Overview

At the time of our interviews in May and June 2018, the most significant question facing lawyers in Brazil was that of the upcoming general election and its outcome. Brazilian politics has lurched from uncertainty to calamity in recent months. An election that started out with 20 candidates and no clear front-runner has led to societal divisions over the direction of the country. Of the two most popular politicians in the country, one, Luiz Inácio Lula da Silva, is is currently in prison serving a sentence for corruption and is banned from running, while the other, Jair Bolsonaro, holds populist, far-right views and has spoken favourably of the military dictatorship that ruled from 1964 to 1985. Disinformation abounds, according to interviewees, with Bolsonaro claiming that if he loses the election, it will be because the Workers’ Party (PT) has rigged it. Left-wing commentators, for their part, have claimed that Luiz Inácio Lula da Silva’s conviction is politically motivated and that an assassination attempt on Bolsonaro was faked by his own party. Sources described to us their concern about the way in which the election has played out so far. By the time this publication goes to press in October 2018, Brazil will have a new government, and it remains to be seen what impact it will have on the legal landscape.

Interviewees reported that the uncertainty over the election has led to a massive capital outflow, as investors have lost confidence in the candidates on the campaign trail. Despite an end to the country’s recession in 2017, investors have decided that the political landscape is not one that will be conducive to business – at the time of writing the real was at its lowest value since the mid-1990s. Lawyers in the space espoused no greater confidence for the coming months. Activity in the capital markets, banking and mergers spaces has slowed, with sources describing an unfavourable business climate. While many lawyers expect things to pick up once the dust from the bruising election has settled, it remains to be seen how much damage will have been caused in the meantime.

There have been some positive signs, however. The country has seen a move towards an image change in the regulatory space in the wake of the so-called “Car Wash” scandal, which damaged the reputations of both Petrobras and the nation, with investors across the continent shaken by the breadth of its reach. Sources we spoke to from a number of sectors highlighted the cancellation of Petrobras-linked contracts as a particularly pressing issue for the economy. Lawyers in the shipping and maritime space noted that “hundreds of contracts in offshore activity have had to be cancelled” and that this has “had a huge impact on the industry”. In response, the government has passed Decree No. 9.355/2018, also known as the “Petrobras Decree”. This will bring in a new system of checks designed to improve transparency and governance within the company. Lawyers expressed the expectation that the decree will benefit the Brazilian energy and shipping sectors, as investors regain confidence in the jurisdiction.

The political scandals have had noticeable impacts on the legal space. Lawyers that we spoke to in the competition space described a reinvigorated competition authority – the Administrative Council for Economic Defence (CADE) – as one direct outcome of the “Car Wash” scandal. In the wake of the bid-rigging scandal, CADE has gained much experience investigating anticompetitive behaviour. Lawyers believe that the authority is now much better placed to carry out investigations into a range of competition matters. It has much to investigate. Throughout Brazil’s economic crisis, many firms took the opportunity to acquire competitors while assets were cheaper and there were more opportunities for sellers to divest. Practitioners working on mergers have described how the regulator is conducting “more sophisticated reviews and is able and better equipped to conduct more complex reviews”. In response, lawyers in the field of competition have been pushing clients to review their antitrust compliance programmes and raise awareness of legislation.

“Change” has been a key term in other sectors too. At the end of 2017, sweeping labour reforms were enacted that aimed to make the market more flexible for employers. Lawyers in the space have described a rise in the volume of consultancy work they are undertaking, as firms and unions get to grips with the new arrangements. Labour law is still a litigious space, with relations between companies and employees remaining fraught and lawyers complaining that it is “almost impossible to settle matters out of court”.

The natural resources sector has also endured its share of turbulence in recent months. Brazil’s legislature has responded to a twin slump in global commodity prices and an emerging markets selloff. Infrastructure development in some major economies, such as China, has dried up as of late. This has caused the price of minerals to fall, and mine operators around the globe have been looking to restructure in response to the contraction. The Brazilian market, although relatively diverse, remains susceptible to such fluctuations and has seen new regulation changes brought in to the mining sector in order to encourage investment. Mining titles will now be available to be used as guarantees for the financing of other operations, in the hope that this will stimulate further exploration of natural resources.

In the finance sector too, the Brazilian market is reshaping itself, based around a new trinity of cyptocurrency, capital markets and fintech-enabled peer-to-peer lending. With interest rates unfavourably high and the inter-bank lending rate currently at 6 per cent, companies are looking to vary their means of finance. Lawyers working in the fields of banking and technology law have seen their caseloads rise as interest in fintech companies increases.

The banking and finance sector has also been affected by new data privacy laws coming into place this year. The Brazilian government is increasingly attuned to cyber-risk and individual privacy in the wake of GDPR reforms and international scandals such as Cambridge Analytica. Brazil’s new General Personal Data Protection Law (LGPDP), which came into force in July 2018, has brought sweeping changes to the way companies handle data in the jurisdiction. Companies will now be required to hire a data protection officer and take up new measures to protect against potential risks to customers’ data. Lawyers working in the field of data law, but also those working in compliance and regulatory matters for industries across the board, are likely to see considerably more work over the coming months.

The Brazilian legal market continues to be dominated by full-service domestic outfits who hold a deep-rooted and incredibly robust position among other firms. Our top 10 firms by number of listings in this edition are all national outfits, illustrating their strength in the market. With the increase in scrutiny from the competition authorities regarding both conduct and transactions, sources have noted “a clear trend” of clients increasingly being driven towards larger full-service firms, to ensure they have “as many aspects of the deal as possible concentrated in one place with one provider”. Despite this, there is no denying that there remains a substantial market for boutique and specialised firms, who also perform well in our research this year.