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Industry trends

Challenges and opportunities in Latin American legal markets in 2015 and 2016

Legal markets have been evolving significantly in Latin America in the last two decades. From a basic family-model structure, leading firms have adapted to international standards and many of them are strong institutions and references in their own countries and communities.

This process has been driven mostly by the economic upturn the region has experienced in the last two decades. Economic growth and investments have produced an increasing need for sophisticated legal services.

But this trend has experienced limitations, due to a less beneficial international market for commodities and also political and economic instability in many of the countries in the region. I have spoken with senior partners from leading firms in the main economies in the region to find out what is happening in their countries in 2015, what could be expected for 2016, and what will be the impact for law firms.


Argentina has had a decade of limited investments and restricted policies toward foreign trade and investments. A government with high intervention in the economy has left little room for long-term projects. This model has impacted productivity in the economy and, consequently, in the legal industry. Business law firms have not experienced growth and have found problems offering opportunities to younger professionals. National elections are coming in October which might prove critical for the future of the economy and also the legal industry. If the candidate for the government – Mr. Daniel Scioli – wins the election, many fear that there will be little chance to find an improvement in the next few years. On the other side, if the opposition wins, although a hard recovery could be expected, the change of expectations will probably produce a wave of new investments within a short period of time. If that happens, law firms will be able to benefit from that upswing and try to recuperate part of the time lost in the last decade. Infrastructure, energy and oil and gas will be at the top of list when business activity starts picking up again.


The current administration led by Dilma Rousseff is under tremendous pressure but contrary to previous occasions there is a great respect for the institutions and no social unrest. Many economic sectors are beginning to feel a downturn, for a number of reasons: (a) devaluation of the Real; (b) sharp reduction in consumption by the population (cars, consumer goods); and (c) infrastructure (especially in the wake of the Petrobras scandal). The devaluation of the Real and the increase in the number of distressed assets create “the perfect storm” for acquisitions by foreign investors that see the strategic opportunity. A lot of M&A activity is arising from those factors. A large number of Brazilian companies in distress could bring Chapter 11-like reorganizations (recuperação judicial) or debt renegotiation. As a consequence, a lot of work for bankruptcy and banking practices might be expected. It’s hard to predict, but many economists say that 2016 will be better than 2015 in terms of GDP growth, considering the political scene will have to be clearer by then.


Chile has experienced a slowdown in its economic activity because of the political reforms by the government of Michelle Bachelet. There have been relevant changes in the tax laws (including tax rates and tax basis) and there is a bill in Congress introducing important changes to labor laws. The result has been a significant reduction in investment and growth. Mergers and acquisitions activity has decreased. However, since prices have fallen this may change in the short run. The practice areas that are performing well are energy, particularly renewable energy; tax on issues of tax reform; labor; and litigation, especially regulatory issues. The World Bank projected a growth of 3.3% for Chile during 2016.


While Colombia has been steadily growing since 2009, this year the country is facing a slowdown to the 3% level in GDP terms. The high fiscal dependence in commodity prices (oil, coal, nickel) which have faced historic lows during the last 12 months also impacts the Colombian economy. Notwithstanding, investment continues to flow in many sectors, attracted by the yet still positive image that the country has abroad, its growing consumption, and lower target prices driven by a 40% devaluation of the Colombian currency. The better-established law firms have benefited from the country’s economic growth of recent years, consolidating larger and better structured teams. In addition the market has seen the entry of foreign firms. The slowdown in the first half of 2015 has been a catalyst, where firms are aggressively competing with fees and talent retention, pushing revenues down and costs up. Next year will be a challenging one for law firms. While the market will continue to expand, rates of growth in terms of revenues per lawyer or revenues per partner and profits per partner will not reach figures of preceding years. Firms with strong dispute resolution, infrastructure and projects practices will do better than others. Transactional, general corporate and tax practices should stabilize. Smaller firms will certainly be tempted to enter into alliances with other local or foreign firms, but leverage will not be the same


The political landscape in México is complex. The economy continues its lackluster GDP growth at or around 2% per annum, although the economy is starting to see the influx of investment in the newly opened telecoms and energy-oil/gas sectors. Across the board, corporate law firms are quite busy in M&A, real estate and corporate finance. Low interest rates and the depreciation of the Mexican peso relative to the US dollar promote deal-making. The telecommunications and energy reforms have generated unprecedented investment and therefore work in those sectors, and that is likely to continue in the short and medium term. In addition to the traditional corporate/M&A and corporate finance work, there will be increasing demand for advice in compliance and dispute resolution in light of the foreign investors’ preference (particularly those operating within regulated sectors such as energy) to resolve disputes through international arbitration. As the US continues to grow, and as the telecommunications and energy reform continue their path towards full implementation, deal work should continue to be robust and, in fact, increase in those sectors. The strength of the US dollar should continue to motivate foreign investors to do M&A in México, be it strategic buyers or financial sponsors.


The current political environment has impacted the economy and last year growth was at its lowest ratio (2.4%) in years, with a severe reduction in investment and many relevant infrastructure and mining projects suspended. 2015 seems to be heading in a similar direction, despite attempts by the government to facilitate investment through new legislation, reducing the terms for approving environmental and operationalpermits, which were taking a very long time to be obtained. Moreover, with elections in April 2016, the pre-electoral period has already started and this typically is a very slow time for investment. With the slowdown in the economy and less investment coming into the country, law firms are starting to feel the impact. Although several big projects that started a couple of years ago (such as the Metro lines in Lima, the gas pipeline in the south, the Las Bambas and Quellaveco multi-billion-dollar mining projects and the Cerro Verde and Southern Peru, expansions, etc.) are keeping the main firms busy, they are also seeing less financing and M&A activity. Therefore, areas of practice like litigation, tax and administrative law are increasing their importance. In general, things continue to be good, but there is some concern in the near future and a lot of expectations on the presidential elections that will take place less than a year from now.

Overall, the boom years for Latin American markets seem behind us and things will be more difficult in the year ahead. Some countries continue to be promising, like México, Colombia and Perú and, to some extent, Chile. Others are facing more severe economic and political challenges, like Brasil and Argentina. Nonetheless, the changes the region has experienced in the last couple of decades will probably continue to consolidate and will continue to make Latin America an appealing region for both investors and law firms.

Author’s Note: I would like to thank the excellent comments provided by Paulo Coelho da Rocha from Demarest Advogados (Brasil); Juan Francisco Gutiérrez from Philippi Prietocarrizosa Uría – PPU (Chile); Jaime Herrera from Posse, Herrera & Ruiz (Colombia); Jean Michel Enriquez from Creel, García-Cuéllar, Aiza & Enriquez (México); and Luis Carlos Rodrigo Prado from Rodrigo, Elías & Medrano (Perú).

About the author

Jaime Fernandez Madero is a consultant in strategy and management of professional service firms and has long-standing experience in the legal industry. He is the founder of Fernández Madero Consulting (FMC), a strategy and management consultancy firm focused on law firms and law departments in Latin America. FMC is associated with Hildebrandt Consulting, a leading international consulting firm in the legal industry.

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