Friday, 16 January 2015 - Alison O′Connell - Survey - Analysis

Our analysis of the law firms used by the region′s largest companies takes a look at Brazil.

In 2014, President Dilma Rousseff narrowly won re-election as president, signalling a fourth consecutive victory for her Worker′s Party (PT) after a bitterly fought campaign with business-friendly opposition leader Aécio Neves. All eyes will now be fixed on whether she can restore confidence in the economy and maintain political support in a sharply divided nation.

Despite Brazil′1s economy growing at a negligible 0.1 per cent in the third quarter of 2014, and with inflation still running high, Latin America′s largest country remains a pillar of strength, with over one-third of the region′s 100 largest companies headquartered there.

Almost half of the top 10 companies in the region are Brazilian. Petrobras, the country′s state-owned oil and gas giant, remains the region′s highest-earner for the third consecutive year. The company had a difficult financial year, which saw its main stock index drop by 18 per cent. However, the region still has some of the largest hydrocarbon reserves in the world, and Petrobras continues to boast great production potential by exploring the vast deep-water deposits in the Santos and Campos fields. 2015 is also set to be a 
trying yearas the company faces falling oil prices and the ongoing corruption investigation that hit the global headlines last year continues to widen.

Other home-grown multinationals to make it to the top 10 included mining company Vale, food processing company JBS and construction conglomerate Odebrecht. Energy company Grupo Ultra was pipped to 10th place by Walmart de México; falling to 11th for the first time in three years.

Telecommunications companies continue to feature heavily in the top 100 (see figure 1). The government recently issued a law offering federal tax breaks for new telecom investments in networks that support access to fixed or mobile broadband, and many companies are expected to benefit. Brazil′s Telefónica/Vivo; Telemar/Oi; and Claro/Embratel all featured in the top half of the table, followed by TIM Brasil and Globo Communicações.

1) Number of companies by industry

Lower mineral prices meant Brazil′s mining industry did not experience the growth of previous decades, however mineral output is expected to remain solid, particularly for iron ore. Domestic companies, such as Vale, Gerdau, CSN and Usiminas, are expected to continue to exploit the country′s significant reserves. 

With the region′s top 100 companies heavily dominated by Brazilian companies, the country′s dynamic legal market stands in contrast to the sluggish economy. Brazilian firms continued to do well providing external counsel, with all of the top law firms representing more clients than the year before. "In view of the current situation in the country there are some areas of law that might represent opportunities for law firms,"says Roberto Quiroga, managing partner at Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados. "There is great potential in the area of compliance, and such growth might require reorganisation and restructuring of several companies, the need for diversified funding options, the need for investment resources and a more specific legal framework."

Many of the country′s managing partners are optimistic about the coming year: "Despite the hazy scenario, I do believe investment will continue to flow. Brazil still offers very strong fundamentals - it has a diversified economy, a young population, a large domestic market, large water, minerals and oil reserves [.] we boosted our number of partners in 2015 to meet a significant increase in the volume of work related to specific areas such as corporate M&A, social security and consumer law. We truly believe that the next few years are going to present good opportunities in the fields where the new partners have been made," says Alexandre Bertoldi of Pinheiro Neto Advogados.

Roberto Pary, partner at Souza, Cescon, Barrieu & Flesch Advogados, shares an equally confident outlook. "We expect that capital market deals will pick up as the government has decided to slow down the participation of government banks in the financing of larger companies and infrastructure projects. International investors will also be closely following the Brazilian economy and that could be a source of deals in M&A if projections are favourable," he says.

Enactment of Brazil′s new anti-corruption legislation and the investigation into alleged government kickbacks at Brazil′s state-controlled oil company Petrobras has 
increased the pressure on the country′s president Dilma Rousseff, which has increased demand from firms in this area according to Mariana Tavares de Araujo, partner at Levy & Salomão Advogados. "The demand for internal investigations and compliance-related services, such as training sessions, drafting codes of conducts, and consultations on potentially sensitive legal issues, has consistently increased over the past few years, in light of stronger enforcement on the anticorruption area," she explains, adding "the fact that the law encourages self-reporting and provides for reduction in fines for companies that have effective compliance programs in place has worked as an additional incentive for such services." 

As a result, the past 12 months have seen an increased focus on anti-corruption for many firms with more and more assisting international clients in adapting their existing codes of conducts to include applicable rules in Brazil. This includes providing training for employees of domestic clients, helping to conduct internal investigations and representing large domestic companies in administrative and criminal investigations of allegedly corrupt practices in Brazil.

Mattos Filho Veiga Filho Marrey Jr e Quiroga Advogados and Machado, Meyer, Sendacz e Opice Advogados remained the two most popular firms among Brazil′s top companies; Petrobras, Vale, and Odebrecht among them. TozziniFreire Advogados, Barbosa Müssnich e Aragão, Veirano Advogados and Pinheiro Neto also fared well, each representing more than 10 companies. Mid-sized firm Levy & Salomão Advogados has seen a substantial increase in clients from the top 100 list (see figure 2), and represented major international companies such as Fiat, Louis Dreyfus and AES, as well as homegrown multinationals Ipiranga, Ambev and Braskem.