Editor’s Note: The authors of this post lead the Latin American team of Major, Lindsey & Africa, a legal recruiting firm. It is the final article in a four-part series on the changing legal landscape in Mexico. Read Part One, Part Two and Part Three.
By Jeffrey Liebster and Joshua Dull of Major, Lindsey & Africa
Energy and infrastructure projects are driving a substantial portion of global transactions today, and law firms that service the big multinationals in these industries are scrambling to position themselves to remain competitive for this coveted work. As the U.S. and its neighbors to the north and south continue to seek North American independence from Middle East energy resources, our interdependence grows. Mexico’s sweeping constitutional reforms that opened its energy and other sectors to private outside investment for the first time in 75 years have fueled dramatic changes in the economic, political, and legal landscapes.
Most leaders of global law firms that represent the major independent and nationally owned oil companies, as well as the midstream and downstream-focused companies lining up to participate in projects arising out of the reforms, are paying very close attention to each new development in Mexico. More than a handful of these global law firms are currently considering following the lead of global giants like Hogan Lovells, Jones Day, Holland & Knight, DLA, Greenberg Traurig, and Baker & McKenzie and major Texas firms like Haynes and Boone who have already established offices there. Those that determine that a presence in Mexico is the best path to landing deals and disputes work are considering how large of an investment to make.
Photo of Santa Fe District by Blatant World (Flickr/Creative Commons)
Hogan Lovells was the first firm to open post-reforms, combining with BSTL, a highly regarded full-service, 80-lawyer institution, giving the firm a high quality and well-respected presence in Mexico City and Monterrey. Mayer Brown, by contrast, recently opened a rep office in order to give lawyers in other offices of the firm a location from which to conduct business while visiting the country.
Mexico’s sweeping constitutional reforms opened its energy and other sectors to private outside investment for the first time in 75 years and are fueling dramatic changes in the economic, political, and legal landscapes.
Regardless of the level of investment firms ultimately choose to make, opportunities abound for those that are able to acquire top talent. Unlike some markets, Brazil, for instance, where there are tight regulations that severely limit what international law firms are able to do, Mexico does not prohibit international firms from practicing local law. In order to best represent developer and investor clients in connection with the projects that promise to drive the market for years to come, many law firms recognize the need to have not only sophisticated corporate and finance capabilities but also an understanding of how to navigate and execute in the country’s unique regulatory and business environments. For example, in large projects that require many layers of legal services, including locally focused work pertaining to permits, right of ways, and contracting with local landowners and municipalities, firms recognize the need for broader expertise and capabilities on-the-ground, relationships and familiarity with local customs and culture, and locally competitive billing rates.
Many Wall Street and Magic Circle firms that enjoy long-standing relationships with the world’s major financial institutions, and regularly represent them in capital markets and other transactions, do not appear to have an immediate interest in veering from their traditional model of limiting their office locations to New York, London, and a handful of global financial centers. Most, if not all, are vitally interested in what is happening in the market, but remain on the sidelines, from which they are watching carefully. One Latin America practice leader shared his prediction that when one such firm goes, several others are likely to follow.
Leaders of global firms considering Mexico are faced with many of the same challenges that are encountered in all international and domestic mergers, acquisitions, and new office openings — as well as some challenges unique to Mexico. These leaders that have had experience with Mexican law firms overwhelmingly agree upon the existence of very high quality lawyers in the Mexico market, many of whom were educated at top tier U.S. law schools and trained at elite U.S. and U.K. firms. They also recognize that many of their Mexican counterparts have highly sophisticated global deal experience, and are able to practice seamlessly in multiple languages.
Most law firms, if not all, are vitally interested in what is happening in the market.
There are several issues that have caused some law firm leaders pause. As is the case in many domestic and international markets, there is a significant disparity in billing rates which may not be compatible with the economic strategy of firms whose principal offices are in New York, London and Washington. Furthermore, many Mexican firms are operated like family businesses which can make it difficult to integrate legacy partners into a global law firm’s compensation and management structures. This family business model also presents cultural integration challenges.
Other concerns that are on the minds of global law firm leaders include the rule of law in a country where corruption in the judiciary and other governmental institutions has persisted. Finally, there are immigration and security concerns, even though much of the drug war related violence is contained in border and coastal towns, far away from Mexico City’s business and financial center.
In closing, global law firm leaders are continuing to monitor developments and formulate strategies for the Mexico legal market. Those that invest the time to learn about the business environment and local culture will better position themselves to acquire the best talent and access their share of deal flow. As the velocity of energy, telecommunications and infrastructure transactions increase and the scope and size of other global firms’ presence grows, the firms that remain vigilant and understand where the opportunities lie will benefit most from this growth market.