A Positive Outlook For Investment In Latin America As Economic, Legal And Structural Reforms Proceed

Friday, October 1, 2004 - 01:00
Raul R. Herrera

Editor: Mr. Herrera, would you tell us about your background?

Herrera: I am originally from Panama. My father, of Honduran descent,
was with the United Fruit Company, currently Chiquita Brands, as was my
grandfather. I was raised in the Philippines and graduated from The George
Washington University, both its law school and the Elliott School of
International Affairs with a specialization in Latin American studies. Upon
arriving in Washington, I served as an intern at the State Department and then
at the Senate Judiciary Committee. These were limited experiences, but they
provided me with a real taste for the exciting opportunities that this city
offers, and, 25 years later, I am still here. Following graduation I joined the
Federal Home Loan Bank Board and went on to the Federal Deposit Insurance
Corporation. This was at an exciting time when the entire financial services
sector was undergoing restructuring, and I was the beneficiary of some terrific
experiences. This included being named temporary FSLIC managing officer of two
failed savings and loan institutions in Louisiana. In 1990 I accepted an offer
to become a founding member of the legal team at the Inter-American Investment

Editor: Please tell us about the role you played as General Counsel of the
Inter-American Investment Corporation.

Herrera: In 1995 I became General Counsel of the Inter-American
Investment Corporation. This is an institution that attempts to further the
economic development of its regional member countries through private sector
debt and equity financing transactions, and I was involved with dozens of these
transactions in every country of Latin America. My responsibilities were
fourfold: to manage the legal department and supervise the quality of its work
product; to advise senior management and the Board of Executive Directors on all
aspects of law and policy; to represent the institution in all legal proceedings
including litigation and arbitration matters; and lastly, to assist the Board of
Executive Directors in the interpretation and application of the institution's
governing articles. Concerning the latter responsibility, my role was not only
to provide sound legal advice, but also to give the Executive Directors
practical guidance appropriate to fulfill their fiduciary responsibilities and
the organization's mission. Shortly after assuming the position of General
Counsel at the IIC, I formed part, as a founding member, of an informal group of
general counsel representing a dozen multilateral organizations that set up a
forum to discuss issues common to all of us. As you can imagine, those
discussions during our annual meetings were fascinating.

Editor: You have also had a very busy career lecturing, teaching and
writing. How does this connect to your practice?

Herrera: My lecturing, teaching and writing relate to my interests in
Latin America. I served in a public position during my many years at the IIC,
and I felt that it was important to speak and write publicly about the issues
with which I was dealing professionally. I believed, and continue to believe,
that this is a way in which to give something back to the community. It is also
an opportunity to continue to learn about issues that continuously evolve. For
instance, I participate in a business roundtable at the annual OAS General
Assembly meetings on an ongoing basis, and most recently I began to participate
at the Ibero-America Summit meetings of the Heads of State of the region and the
King of Spain, at which I led a discussion of the region's energy policies. Just
a few days ago the Chair of the International Law Section of the ABA appointed
me Co-Chair of its International Investment and Development Committee, a task
that I approach with great interest. I trust that these undertakings will
continue to inform my practice and benefit the firm's clients.

Editor: Speaking of the firm, how did you come to Winston & Strawn?

Herrera: At a certain point I became interested in taking on a new
career challenge. I had never been in private practice, and I put together a
list of firms that had been active in Latin America over the years. Winston
& Strawn was at the top of the list. I knew Chris McIsaac, Chair of the
firm's global project finance practice, and I was well aware of the quality of
the firm's attorneys, its work product and its reputation, particularly in the
practice areas where I had spent my career. I joined the firm a little more than
a year ago, and I have found it a superb platform for the practice in which I am

Editor: Please tell us about the firm's Latin America practice group.

Herrera: The Latin America practice consists of a multi-disciplined
group of lawyers from a variety of different practice backgrounds, including
project finance, corporate, private equity and arbitration. I am happy to
announce, in this connection, that Ron Goodman, a former partner at White &
Case, has joined the firm and will be pursuing his Latin American arbitration
practice with us. Ron has an active practice, and his joining us demonstrates
the full array of services that we offer clients in the region and those who
conduct activities there. We are active in a wide variety of financing work: in
July we closed a $150 million 144A bond issue for the Caribbean Development
Bank, we continue to be actively involved with a large petrochemical project in
South America, and last year we closed five major infrastructure project
financings in Latin America. In the restructuring area, we are advising the
senior lenders in the Electrobolt project, the first successful Latin American
asset foreclosure in a busted project deal. In the equity funds emerging markets
practice, we are engaged in advising investors and a fund manager who have
targeted Latin America as an investment destination. The Latin America practice
group reflects outstanding expertise in a number of different areas with solid
language and cultural skills and considerable hands-on, practical experience in
the region.

Editor: What kinds of transaction is the group handling?

Herrera: The group has a couple of core areas. One is the agency
practice. We represent numerous lenders and sponsors in Latin American project
financings. Our representation of multilateral and export credit agencies is
particularly strong. The other core area concerns private equity. This is an
extremely interesting area, and we find ourselves benefiting from a significant
turnaround in the investment climate. There are other areas of opportunity that
the practice is developing, including corporate governance and corporate
internal investigations. The past decade was a very active period for Latin
American issuers in the United States. The collapse of a number of companies
because of fraud and corruption has resulted in serious interest on the part of
governing boards concerning a variety of corporate governance issues, on which
we are very prepared to advise.

Editor: Would you give us an overview of Latin America as an investment

Herrera: Overall I think the outlook is very positive and with
so-called good growth taking place. The energy requirements of the U.S. and
local Latin consumers continue to grow, and with the tremendous resources
available in the region, the energy sector in Latin America is going to continue
to attract attention from investors. And provide for interesting deals for
transactional lawyers, I might add. In the private equity area, the outlook has
improved considerably in light of the institutional reforms taking hold in most
of the larger jurisdictions - Mexico, Colombia, Brazil, Peru and Chile Ñ of
protections for minority shareholders and standards for corporate governance.
These key developments are also underway in other jurisdictions in the region.

Concerning specific jurisdictions, allow me to say that political stability
in Venezuela is very important for the region as a whole. The country is a major
oil producer, and any instability there resonates through the entire region. I
am hopeful that the recent referendum, which was favorable to President Chavez,
will translate into greater stability for the country and thereby improve the
climate for investment. Last year we closed a high-pressure gas injection
facility transaction in Venezuela on behalf of the lenders. In Bolivia, the
recent referendum on the extraction and exploitation of energy resources was an
important event. The implementation of that referendum and proposed changes to
the hydrocarbons laws will determine how much traction foreign investment takes
to the country, and that in turn will determine its economic future.

Argentina, which was a favored destination for foreign investment during the
1990s, has simply imploded. I think it is probably at the lowest point in the
economic cycle right now, which is good news for investors looking for excellent
opportunities at bargain-rate prices. However, until Argentina resolves its
default with the IMF and settles with the global bondholders committee, the
recovery will be short lived. I think we are going to be busy in all of these

Editor: Is the possible indictment of a former President of Mexico an

Herrera: Regardless of the judicial outcome, the fact that a President
of Mexico faces at least the possibility of being called to account for his
actions bodes well for progress on the rule of law front. Actions such as these
that reinforce the rule of law send a positive signal to foster and deepen
foreign investment. We have seen this in a number of countries, including
Brazil, Chile, Peru and Nicaragua. The discussion underway in Mexico at the
moment means that the political class is not going to be able to act with
impunity in the future. That is a very positive step in the right direction.

Editor: What about the rising world oil prices?

Herrera: High oil prices are something of a mixed blessing. For the
oil producing countries, high prices represent a bonanza. In Venezuela,
President Chavez has been able to finance his ambitious social programs on the
basis of such prices, and this did influence, I think, the recent referendum on
his leadership of the country. For those countries that are forced to meet their
energy needs on the world market, of course, this is a negative; however, these
costs are manageable. The region has countries on both sides of this particular
divide. In general, high oil prices mean that money is going to flow into the
region, and that is good for the region overall.

Editor: The emergence of Brazil as an economic superpower in the region is
on everyone's mind. How do you think that will play out?

Herrera: I think Brazil is the sleeping giant of this century, and I
am happy to see that President da Silva has been very successful in navigating
the difficult waters between his party's left-leaning partisans and the private
sector on the issues of governmental regulation of the energy sector and
financial markets. Its large current account surplus bodes well for the country.
Brazil is going to be an investment target in the region for many years to come.

Editor: In light of NAFTA and now CAFTA, do you think it is possible that
the entire hemisphere might one day constitute a single trading bloc?

Herrera: That is something that we would all like to see come to
fruition. But we have a long way to go. Nevertheless, we have made a good start.
I think that there is a clear understanding among the leadership of Latin
America that the economic, legal and structural reforms - including
administration of justice and judicial reforms contributing to the rule of law -
that were initiated in the 1990s must continue. There is general acceptance
throughout the region that market-driven solutions represent the future of
economic development in Latin America. Winston & Strawn anticipates being
involved in all aspects of this evolution.

Please email the interviewee at rherrera@winston.com with
questions about this

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