Venezuela’s law firms faced continued economic and political uncertainty throughout 2019. A presidential crisis gripped the country early in the year, as the opposition-controlled National Assembly declared that incumbent Nicolás Maduro’s 2018 re-election was invalid. Its president, Juan Guaidó, is still recognised by over 50 countries as acting president of the nation. At most, law firm managing partners have grudgingly accepted the situation and are working hard to maintain their business during these difficult times.
Hyperinflation rather than Venezuela’s economic collapse remains the most pressing issue for law firms. It reached an eye-watering 200,000% at the close of 2019 and remains rampant despite recent currency reform, which replaced the old bolivar fuerte with the bolívar soberano. One soberano is worth 100,000 fuerte, representing a currency devaluation of 95%. For law firms, inflation means pay packets are routinely reassessed, and remuneration in US dollars is commonplace across the board.
Despite their best efforts, nearly all the firms in this listing are struggling to retain lawyers. For the first time, partner as well as associate counts were down at most firms this year. Many have fled Venezuela, or are at least spending as much time away from it as possible. A recent study found 4.6 million people, or 16% of Venezuela’s total population, is now living abroad. Lawyers are a big part of that brain drain, and in most cases firms do not have the luxury of being able to restore their ranks.
Narrow margins mean firms are forced to make tough decisions over who to keep on. Junior lawyers have been hit hardest. The associate job market at top firms is largely stagnant and the prospect of promotion at most firms is negligible. Meanwhile partners, once prioritised for retention, are sometimes being forced to move on, or retire early. As for structural reform, career path institutionalisation has been put on hold at most firms. Concern over of who will replace the current generation of partners is widespread.
However, the Venezuelan legal market is not in a complete state of collapse. The upside of the present administration’s style of management is that it puts the lawyer front and centre: companies determined to ride out the storm need regular day-to-day advice to navigate their way through the country’s labyrinth of red tape. The firms in this chapter have shown remarkable resilience over the years, helped by sustained demand for labour, disputes and regulatory counsel. White collar and compliance advice is a new source work driven by recent US and European Union sanctions, along with private wealth.
Other areas of law are not performing so well. Firms with especially strong reputations for M&A work can get work on distressed acquisitions and large cross-border deals, but these transactions are out of reach for most. The same holds for firms known for their banking and finance know-how. Unsurprisingly, few banks are willing to lend money in the current climate, while only investors willing to accept massive risk are putting money into Venezuela’s industries.
Lawyers who focus on energy law have also seen better days. Once a staple source of work, Venezuela’s political and economic environment combined with low oil prices mean only a few Chinese and Russian companies are willing to invest in the sector.
The outlook for intellectual property continues to be bleak. Another hike in registration fees has led many companies to abandon Venezuela altogether. Boutiques and firms with large IP practices must now become increasingly creative to stay afloat, providing highly specialised services or acting as expert witnesses abroad.
Predictions for 2020 are hard to make. All eyes remain on PDVSA, which has stopped paying interest on most of its bonds, and which together with Venezuela’s government has accumulated billions of dollars in late interest payments. As of January 2020 it owed almost US$25.2 billion to bondholders. The state-owned oil and gas company is responsible for 90% of Venezuela’s export revenue, and its collapse would have a devastating effect across the entire economy. Many companies are already turning to firms for pre-emptive counsel.
Geographically, the once-thriving oil sector persuaded firms to move beyond Caracas in the past. Over one-third of the firms listed have branches elsewhere in the country, particularly n Maturín, along with other oil hotspots like Barcelona, Maracaibo and Puerto La Cruz. Some also maintain an outpost in the industrial hub of Valencia. However, only three firms listed here can be described as having a national network.