Siqueira Castro Advogados is one of the leading law firms in Brazil. Here Partner Carlos Roberto Siqueira Castro discusses the delicate political and economic situation in the country and also comments on how his firm managed to adapt to these times of turmoil.
Leaders League. What is your view on Brazil’s current economic and political situation?
Carlos Roberto Siqueira Castro. Brazil has faced a very difficult period from a political and economic standpoint since the start of 2015. On the political front, a president was impeached (Dilma Rousseff) and many politicians of the executive and legislative branches have been investigated for corruption, leading to a large number of criminal accusations, especially emerging from the so-called Operation Car Wash. Regarding the economy, these past two and a half years have been marked by a very deep recession, during which the nation’s GDP has fallen by about 10%, accompanied by high unemployment, which now stands at around 13.5 million. Despite the weak economy, inflation had been high until very recently.
Fortunately, the political and economic pictures have started to improve substantially in the second half of 2017, as was expected by the market. Charges have been filed against politicians implicated in economic and tax crimes and malfeasance in office, and many have been convicted and sentenced to jail while others are still awaiting trial. This has created moral and ethical relief for the nation, since it demonstrates that Brazil’s democracy and institutions, like the Federal Police, the Federal Prosecution Service and the courts, are fully functioning according to the constitutional tenets. Therefore, Brazil is not experiencing an institutional crisis, consisting of the breakdown of sovereign institutions. Much to the contrary: despite the severity of the political crisis, all the institutions have been acting in line with their constitutional duties.
The press has had total freedom, of access to information and to make criticism, and the Brazilian people can express themselves freely in the streets and in the various types of media. I believe that few countries in the world, throughout history, have carried out an ethical and moral house-cleaning of their institutions and political class as great as the one Brazil has done in recent years. It’s a bitter pill, but it is leading to a definitive upgrade of institutions and political representativeness. In the economic sphere, unemployment has started to decline, and inflation has fallen steeply. This has allowed the Central Bank to substantially lower the benchmark interest rate (Selic rate), creating a climate of confidence in the market and among Brazilian and foreign investors.
“As the economy
will continue to decline,
and the GDP should
grow by 2% or 3%”
What is the medium-term outlook and what do you expect for 2018?
It will be a better year than 2017. Despite the public deficit being high, the federal government is carrying out reforms to improve the fiscal picture. Inflation in 2018 is projected to be below the target of 4.5%. As the economy recovers, unemployment will decline further, and GDP should grow by about 2% to 3% in 2018. Above all, we will have general elections for President of the Republic, state governors and Congress (all members of the Chamber of Deputies and one-third of the Senate). This will see a renewal of the political class, which can generate new hope for Brazilian society. Political reform is being avidly discussed and all indications are that our institutions and the functioning of the Republic will be improved greatly before the end of this year.
How did Siqueira Castro Advogados manage to sail through these challenging times?
What we did in 2015, when the economic crisis started, was to invest in the optimization of our resources. We had to do more with less, which wound up generating better results for the firm and allowed us to continue executing our projects. We maintained our growth, although at a lesser pace, despite the economic downturn and political crisis. This is a demonstration of our ability to react to crisis situations and pursue priorities, paying close attention to our financial resources, without
overlooking the value of our human resources, and to continue growing despite external situational difficulties. We will continue executing this project to optimize our human and financial resources in 2018 and we will certainly grow even more in all of our practice areas.
What are the firm’s main goals for the next two years?
We have been growing exponentially in some areas, such as business crimes and compliance, the regulatory, labor and environmental
areas and cross-border deals. We will have many opportunities related
to privatizations and auctioning of concessions under the federal government’s Program for Investment Partnership (PPI). The government has already announced privatization and concession auctions in areas like oil and gas, hydropower, energy transmission, airports, highways, ports and railways.
To give you an idea, only 50% of the portfolio of approximately 90 projects under the PPI have been auctioned so far. Therefore, we will have a large demand from potential participants in tenders for the remaining 50% of the projects. These will involve investments that can exceed R$100 billion, generating many engagements in the areas of M&A, compliance, regulation, tenders and the environment, besides the related due diligence work of all types. It is very encouraging that new
foreign investors, which did not take part in previous tenders, are now showing strong interest in the Brazilian market. My perception is that new companies particularly from China, India, the United States and Central Europe will invest heavily in the country. Brazil, together with Mexico and Colombia, is among the countries attracting the most foreign investment. For our office, this scenario means we will continue making large investments in the information technology area, including the creation of new digital platforms to serve our clients in real time. Likewise, we will continue to strengthen our teams of partners, associate lawyers and administrative staff, including an increase of the number of equity partners, as we have been doing in recent years. Finally, we will continue investing strongly in the international area, to forge new partnerships with foreign law firms and clients, reflected in the growth of our international committee and number of partners involved in our international law practice.