecht.
Energy company Grupo Ultra was pipped to 10th place by Walmart de México;
falling to 11th for the first time in three years.
Telecommunications
companies continue to feature heavily in the top 100 (see figure 1). The
government recently issued a law offering federal tax breaks for new telecom
investments in networks that support access to fixed or mobile broadband, and
many companies are expected to benefit. Brazil′s Telefónica/Vivo; Telemar/Oi;
and Claro/Embratel all featured in the top half of the table, followed by TIM
Brasil and Globo Communicações.
1)
Number of companies by industry
Lower
mineral prices meant Brazil′s mining industry did not experience the growth of
previous decades, however mineral output is expected to remain solid,
particularly for iron ore. Domestic companies, such as Vale, Gerdau, CSN and
Usiminas, are expected to continue to exploit the country′s significant reserves.
With
the region′s top 100 companies heavily dominated by Brazilian companies, the
country′s dynamic legal market stands in contrast to the sluggish economy.
Brazilian firms continued to do well providing external counsel, with all of
the top law firms representing more clients than the year before. "In view
of the current situation in the country there are some areas of law that might
represent opportunities for law firms,"says Roberto Quiroga, managing
partner at Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados. "There
is great potential in the area of compliance, and such growth might require
reorganisation and restructuring of several companies, the need for diversified
funding options, the need for investment resources and a more specific legal
framework."
Many
of the country′s managing partners are optimistic about the coming year:
"Despite the hazy scenario, I do believe investment will continue to flow.
Brazil still offers very strong fundamentals - it has a diversified economy, a
young population, a large domestic market, large water, minerals and oil
reserves [.] we boosted our number of partners in 2015 to meet a significant
increase in the volume of work related to specific areas such as corporate
M&A, social security and consumer law. We truly believe that the next few
years are going to present good opportunities in the fields where the new
partners have been made," says Alexandre Bertoldi of Pinheiro Neto
Advogados.
Roberto
Pary, partner at Souza, Cescon, Barrieu & Flesch Advogados, shares an
equally confident outlook. "We expect that capital market deals will pick
up as the government has decided to slow down the participation of government
banks in the financing of larger companies and infrastructure projects.
International investors will also be closely following the Brazilian economy
and that could be a source of deals in M&A if projections are favourable,"
he says.
Enactment
of Brazil′s new anti-corruption legislation and the investigation into alleged
government kickbacks at Brazil′s state-controlled oil company Petrobras has increased the pressure on the country′s president Dilma
Rousseff, which has increased demand from firms in this area according to
Mariana Tavares de Araujo, partner at Levy & Salomão Advogados. "The
demand for internal investigations and compliance-related services, such as
training sessions, drafting codes of conducts, and consultations on potentially
sensitive legal issues, has consistently increased over the past few years, in
light of stronger enforcement on the anticorruption area," she explains,
adding "the fact that the law encourages self-reporting and provides for
reduction in fines for companies that have effective compliance programs in
place has worked as an additional incentive for such services."
As a
result, the past 12 months have seen an increased focus on anti-corruption for
many firms with more and more assisting international clients in adapting their
existing codes of conducts to include applicable rules in Brazil. This includes
providing training for employees of domestic clients, helping to conduct
internal investigations and representing large domestic companies in
administrative and criminal investigations of allegedly corrupt practices in
Brazil.
Mattos
Filho Veiga Filho Marrey Jr e Quiroga Advogados and Machado, Meyer, Sendacz e Opice Advogados remained
the two most popular firms among Brazil′s top companies; Petrobras, Vale, and Odebrecht among them.
TozziniFreire Advogados, Barbosa Müssnich e Aragão, Veirano Advogados and
Pinheiro Neto also fared well, each representing more than 10 companies.
Mid-sized firm Levy & Salomão Advogados has seen a substantial increase in
clients from the top 100 list (see figure 2), and represented major international
companies such as Fiat, Louis Dreyfus and AES, as well as homegrown
multinationals Ipiranga, Ambev and Braskem.