Editor: Would you tell our readers something about your professional experience?
Valera: My legal career started in Peru. Following law school, I joined a firm in Lima which acted as local counsel to a Houston-based oil company exploring in the Peruvian area of the Amazon. My mentor at the firm suggested that I do an internship in Houston with that client's legal department. That led to an offer of employment, and the company went on to sponsor a work visa for me and to pay for my law school education in the U.S. I am now licensed in Texas and Louisiana and have been practicing in the U.S. since 1986. My practice has been focused on the energy industry in Latin America.
From 1991 to 2002 I was with Akin Gump's Houston office. I joined King & Spalding in the fall of 2002 largely because of the firm's strong commitment to a global energy practice. My background and experience in working with a variety of clients engaged in energy projects across Latin America constituted a great fit with such a global undertaking.
Treistman: Like José, my origins also trace to Peru. My practice focuses on mergers, acquisitions, joint ventures and infrastructure development in Latin America. When I began my career in law, I wanted to devote my attention to the region. Fortunately, Latin America was experiencing a tremendous number of privatizations, and I was the beneficiary of a great deal of experience with energy companies investing throughout the region at the time. Over the years, as that aspect of my practice began to slow down, other areas began to prosper. I joined King & Spalding in 1998 because I saw a platform that would enable me to expand my practice beyond the energy industry. I was able to capitalize on the firm's diverse practice areas and its major multinational client base. In this way, I started representing clients in a variety of sectors such as telecommunications, mining, logistics, global freight forwarding and real estate. I assisted many clients including Fortune 50 companies take advantage of the opportunities in Latin America. Although I am still engaged in transactional work for energy companies, I have a mixed clientele and enjoy being engaged in a great variety of transactions throughout the region.
Editor: Can you give us an overview of the firm's Latin American practice?
Valera: Our Latin American practice is not constituted by a group that works only on Latin American projects and transactions, but rather draws upon a variety of legal disciplines and practice groups from across the firm. For example, I am part of the firm's Global Transactions Group, which handles project development matters for the firm's global energy clients, as well as M&A, other corporate matters and real estate transactions for the firm's clients globally. Some members of the group, myself included, work primarily on Latin American matters. The practice of the firm's corporate group, the international arbitration group and the international trade group, among others, also have a strong Latin American component.
Editor: So this is an overlapping practice group that draws upon substantially everything the firm does?
Valera: That is correct. At least ten of the firm's practice areas have substantial involvement on Latin American matters. For example, in addition to the practice areas I mentioned before, King & Spalding's IP group handles matters all over the world, including a substantial practice in Latin America.
Editor: Is this outbound work or are you also representing Latin American clients?
Valera: It is mainly outbound American company work, but we also represent a substantial number of Latin American and other multinational companies doing business within the region. At present, for example, we are working with Argentine, Chilean, Colombian and Peruvian clients within their respective countries. We also represent European clients in projects and other transactions throughout the region.
Editor: And your individual practice?
Valera: By 1991 privatization was just underway in Latin America. Argentina was the first country to take concrete steps toward the privatization of its electric and oil industries, and I was retained by YPF of Argentina to help in the reorganization of its assets in anticipation of going public. I also had the opportunity to work with the first American company to purchase an electric company in Argentina. I continued in that line of work as other countries gained momentum in their privatization initiatives, including Bolivia, Brazil, Colombia and Peru. While most of my work has involved the representation of private investors, from time to time I have worked with governments on privatization and regulatory matters.
Editor: I gather that each of you can draw upon a variety of skills from within the firm on your projects.
Treistman: Absolutely. While we have been talking about energy and other international transactions to which our group devotes much of its time, our team on a given project or transaction is composed of lawyers with a variety of expertise from different practice areas in all of our offices. After many years of working throughout Latin America, our lawyers in diverse practice areas have acquired a profound knowledge of the different laws, customs and cultures of the region and have forged strong relationships with the government, business and legal communities. This collective experience enures to the benefit of the firm's clients.
Editor: Mr.Valera, you recently commented on the political struggles in the region and their impact on Latin America's risk attractiveness. Can you summarize your thoughts on this for our readers?
Valera: Today, risk needs to be examined on a country-by-country basis. A risk profile analysis for the region is no longer appropriate since countries have taken different paths with respect to the structural reforms that began in the early 1990s with the breakup of state monopolies, privatizations, deregulation and restructurings. Consequently, it is important, when contemplating a new investment, to look carefully at the particular country to determine how it has evolved in recent years.
In the oil and gas sector, the most attractive destinations - in a legal and political risk sense, and aside from geology - for investors today are Colombia and Peru. Next comes Brazil. Brazil operates through a state-owned oil company, although its monopoly was broken up almost 10 years ago, and through private sector companies, although it is going to be some time, if ever, before the dominance of Petrobras is tempered. Other countries have experienced an opening and then closed again. That is where the risk lies. There has not been policy continuity, and this presents uncertainties looking forward. Argentina was the pioneer in opening its energy industry, but today prices for gas and electricity are kept low for political reasons, and as a consequence there is no incentive for new exploration. This is a significant problem for the country. A framework that is supportive of private sector investment is simply not there in the way it was in the past. Similarly, Bolivia attempted to break up its large state-owned enterprises some eight to ten years ago. Today, however, there is a real possibility that the present government or the next is going to try to turn the clock back, and this is discouraging new investment in the oil and gas industries. Ecuador is another country that has seen significant political turmoil and policy shifts in recent years, and that is hardly encouraging for new investment. In Venezuela, it is important to distinguish between oil and gas. The latter appears to be more open to foreign investment, but with respect to oil it takes an act of the Venezuelan Congress for a foreign company to own more than a 50 percent interest in an oil project. Finally, there is Mexico, with its longstanding policy for oil and gas being closed to foreign investment. The administration of President Fox has tried for the last few years to get the Mexican Congress to permit private sector investment but without success.
Editor: Mr. Treistman, in light of the risks, you have spoken about the ways in which a foreign investor might minimize risk. Would you summarize your conclusion on this?
Treistman: Minimizing risk in a foreign investment is a complex, multicomponent analysis. This is particularly true in Latin America, where each country is rich with its own laws and customs. Although there are many legal and other factors to consider, the cornerstone of any successful transaction involves a thorough due diligence process to analyze all the potential risks and legal ramifications of doing business in a foreign jurisdiction. There are some excellent opportunities in a variety of sectors in many countries in the region, but it is important for the investor to be cautious, to take time to work though the issues, and to retain the right advisors. In 2004, foreign direct investment flows to Latin America and the Caribbean increased by 44 percent. This was the first time since 1999 that the region posted positive growth in foreign direct investment. This increase in foreign direct investment underlies a real sense of excitement in a number of countries and in several sectors, but it is important for outside investors to utilize their lawyers and other professionals to sort through the various issues and to take sufficient time to structure their transactions in a manner that addresses risk tolerance, whether legal or commercial.
Editor: What about the next five years? How is the region going to evolve as a place to do business in the near future?
Treistman: Growth in this region is difficult to predict. However, if 2004 is any indication, the best places to do business over the next few years include Mexico, Brazil, Chile, Argentina and Colombia. These are the countries that are seeing the largest inflows of direct investment at present. Of course, Mexico and some Central American countries provide many opportunities as a direct consequence of their proximity to the U.S. Noteworthy, real estate ventures throughout Latin America are generating considerable attention, in large part as a consequence of the potential profits that exceed similar U.S. opportunities. Also, energy transactions are steadily increasing in a variety of energy-rich countries in Latin America, and several export commodities have hit record highs in countries such as Venezuela and Peru.
Other trends to watch are soaring stock markets, such as those in Chile, Peru, Colombia and Mexico. In sum, I see tremendous opportunities in many Latin American countries over the next few years.
Editor: How do you see King & Spalding's Latin American practice evolving over the next five years?
Valera: We do not anticipate a change in our current practice model. We expect to serve our clients by approaching the region from a variety of practice areas, coordinating and drawing upon different areas of expertise on an as-needed basis. This model has served us well, and we anticipate that it will enable us to achieve maximum growth in a region that is poised to become one of the global economy's most important trading and extractive industry areas.