Editor: You were partner-in-charge of Jones Day's Madrid office and now manage the new São Paulo office. Can you fill us in on your personal and professional background?
Riesgo: I joined Jones Day when the firm opened its office in Madrid in 2000 and became partner-in-charge of that office and head of the firm's Latin American operations in 2006. I have practiced law for over 20 years with a focus on corporate law, M&A and private equity deals. In 2009, I was responsible for the opening of the Mexico City office and now move to São Paulo as partner-in-charge of the office, where I continue in my role as chair of the firm's Latin American practice. In Madrid, we have been able to help our Spanish clients with their international expansion, because we are one of very few global firms with operations in both Mexico and Brazil as well as Madrid.
The decision to open in Brazil is an exciting challenge for us, similar to the one we faced in Madrid. The Madrid office was opened to provide better service to global clients that had, or planned to have, operations in Spain as well as to big Spanish companies that were at that time starting to become global players. Our decision to open an office in São Paulo is based on similar considerations. In Mexico City, it was quite easy because many of our clients had been there for years. The situation in Brazil is different because the interest of global investors built up so quickly. It was a question of being available for existing and future clients when they first started to consider being in Brazil.
Editor: How does the firm cover the whole of Latin America from only those two offices?
Riesgo: For many years, Jones Day had been representing its clients throughout Latin America from the U.S., Madrid or elsewhere and had been using trusted local counsel where necessary. This was sufficient because the area was developing slowly and relatively few of our clients had operations there. Today, with some of the most important economies located there, this is no longer an option. We needed to be physically present in the most important jurisdictions, namely Mexico and Brazil. We will continue to serve clients in the other countries with experienced lawyers from our U.S. offices and where necessary retain strong local firms to meet the needs of those clients. Recently we have acted for our clients in Colombia, Peru, Argentina, Costa Rica and Chile to name but a few. We have over 50 lawyers engaged in Latin American work, which gives us a great depth of experience.
Editor: Brazil has somewhat restrictive rules concerning foreign-based law firms. How has Jones Day dealt with that?
Riesgo: The model that we follow in Brazil is similar to that of most other international firms. We will open as a foreign legal consultancy, as required by the Brazilian Bar Association (OAB). Our consultancy status permits us to advise our clients in foreign law and, for advice with respect to their operations in Brazil, we wanted to retain the flexibility to select the local firm that best served their particular needs.
Editor: What practice areas does the São Paulo office emphasize and how is it staffed?
Riesgo: We plan to focus on supporting global clients with inbound investments into Brazil and elsewhere in Latin America, working together with the best local independent law firms, as well as providing legal counsel to Brazilian companies in their international operations. The São Paulo office will concentrate on cross-border M&A, private equity, banking and finance, and project finance/infrastructure transactions, as well as energy and capital markets.
To provide these services we have staffed our São Paulo office with a team of lawyers with strong M&A expertise. We have three partners and two associates. The other partners are Sanjiv Kapur and S. Wade Angus, corporate partners in Cleveland and New York respectively, each with extensive experience working with clients on transactions in Brazil and throughout Latin America.
Editor: Can you tell us about the prospects of Brazil in the wake of the recent election?
Riesgo: The good thing about Brazil is that now the economy is not so dependent on the results of elections. Talking with people in Brazil, it is apparent how much things have changed in the last few years. When Lula became president in 2002 there was great concern regarding the outcome of his mandate. That is now not the case. Everyone is convinced that business will continue to thrive as in the past whatever the result of elections.
The fact that Dilma, the new president, won the election is a warranty of continuance of the policies that have led Brazil to a situation in which basically they have not suffered from the global crisis. My experience is that people driving Brazil's development are very prepared, very young and very energetic. Almost everyone in a top position is in his or her late 30s or early 40s. The cities are vibrant and full of energy. It's really great to be a part of this evolution and see how proud they are of their country and how hard they are prepared to work to make this happen. It is a one-time opportunity for the country and they are prepared to take advantage of it. I see nothing on the horizon that would slow the explosive growth in its economy. It will continue to create wealth as it has in recent years, while addressing pressing issues like reducing poverty and improving the coverage of the educational and public health systems.
Editor: How about the energy industry?
Riesgo: Here too the future is very bright. As for oil and natural gas, all the new reserves that have been found position Brazil as one of the world's leading producers. It now ranks 15th among the world's largest producers of oil. It ranks second among the ethanol producers and third among hydro-electric power producers. On top of that, we are seeing an incredible rush of capital into investments in renewable energy. Brazil is a world leader with huge potential given the size of the country and with so much undeveloped land. All these resources invite international players to come to the country and share the benefits with local players.
Editor: Do you see any changes on the horizon that might affect foreign investment and trade?
Riesgo: The new president, Dilma, has a lot of big challenges. Among the debates heavily featured is that of the need to simplify the regulatory structure. Businesses are swamped with regulations, one on top of the other, and not always consistent. The tax system is highly inefficient and not just for international investors. Local businesses are pressing for simplification of the tax rules because it will help in the growth of the economy and in the creation of more wealth for a growing middle class.
Editor: Do U.S. global companies face competition from other countries? In competing for investment dollars, how does Brazil stack up against other major developing countries?
Riesgo: Right now the entire world is looking at Brazil. The two biggest players there are the U.S. and China. The Chinese are investing heavily in Brazil, particularly in commodities and in infrastructure projects. Although the U.S. is very well positioned to play a big role in the immediate future, a lot depends on the value of the dollar and other currencies.
Probably the most important difference between Brazil and China and India is that the rule of law is much stronger in Brazil than in those countries, and the culture and the economy are similar to what you would expect to see in the U.S. or in Europe. Although Brazil is huge geographically, it has only 200 million people; but China has seven times that population and India has five times.
Editor: I understand Brazil has strong state and local governments. Does that raise issues for foreign business in terms of taxes, regulations, permits and so on?
Riesgo: The fact that Brazil has many states is not very relevant given that most of the growth in business activities has taken place in three states, São Paulo, Rio de Janeiro and Minas Gerais. These states have tried to maintain a certain consistency in terms of regulation and taxation.
However, you don't see the same type of competitive situation that you see in the U.S. In Brazil, the choice depends in most cases on whether a particular state offers the roads and other features required by your business.
Editors: What else should corporate counsel understand about Brazil's business culture and environment?
Riesgo: It's very important in Brazil to partner with local investors who really know the market. Local regulations require the involvement of Brazilian investors. However, the economy has become much more open to foreign investors in the last few years and has become very similar to what you might find in any global economy such as in the U.S. or Europe.
Although being aware of the regulations is very important, knowing the culture and the expectations of the local people can't be overemphasized. When someone comes from abroad and immediately starts talking business, it's considered rude. Personal relationships are still very important for Brazilians, and it's essential to have someone to help you understand that. When making a large investment, it's important to have a strong, reliable local partner. Most of the experienced international players are getting into the country through joint ventures, which seems to be working very well.
Editor: Are there aspects of the legal regime that American corporate counsel may find puzzling?
Riesgo: Brazil is a highly litigious country. You have to be very careful about the way you handle disputes since there are some specific areas where the government is highly protective, as in the case of labor and the environment. Moreover, courts are really slow in handing down decisions, particularly the higher courts. Arbitration can be an alternative, especially for international deals, as Brazil has a pretty modern arbitration law, good arbitrators and experienced arbitration chambers.