Leon Lopez
Co-managing partner
Cuatrecasas Mexico
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View from the Top

A Need for a Transparent Legal Framework

By Jan Hogewoning | Tue, 03/31/2020 - 11:17

Q: What impact has the new administration had on your clients’ activities in the country?

A: A few decisions by the government raised some concerns, such as the cancellation of the new international Mexico City airport (NAIM) and renewable energy auctions, as well as changes to clean energy certificates (CELs). About 5 percent of our clients have left the country, not necessarily due to government decisions, but due to delays in permits and other arrangements. About 25 percent of our clients are on standby as they wait to see where things go. Most clients, however, are moving ahead with their plan or taking the opportunity to broaden their portfolio in segments such as infrastructure, renewable energy, telecommunications, fintech and real estate. Overall, the economic potential is huge with many investment opportunities. We maintain a positive outlook.

Q: How strong is your ability to predict government decisions?

A: Two of our partners worked in the public sector for a long time and know how public officials work. Also, we follow legislative changes every day and maintain close contact with big industry players. Of course, it is hard to anticipate all government decisions, but we believe the government will be pragmatic. The country has many areas that need to be attended. Overall, the main parameters of previous governments have been maintained. So far, there have been no drastic legal or regulatory changes. The main economic parameters are also still the same, with the peso relatively stable and an independent central bank. Our clients seek more transparency and more certainty from the government, however. Political meddling in decision-making can also be a concern. Tenders should be awarded on the basis of merit and economic and technical qualifications. This can be further strengthened by setting very clear rules on tender requirements, as well as providing a visible legal framework for the project. 

Q: How have your services evolved and what are your main challenges?

A: When we opened our offices in Mexico City, we expected our main areas to be M&A and finance. We have since increased our activity in litigation and arbitration, providing advice to clients regarding these procedures and also assisting with prelitigation strategies that anticipate certain decisions and take trends into account. 

The big challenge is to further consolidate our position in the market, which has been very strong since the beginning, and keep growing steadily to become a leading local firm. Compared to last year, we have grown 82 percent. We increased the number of deals in all areas and expanded our teams. We have a very clear view of the type of clients and type of deals we are looking for. We are not looking to advice on plain vanilla matters such as incorporating companies, or providing basic ongoing tax advice. Of course, we can do this, but normally we advise clients on complex transactions, providing a high added value. To do this you need talent, which is why recruitment is a constant obsession for us. Applicants go through a rigorous application process involving our partners in other parts of the world. Ultimately, we want our new members to have the ability to become specialized because that adds significant value.

Q: What are your goals when working on a transaction?

A: The first factor is to protect the client’s interests from a legal perspective. You need to be aware of the lines in the sand, knowing where you can push and where you cannot. These lines apply to the client and the transaction itself. We are a business-oriented firm and know that legal protection is just one angle in a transaction. There are also the commercial and environmental sides. Ultimately, there needs to be a commercial understanding. Lawyers are not there to create issues that were not there before. 

Q: What role does innovation play in your firm?

A: The firm has invested in technological innovation for many years. We have a startup accelerator that will celebrate its fourth edition in 2020. We invest in companies that develop technology for the legal sector and others. All our employees are equipped with advanced technology, ensuring that communications are fast and reliable. Having short response time from other parts of the world is very important. One of the advantages our international clients enjoy is that we offer them one contact person who can provide advice on issues that can pertain to multiple jurisdictions. We have also invested in lean and project management methods in our processes to foster collaboration across disciplines and the exchange of client focused solutions. We believe that in a few years, standard due diligence and preparation work for first drafts of agreements will be done by software. Of course, the lawyer will examine it, but it will set a solid standard and allow work to be more efficient.

Q: Several countries have seen collaborative efforts to create agreement templates. Is this something that would serve Mexican sectors well?

A: We have been active in one initiative like that in Spain. This was an adaptation for the Spanish market of the London market association form for credit agreements. Having lawyers from different firms and professionals from other areas contributing to writing agreements is beneficial. It sets a standard that creates a common understanding of the limits of agreements.

Q: Is this government stimulating social and environmental awareness among companies?

A: Indeed. However, it is not unique to the current or previous governments. Overall, companies are thinking of social well-being and developing local communities. Participating in economic activity and obtaining profit is perfectly compatible with this. In renewable energy projects, if all players do things well, there is not only an investment in solar panels or wind turbines, but also action that is considerably beneficial to local communities. This includes education or employment opportunities.

 

Cuatrecasas is an international law firm specialized in all areas of business law. The firm has 28 offices in 13 countries, with a strong focus on Spain, Portugal and Latin America

Photo by:   MBP
Jan Hogewoning Jan Hogewoning Journalist and Industry Analyst