Following some challenging years fiscally, particularly on the back of a crash in oil prices in recent years, Brazil’s economy has somewhat rebounded, and the country expects GDP to grow 2% in 2022.
The enacting of a comprehensive pensions reform was a huge indicator that the government was serious about putting public spending back on track to combat a growing debt pile. In the next decade, the government expects to save up to 855 billion reais (US$191 billion) thanks to the implementation of the reform. Meanwhile, the investment-friendly environment remains, with a pro-business approach having been adopted across the board and relevant ministries are equipped with technically skilled officials who are receptive to dialogue.
As such, many law firms here, and particularly those with an international client roster, have continued to see enhanced demand from investors, with traditional transactional areas such as corporate work, finance and capital markets showing an increase in activity.
Movement towards privatisation, with the government pumping up concessions as well as public-private partnerships, has led to sustained activity in M&A work, particularly in multijurisdictional acquisitions. State-owned companies making large divestments are also keeping law firms busy.
Debt and equity capital market activity remains a growing source of work for Brazilian law firms, while demand for counsel in large restructurings and bankruptcy cases remains high.
The infrastructure sector has seen a healthy uptake in activity, with the government’s recently implemented programme for investment partnerships offering major opportunities for ports, airports, roads, railways and sewage development through concessions and privatisation deals. Private equity funds with interest in infrastructure are circling, creating more work for law firms.
Favourable regulations from the Central Bank in recent years have carved out a space for innovation in the fintech market, which has gone hand-in-hand with the growing demand for cashless payment systems and less traditional banking methods. In the broader tech industry, start-ups, including e-commerce platforms and software companies, continue to seek investment and law firms have raised to this demand, amending their traditional billing structures to meet the needs of start-ups. One example of this is Demarest, which launched billing alternative ‘Disrupt,’ which offers tailored legal advice and flexible fees to Brazilian start-ups.
An already heightened corporate interest in matters of sustainability and social impact has only increased in 2022, remaining a key area of focus for Brazilian law firms, both regarding advising clients as well as updating their own practices. Leading law firms keep focusing on environmental, social and corporate governance (ESG) initiatives. Clients are increasingly flocking to these firms for assistance on sustainability-linked bond issuances. In terms of internal corporate responsibility, firms here are also placing great emphasis on pro bono work, with an increased institutionalisation of this practice.
The country’s non-transactional market has also continued to be characterised by ongoing activity in tax guidance, particularly advising clients on the best tax structures to operate in the country, as well as how to comply with recently implemented, fierce compliance regulations in a post-Car Wash world.
An increased volume of life sciences work has also shaped 2022 so far, with many firms launching standalone practices to cope with uptake in these mandates. Brazil’s intellectual property, antitrust, labour and tax boutiques, among others, are for the most part also going from strength to strength.
Where firms in previous years would be seen farming out anti-corruption advice to partner boutiques, a clear shift has been seen in recent years. Almost all firms have anti-corruption departments established by partners specialising in criminal law and Brazil's anti-corruption framework has come a long way since the days of Operation Car Wash.
Brazil remains the most developed and competitive legal market in Latin America by a long shot. Lateral hires continue to be a market fixture, while many firms have also seen significant promotions to the partnership in 2022. With their eyes set on staying firmly ahead of the curve, many firms have successfully implemented strong modernisation programmes (with partner compensation structures designed to support cross-team collaboration and transparent career plans). Most recently, technological investment has also been at the centre of these firms’ minds, many of which have allocated invested in digital platforms, AI and cybersecurity tools.
Despite their often-significant size and ability to attract recruits, these established firms have not prevented several successful newcomers from carving out their own space in the market. For the most part, these firms are nimble and able to offer streamlined services with excellent value for money. On the other side, those firms that are taking longer to establish well-institutionalised structures are struggling against aggressive competitors.
Moving forward, firms here, much like elsewhere in the world, are working to marry client expectations of sophisticated services and value for money, toeing the line between increased practice specialisation and a simultaneous push towards a bigger and broader firm model capable of a full-service offering.
With the possibility of a lingering global recession on the horizon, there is no doubt that Brazil may find it a challenge to reach its full potential, but the legal market has withstood tests before and learned to thrive in good as well as troubled times, with nothing suggesting that law firms’ mission to institutionalise will lose momentum any time soon. Adaptability is certainly key to making a footprint in this market, and Brazil is teeming with examples of firms that have learned to not only survive in adverse conditions but thrive.
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