The Brazilian legal market: increasingly dynamic despite uncertain economic situation (Part I)

In the first part of the study, we depict the structure of the Brazilian legal market, which remains dynamic and appealing for FDI, in spite of encountering some economic troubles. The second part intends to explain the current geographical inequalities concerning the distribution of lawyers, and analyze the profile of the law firms in the strongest legal hubs of the country.

Posted Wednesday, July 8th 2015
The Brazilian legal market: increasingly dynamic despite uncertain economic situation (Part I)

An opening market to FDI

Is Brazil a place worth investing in? Despite its economic turmoil, Brazil’s demographic, natural, and economic potential are real and cannot be underestimated. The investors make no mistake about it, and continue to invest in the economy due to their long-term vision and understanding of tomorrow’s issues. In 2014, Foreign Direct Investments (FDI) reached $62bn USD, a drop of 2.3% compared to the past year, and Brazil fell to 6th position of the most attractive countries for FDI. Even if the economy is lately slightly running out of steam, the Auriverde country still represents a major regional financial center, especially in Latin America where it remains the region’s leading industrial power. Let’s remember Brazil was chosen to host the FIFA World Cup last year, and the Olympic Games in 2016, both events that spurred the government to undertake infrastructure projects.

International competition not yet welcomed

Foreign lawyers or law firms are only allowed to practice international, or their own countries’ laws, as foreign consultants. Basically, the rules enacted by the powerful Brazilian Bar Association (OAB) are simple: foreign law firms are barred from sharing fees or equity with a Brazilian firm and are forbidden to enter in a partnership with or employ any Brazilian lawyer. What they can do is to combine their forces and collaborate together by referring business to each other and providing advice on their respective countries’ regulation.

However, this does not stop major international firms from effectively maintaining a foothold in the Brazilian territory. In 2014, thirty-one foreign law firms were listed in Brazil, almost of all them originating from either the U.S. or the U.K. Under the Brazilian bar association’s rule, these international firms, such as Clifford Chance, Allen & Overy, Skadden Arps Slate Meagher & Flom, Baker & McKenzie or Mayer Brown, are performing as foreign consultants delivering English or American law advice – mainly in corporate and finance areas – to Brazilian actors that are looking to access international capital markets, or intending to develop projects abroad.

Small players vs. big giants
Brazilian law firms are many but dissimilar. Among the 835,000 lawyers registered with the OAB, the majority operate as sole practitioners or in very small structures, mostly involved in domestic work. On the other side, we also find very sophisticated firms comprised of hundreds of lawyers: Souza, Cescon, Barrieu & Flesh, TozziniFreire, Pinheiro Neto, or Mattos Filho, are few examples among others. These giants turn to be mostly full-service firms offering a wide range of practice areas, splitting their activity between domestic and international work.

The majority of these giants are logically located in the prosperous cities of São Paulo and Rio de Janeiro. In the shadow of these two megalopolises, few started their business in Belo Horizonte in the south of the country. This 3rd most populated metropolitan area attracts full-service firms that also expand internationally, such as Campos Fialho Canabrava Borja Andrade Salles advogados, Rolim, Viotti, & Leite Campos or Marcelo Tostes advogados.

Julie Eliachar