For at least the last two decades, conventional wisdom has held that Central America is not an attractive market for setting up local operations of global firms, because of three key factors:
- None of the individual country markets is large enough to justify the investment of money, time, and effort.
- Top law firms with offices throughout the region depend on referrals from multiple international law firms for their international business, which makes an exclusive association with one firm very risky.
- Several of the “regional" law firms actually are cross-referral networks with little or no integration.
While all three factors remain present to date, other market factors have altered the picture somewhat:
- A recent wave of new projects for regional integration and regional expansion has multiplied the number of available regional players with strong credentials. Currently, close to 20 different Central American law firms have offices in several countries of the region, and the number continues to grow.
- The Central American market for legal talent has become much more fluid, with lateral recruiting of partners becoming much more frequent. This has made it more feasible to put together a strong regional team. In recent years, top-ranked partners and entire practice teams have been moving from one regional outfit to another. Without this increased lateral mobility, it is unlikely that, for example, the recent Dentons combination in Central America could have taken place.
- Global clients increasingly are demanding truly global presence for certain practice areas, such as labor and employment law, immigration, and insurance, that support their day-to-day operations throughout the world.
- A significant trend toward preferring a "Swiss Verein" type of affiliation (a "combination," rather than a traditional merger or acquisition) has made it somewhat easier to negotiate and implement regional and international associations, by avoiding the issues of ownership and governance, which historically represented unsurmountable obstacles to international integration.
So, is Central America to become "the next Colombia," a key part of international law firms' plans for global expansion?
Not quite.
It is likely that other opportunities will arise in the coming months and years for a global firm to find some credible candidates for association among one of the recent or upcoming regional players. It is even more likely that a few practice-specific associations will take place. However, beyond a few additional "combinations" and "formal associations," there are no indications that the market can expect an avalanche of new global firm offices in the region.
Fernando Moreno
Norman Clark