Venezuela’s law firms faced continued economic and political uncertainty throughout 2020. The outcome of the 2018 election remains disputed, with Nicolás Maduro and Juan Guaidó jostling for the title of president. Around 50 countries worldwide recognise Guaidó as Venezuela’s acting president, while others, including Russia and China, identify Maduro’s presidency as legitimate. 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. In August 2021, the country slashed six zeroes off the bolívar soberano, dividing the currency by one million. This marked the third devaluation of the currency in less than 10 years. 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 counts (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. Around five million Venezuelans, equivalent to 16% of the country’s total population, have emigrated as a result of the political and economic crisis gripping the nation. 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.
The Venezuelan government’s response to the covid-19 pandemic has been far from exemplary. The number of registered deaths is low in comparison to the numbers reported by its neighbours, and experts believe this comes as a result of underreporting and misclassifying data. The country’s vaccination programme has been slow – it has now received at least 1.4 million AstraZeneca doses from COVAX, the global vaccine initiative for low-income countries.
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 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 the sustained demand for labour, disputes and regulatory counsel. White-collar and compliance advice is a new source of 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, The combination of Venezuela’s political and economic environment and low oil prices mean only a few Chinese and Russian companies are willing to invest in the sector.
Back in April, global firm Dentons absorbed a local tax boutique, Vallenilla, Escalante & Asociados. Dentons, which operates as Despacho de Abogados miembros de Dentons in Venezuela, strengthened its tax abilities to better serve local and international clients looking to do business in Venezuela. The decision to expand came as Venezuela battled astronomical inflation rates and the growing presence of the US dollar as an alternative to local currency.
The outlook for intellectual property (IP) 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.
All eyes remain on state-owned oil and gas company 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. The company is responsible for 90% of Venezuela’s export revenue and its collapse would have a devastating effect on the entire economy. Investors predict that the bonds would double in value if Maduro were to leave office.
Geographically, the once thriving oil sector persuaded firms to move beyond Caracas in the past. Many of the firms listed have branches elsewhere in the country, particularly in Maturín, along with other oil hotspots like Barcelona, Maracaibo and Puerto La Cruz. Some also maintain an outpost in the industrial hub of Valencia.