Congratulations, Rio! Home to the 2016 Olympics

A Olimpíada é nossa!  (Or Brazil’s, I guess).

Rio de Janeiro’s recent victory in the competition to host the Olympic Games is yet one more indicator of a city and country on the rise.  One of President Lula’s strongest arguments in favor of hosting the games is the fact that Brazil is the only top 10 economy not to have hosted the Games.

In line with my optimistic back of the envelope math, a scholar at Foreign Policy argues that BRIC countries are the best hosts for an event like the Olympics because: (1)  the infrastructure investments to be completed for the Olympics are truly needed and (2) higher growth rates mean future debt service is less of a burden.

Of course, the best reason to have the Olympics in Brazil is obvious.  It’s the Brazilians.  Warm, gregarious and sports-loving, the people of Brazil will be excellent Olympic hosts.  Parabéns prá vocês.


Back of the envelope math

The Brazilian economy is just under 2 trillion and its population is a little less than 200 million, making its GDP per capita around $10,000.  (Attention Americans: it is more expensive here than you think.)

The US just crossed the 300 million population mark, our economy is just over 14 trillion and GDP per capita is around $45,000.

What are the respective economies going to look like in 5 years?  In 10 years?  How is that going to impact the demand for high end legal services?  And how will those shifts in demand affect legal careers?

Play out a few scenarios in your mind.

US economic growth will be close to flat for the year.  Most of US economic growth since 2001 occurred in the finance and real estate sectors of the economy.  Both sectors shed a substantial amount of jobs and there are many qualified people to fill those jobs—if those jobs return.  The political will to reform health care (lifting a burden off the shoulders of American employers) and stimulate the green economy seems lacking.  It is hard to see where the economic growth will come from.  For attorneys, there will likely be growth in tech, bankruptcy and possibly alternative energy practices, but probably not at levels that fully replace the jobs shed in real estate and finance practices, while still providing opportunities for all recent graduates.

In contrast, Brazil economic growth is projected to be around 5 percent for 2010 (2009 economic growth is expected to be 1 percent, quite respectable during a global contraction).  Brazil is making substantial investments in infrastructure that will require at least some international suppliers and sophisticated financing arrangements, e.g. offshore oil wells and port upgrades.  Demand for commodities may continue to help Brazilian exporters and consumer confidence is still at a decent level.  It is easier to envision economic growth in Brazil.

If Brazil continues at its present pace, GDP could grow to $3 trillion in 7-8 years.  That would be an increase of 50 percent, which I can imagine that relatively easily.  Can you imagine US GDP increasing by 50 percent in 8 years?  Will we all have 50 percent more stuff in 2017?  I struggle to see that.

So if the Brazilian economy expands by 50 percent, do I think demand for high end legal services will grow by a corresponding amount?

No, I do not.  I think the demand for high end legal services could grow by greater than 50 percent in Brazil in the next 7-8 years.  As GDP per capita levels move away from $10,000 and toward $15,000, the kinds of projects businesses and people undertake change.  Projects grow more complex, cosmopolitan and expensive.  To better manage risk, financing structures will change.  All of this requires greater attorney involvement.  And hopefully, greater opportunities for young international attorneys.

Update: the first version of this post incorrectly stated that 2009 Brazil economic growth was projected to be around 5 percent.  Economic growth in 2009  will be around 1 percent.  Economic growth in 2010 is expected at 5 percent.  The post has been corrected with the proper estimates.

Readings on the pre-sal oil fields

World Politics Review provides an excellent English language introduction to proposed changes in Brazil’s oil exploration and production regime in the context of the presidential campaigns.

Exame, a leading Brazilian newsweekly, offers this Portuguese language summary of the investments necessary to exploit the Pre-Sal fields.

Update:  Foreign Policy magazine provides a special report on the future of oil in its Sept/Oct 2009 issue.

What recession?

The Financial Times reports:

Brazil: Good behaviour sees rewards

By John Rumsey

Published: September 9 2009 18:13 | Last updated: September 9 2009 18:13

Brazil has been confounding sceptics who doubted its economic robustness with a recent display of vigorous corporate life. Thanks to good economic policy and a dash of luck from its export exposure to commodity prices, the country, which was one of the last to plunge into recession, is now likely to be one of the first out.

Where are the lawyers?

Who are the lawyers working in Brazil?  What firms are they at?

I recently joined the chorus and wrote that Brazil is a hot place to invest—whether through mergers and acquisitions, opening affiliates or through the purchase of debt or equity.  What is less appreciated is that Brazilians are also investing abroad.  In either instance, these transactions require high-level legal talent.  Much of this work is done in New York or London.  However, most would agree that deep commitment to a market requires a local presence.

Let’s have a look at the US and UK-based firms with offices or affiliates in Brazil. (Under Brazilian law, foreign firms are not allowed to advise on Brazilian law.  As a result, many foreign firms enter into agreements with local offices to advise on Brazilian tax, civil and regulatory matters).  The list that follows is alphabetized—not ranked—and is not exhaustive.  Local affiliates are named in parentheses; office locations are bracketed.

US or UK-based firms with offices in Brazil.

Several other deserve mention for significant work in Brazil and Latin America.  These firms do not have offices in Brazil.  This list is even more subjective.

Brazil is a hot place to invest–nem só eu que fala, é o jornalista estrangeiro que fala

Lines for the register in the grocery store often braid and cross each other here.  As a consequence, the man in front of me was waiting in two lines and looked a little confused.  I asked him in Portuguese which line he was in but he didn’t quite catch what I said.  Guessing that he might be a fellow foreigner, I switched to English and we struck up a conversation.

He turned out to be a journalist from Forbes researching the investment climate here in Brazil.

He asked me what I was doing here.  I explained that I am a law student from the US studying at PUC-Rio and launched into my Brazil pitch: the Why Brazil Question that I have been turning over in mind ever since I first visited in 2006.

In the next week, I’ll answer that question for the blog.  The general answer is that Brazil enjoys a diverse and growing economy and is well-position to thrive in a very tough global climate.  The demand for high-end legal services provided by American attorneys will expand along with the economy.  Yet relatively few young attorneys with language skill are targeting the Brazilian market.  And even fewer US law students like me are coming to Brazil to study for a semester alongside Brazilian law students, intern at firms run by Brazilian attorneys and develop contacts here.  Each of these activities has huge potential upside, especially if it positions you to work on Brazil-US transactions.  As lots of people on Wall Street and in Detroit know better than I do, it’s better to be in a growing market, than a shrinking one.

Plus I like the culture and speaking Portuguese.

Migalhas–not just table scraps

What should you read to stay current on business news in Brazil?

Before coming to Brazil, I reached out to a handful of US attorneys with experience in cross-border transactions involving Brazilian companies.  Most were generous with their time and agreed to speak with me.  At the end of one informational interview with a partner at a Biglaw firm, I asked my standard question: What, if anything, should I be reading to stay up on events in Brazil?  Her answer: Migalhas.

I met with a prominent partner in Rio de Janeiro to discuss the legal market here.  Same question.  What should I read?  His answer: Migalhas.

At the law firm I currently intern at, what do the interns read in their free-time?  Migalhas.

As near as I can tell, Migalhas is like the WSJ’s law blog, Andrew Sorkin’s Dealbook, and ATL all rolled into one.  Migalhas, which means table scraps in Portuguese, is anything but leftovers.

Please leave any other sites to check in comments.