Project lawyers in Brazil: the “Navy Seals” of the legal profession
Project lawyers in Brazil are somehow similar to being the “Navy Seals” of the legal profession. The country’s recent history is full of economic and political crises promoting an environment of war for business development. Along with the battles against ground enemies such as a complex tax structure and an indescribably bureaucratic state, project lawyers have to face the legal uncertainty coming not only from the Congress and other regulators, but also from the courts. A minefield has been created due to constant changes in the regulations and jurisprudence. However, as it goes for any war, there are many opportunities for well-prepared “soldiers”.
Project law is not a clear practice. It usually relates to sophisticated deals that involve many contracts, financial transactions, corporate law inputs and regulatory assessments. Furthermore, it is expected that a project lawyer will have enough background to be able to discuss subjects regarding economics, accounting and business valuation. Maybe from the perspective of a mature jurisdiction such as the United States, such capabilities might be easy to find among regular practitioner; in Brazil, however, they are quite uncommon for many reasons, especially the following.
First, the local law schools, in the greater part, are not pedagogically oriented to train “Seals”. The curriculum is evolving but, in general, continues to be attached to a formal division of legal areas with low permeability to other fields of knowledge. Even within the elite schools, there are professors who are not committed to helping their students open their minds to the real-life challenges. Many times, theoretical approaches still prevail over practical outlooks, and several educators are fully dedicated to the academy without close linkage to concrete deals. Some institutions even prefer such professors’ profiles, disappointing a market that expects young lawyers to be more connected to the most relevant companies’ problems.
Second, there is a pernicious formula that assigns few projects to each lawyer or law firm, limiting their expertise refinement: compared to the amount of legal professionals across the country, the number of complex transactions is not that big because our economy, despite being one of the ten largest in the world, is structurally simple and commodities-based. Few cases in the numerator and many lawyers in the denominator equals less training for each “soldier”.
Third, the state is strongly involved in projects in Brazil. It controls a lot of valuable assets, some state-owned companies are monopolists in their sectors and, due to our macroeconomic history of high interest rates and weak capital markets, project financing depends on some state agencies that grant credit under special conditions of grace period, duration and costs. The public entities may count on requests for proposals from the private sector to design the projects. Notwithstanding this, it is not rare that they prefer doing it internally without the participation of private lawyers, or through advisers hired by public bids, which are not attractive to highly qualified firms because of the fees’ depreciation. This scenario represents a barrier to the “Seals” improvements as well.
But there is good news on the horizon. Covid-19 is forcing Brazil to review some of its idiosyncrasies in order to rebuild the economy. Law schools are putting in place some changes to their teaching methods, turning it into a more problem-based process. State reforms through deregulation, privatisation, concessions and public-private partnerships are crowding the political debate. Recent new bills will bring in billions in local and international investment in sectors like sanitation and oil and gas, leaving more space for private entrepreneurs and, thus, for project lawyers. The number of transactions will grow in the near future, calling the “Seals” up for a “Blitzkrieg” among such opportunities.
Together with what is to come, there is a current specific battle to be handled by the proper “soldiers”: business restructuring. Brazil expects to have more than 3,500 insolvency procedures as a result of the pandemic. Companies are devastated and in need of help to manage their liabilities either through courts or out-of-court initiatives. Amendments ready to go in the insolvency law will probably create new windows for transactions in this context. The projects here are enforcing the alternatives for the debtor survival dealing with several stakeholders to reach distressed deals. We hope to see more debtor-in-possession financing, stalking-horse agreements and, by the end, companies’ turnarounds guided by specialists including, why not, the so-called “vulture funds”. Meanwhile, soft skills are particularly requested from the lawyers, such as negotiation ability, creativity in business-legal solutions and resilience before hard-pressure circumstances. Distressed deals are a rough terrain where the “Seals” have to work simultaneously in the defence and attack modes.
In brief, a project lawyer in Brazil is someone who has a pragmatic view on the local minefield of uncertainties in regulation and jurisprudence, and on the obstacles of the state bureaucracy against businesses. On the other hand, he or she is also someone who chases the opportunities arising exactly from this hostile picture and is prepared for making the right moves on the trails to be opened by the several legal and economic changes caused by Covid-19. International networks will also be a weapon to be explored by these “soldiers” for cross-border deals that will be hosted down here, following the state assets selling schemes that will be mandatory to support the public expenditure devoted to overcoming the pandemic's consequences.
Therefore, Brazil is a combat arena for the “Seals” of the legal profession ready for the “sea” of multiple and complex regulation, the “air” of an unfriendly state and the “land” of entrepreneurs struggling to survive in a non-trivial business environment. Project lawyers, welcome!