Venezuela’s law firms continue to face economic and political uncertainty. The outcome of the 2018 election remains disputed, with Nicolás Maduro and Juan Guaidó still jostling for the title of president.
Maduro now, however, appears to have consolidated power. Although the US continues to recognise Guaidó as the leader, the Joseph Biden administration appears to have adopted a less hawkish approach to the country than Donald Trump had. In 2022, a high-level US delegation held talks with the Maduro regime, the first between the two countries since 2019, perhaps a sign of a thawing relationship.
Unsurprisingly, local law firm managing partners are working hard to maintain their business during these tough times. Inflation rather than Venezuela’s economic collapse remains the most pressing issue. In 2021, the country’s annual inflation rate reached 686.4%. For law firms, this means pay packets are routinely reassessed, and remuneration in US dollars is commonplace across the board.
There is some positive economic news, however. This year Venezuela’s economy is set to grow at its fastest rate in 15 years with an expected 8.3% GDP increase. The country’s sudden revival is the result of an increase in oil production and a rise in domestic demand.
Despite their best efforts, nearly all the firms in this chapter are struggling to retain lawyers. Many have fled Venezuela or are at least spending as much time away from it as possible. There are around six million Venezuelan refugees and migrants globally who have left the country as a result of the ongoing political and economic crisis in 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.
Narrow profit margins mean firms must 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 a promotion at most firms is negligible, although Leĝa Abogados bucked the trend by making six promotions in 2021. Meanwhile, partners, once prioritised for retention, are sometimes forced to move on or retire early. As for structural reforms, career path institutionalisation has been put on hold at most firms. Concern over who will replace the current generation of partners is widespread. On the plus side, however, Venezuelan firms operate with an exceptionally low partner-associate ratio (compared to other Latin American firms), partly as budgets do not allow for large departments, meaning clients benefit from an important level of partner involvement.
However, the Venezuelan legal market is not in a complete state of collapse. The upside of the Maduro 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.
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 Venezuelan firms. The same holds for firms known for their banking and finance know-how. Unsurprisingly, few banks are willing to lend money given the state of Venezuela’s economy, while only investors willing to accept massive risk are putting money into the country’s industries.
Lawyers who focus on energy law have also seen better days. Although sanctions on Russia over its invasion of Ukraine may lead to countries sourcing alternative oil supplies, Venezuela’s fragile oil industry (which requires substantial investment) is unlikely to be able to respond to this demand.
In 2021, 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. Baker McKenzie, the only other international firm in this chapter, remains an important player in the market.
The outlook for intellectual property (IP) continues to be bleak. High registration fees have caused many companies to leave the country. 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; it saw debt rise to US$34.9 billion in 2021. The company is responsible for 90% of Venezuela’s export revenue and its collapse would have a devastating effect on the entire economy.