Central America 2019: Overview

Belize

As the smallest country represented in our Central America research, the population of Belize accounts for less than 1 per cent of the region. With a population of roughly 390,000, the Belizean economy remains small and highly reliant on tourism and some agricultural exports. The economy itself did improve around the turn of the century as a result of concerted efforts by the government to carry out economic expansion via the Banks and Financial Institutions Act and the inter-bank market. However, the growth Belize experienced in the 2000s has plateaued in recent years.

The country continues to import most of its energy and generally suffers from a significant trade deficit, causing concern for any likelihood of its market developing substantially. Furthermore, serious income inequality and high unemployment has led the government to rely on international aid to tackle its socio-economic problems, compounding its foreign debt.

Shadowing the fragility of the economy, the legal market is not as developed as some of the larger jurisdictions in the region, which results in law firms being relatively general in their focus. Practitioners in the market support clients across a relatively varied spectrum of matters, performing well in general litigation proceedings – as reflected in the country’s strong administrative and public law showing. Courtenay Coye is a major Belizean firm with a strong presence in the market, alongside Arguelles & Company and Barrow & Williams.

Costa Rica

Since the presidential election in March 2018, the Costa Rican government has sought to tackle many of the polemic issues that were debated during the campaign, including the country’s crippling deficit, allegations of corruption and high unemployment rates. The new tax reform bill, enacted in December 2018, aims to bolster the country’s economic position. Several lawyers mentioned these reforms, noting, “Many developers and investors will now be reviewing their corporate structures and how they conduct business in the country,” with many concluding that it will result in a significant growth in work for the legal market.

On the disputes side, sources have pinpointed a mounting focus on white-collar crime and compliance matters, stating, “The region is especially active in this area, particularly with matters relating to public contracts.” They add that “regulation is being radically modified to be much harder on financial institutions”. In terms of development, “The government is very focused on developing important infrastructure across the country,” highlight sources, adding, “There are a lot of projects on the horizon that will be taking place in the next few years.” Highways, train lines and airports are just some of the areas singled out by lawyers are points of focus.

Costa Rica is home to one of the most competitive and mature legal markets in the region. In this edition, over a quarter of the total listings are achieved by Costa Rican lawyers and firms – more than any other country in the region. The legal landscape is diverse by nature, featuring a range of outfits from full-service regional firms to specialised domestic boutiques. Regional powerhouses BLP and Consortium Legal are highly sought after for their strong regional footprint, while national firms Facio y Cañas and Zurcher, Odio & Raven also hold prominent positions in the market.

Costa Rica has also attracted greater international interest over the past year, seen most notably with the merger of EY Law with Pacheco Coto. This follows the market-changing division of Arias & Muñoz, the latter of which went on to merge with international giant Dentons. The Costa Rican legal market is constantly shifting and growing in competitiveness, providing international and domestic clients with a dynamic range of high-quality offerings.

Dominican Republic

The Dominican Republic continues to be a promising economy in the region, developing its services sector alongside its established agricultural and mining industries and seeing tax reform improve its deficits. While the country still suffers from unemployment and income disparity, the jurisdiction as a whole is diversifying its economy and boasts a strong services sector, of which the legal market is an important part.

Intellectual property is a major industry in the market and with strong international ties, particularly to the US, practitioners are regularly involved in high-end regional work with multinational clients. One source notes that trademark work is especially prevalent in the jurisdiction and that “the number of filings is on the rise” with “international law firms sending increased work”. Sources also continue to highlight the positive effect of the DR-CAFTA trade agreement operating in the area, which continues to draw work from around the region. Along with the Anti-Money Laundering and Terrorist Financing Act which came into force in 2017, the country is increasingly looking like an investor-friendly place in which to do business.

As the legal market in the country develops, their showing in our guide highlights a focus on established areas of law, particularly banking and dispute resolution, where a variety of firms perform well. The legal market is predominantly made up of local firms, although there is a small presence of international firms, such as Squire Patton Boggs and Russin & Vecchi. Regional firms have a greater role in the market, but national players continue to dominate. Significant firms include Headrick Rizik Alvarez & Fernandez, Pellerano & Herrera and Jiménez Cruz Peña, who all offer clients expertise in a range of practice areas.

El Salvador

Despite being the smallest country in the region, El Salvador is still home to an active and diverse legal market. Legal specialisation is not particularly prevalent in the market; however, as illustrated by our research, there remains a deep bench of expertise across core areas of practice including corporate, IP, banking and finance and disputes.

Lawyers we spoke to pointed to sustained activity “mainly in the financing of tourism, energy and property development projects”, adding that those are areas that have seen focus across the whole region. As presidential elections came to an end at the beginning of 2019, one source noted, “The economy has been quite slow in El Salvador which has affected the market significantly.” Key consequences of this have been a rise in disputes as well as a “shrinking in activity” in the banking arena, with more local companies moving abroad due to interest rates. “Despite this, we are expecting political changes in our country,” says one lawyer who expresses the hope of greater cooperation between the government and private sector, resulting in greater foreign investment in the development of new projects throughout the country.

With a history rooted in the national market, regional powerhouse Arias continues to play a prominent role in El Salvador. It showcases its dominance across the country by achieving almost double the number of listings of its closest competitor. Other firms that stand out in the jurisdiction include top national outfit Romero Pineda & Asociados as well as regional players Consortium Legal and LatamLex Abogados. One lawyer we spoke to described “a very saturated market in terms of practitioners” while another assessed the situation as “a race to the bottom for fees”. High-quality service, specialisation and a strong regional presence are becoming ever-more important for a successful practice. As one source put it, “Every day there is more competition. We have to be prepared to go the extra mile.” Many also highlighted the growing interest from international players in the region, citing EY’s entrance as “a trend towards alliances between firms”.

Guatemala

Guatemala is home to a diverse and robust legal market, with national firms leading the pack. Specialisation is not a dominating feature of the market; however, lawyers across the country continue to excel in core legal practice areas including corporate law, banking and finance and contentious matters.

Lawyers witnessed a shift in the corporate and tax environment in Guatemala over the past year, citing clients becoming “more cautious and less aggressive regarding their tax structuring”. Transactional work remains steady with sources highlighting “a lot of M&A work at the moment”, particularly when it comes to acquisitions of existing companies in the country. On the infrastructure and development side, lawyers we spoke to pointed to a growth in PPPs within the country, with one adding, “It’s an area that is generating a lot of news, as local banks now have a lot of liquidity and are pushing hard for projects.”

The country’s presidential elections are set to take place in June 2019, with corruption a hot topic in this year’s battle, after current President Jimmy Morales recently withdrew from a UN-backed anti-corruption commission. The results of this year’s election will direct the future of the country and its economy and in turn dictate the type of work that will be keeping lawyers busy for the near future.

Unlike many other Central American countries in which regional firms play a prominent role, the Guatemalan legal market is dominated by full-service national firms including QIL+4 Abogados and Carrillo y Asociados. Guatemalan firm Mayora & Mayora also holds a strong position in the country and has bolstered its regional presence with further offices in Honduras and El Salvador. Regional outfits such as Arias and Consortium Legal still feature as part of the legal landscape, adding to a diverse and varied range of offerings for domestic and international clients.

Honduras

The Honduran economy suffers greatly from high unemployment and wealth disparity, while significant levels of violent crime and social issues such as gender inequality contribute to the country’s problems. The state does benefit from foreign aid, including a US$103.9 million package from the World Bank, but a notable development has been President Trump’s announcement that he plans to cut aid to the country, with aid from the US slated to fall from US$180 million in 2017 to US$49 million in 2019. The DR-CAFTA sees the country continuing to rely heavily on the trade with the US, while remittances from Hondurans living overseas assists domestic growth.

The growth of the legal market has reflected the small size, yet relative stability, of the economy – in that there is little presence of international firms, but regional players play a significant role. While major international work is not commonly seen in the market, domestic work continues to be strong, with our research noting particular activity in the corporate and banking sectors where commercial work is often most profitable. There have been reports of an increase in foreign direct investment into the country, a contributing factor driving the increase in activity in corporate finance.

Regional firms perform well in the jurisdiction, with outfits such as Consortium Legal, Arias, Aguilar Castillo Love, and García & Bodán dominating the market. While foreign firms do not have a highly visible presence in the market, practitioners have noticed an uptick in some sectors by international players, stating “foreign competitors are also increasingly present”. A notable example of this has been EY’s spread through Central America. While they have yet to establish a foothold in high-level work in Honduras, their expansion does pose the potential for increased competition in transactional matters. Regarding domestic firms, Matamoros Batson & Asociados enjoys a prominent position in the market while specialist groups also impress on a boutique level – most notably Bufete Mejia & Asociados, which excels in intellectual property matters.

Nicaragua

In April 2018, widespread unrest directed at the Ortega government swept the country, triggered by unpopular reforms to its social security programme. Despite a backtracking by the government on the changes, the protests have grown and now call for Ortega to step down. The heavy-handed government response has led to hundreds being killed, censorship of the press and large-scale repression of the protests. Prior to this, endemic corruption and the excessive authority wielded by Ortega has undermined democratic systems in the country.

As one of the smallest economies in the region, it suffers from high unemployment, despite a 4.5 per cent growth in GDP over 2017 – although one commentator believed that “the GDP was now decreasing by about 4 per cent”. The recent unrest and government oppression have affected the legal market with practitioners stating that “the country is in a stalemate since April, it has stopped its economic continuity”. A variety of sectors have deteriorated under the pressure, with sources noting that “energy and tourism have both plummeted” and lamenting “this year will likely be a lost year”.

Some areas are experiencing activity tied to the disruption to the economy, notably litigation and tax evasion proceedings, although this is unlikely to offset the blows to other traditionally important areas such as corporate transactions and financing matters.

The legal market is nonetheless relatively varied, albeit dominated by regional outfits. Full-service firms Arias, García & Bodán and Consortium Legal lead the pack on the largest and most complex matters. Local firms do have a strong presence however, with outfits such as Alvarado y Asociados performing well on domestic and cross-border matters.

Panama

Since the Panama Papers scandal of 2016, the country has fought to recover and reposition itself at an international level as a paragon of transparency, anti-corruption and compliance. This push was seen most clearly with Law 70 of 2019, which finally criminalised tax evasion in the country. The growth of compliance measures has also been prevalent in the labour and employment space following the introduction of Law 7 in 2018, tackling discrimination and sexual harassment in the workplace. Such legal changes are key to promoting Panama as a jurisdiction in which to do business, and are surely only the beginning of further reform, paving the way for a strong pipeline of work for corporate, compliance and regulatory lawyers.

Although the country is best known for its shipping industry, its aviation sector has taken off in recent years. It has seen significant growth recently with the expansion of Tocumen International Airport which, according to sources, is “fast becoming one of the most important airports in Latin America”. Exploiting the country’s strong geographical position, such expansion continues to promote Panama as a tourism destination while also providing a launchpad to the rest of the region. Other industries across the country continue to thrive, with lawyers highlighting the consolidation of franchises in the fast food industry as well as a shift in players within the telecommunications sector as key market trends.

Panama has a very robust and dynamic legal market which is dominated by a strong selection of national firms. Morgan & Morgan, Alemán Cordero Galindo & Lee, Arias Fábrega & Fábrega and Galindo Arias y López are among just some of the country’s leading offerings. “Competition is increasing,” observe lawyers, adding that “a lot of companies have their regional headquarters in Panama, and therefore the market has become more specialised”. Indeed, according to one source we spoke to, “The market is becoming more sophisticated with more firms providing better services now than they used to be able to.” This trend, they note, has been “triggered by the expectations of the international community”. Looking forward, it seems the Panamanian market remains well on its way to providing increasingly specialised and high-quality legal services to domestic and international clients.