Latin America: Top Legal Concerns Facing General Counsel in 2020

In Short

The Situation: 2020 presents old and new challenges to international companies doing business in Latin America.

The Result: Although many of the challenges described in this Commentary are shared by other regions of the world, institutional weaknesses and political uncertainty in Latin America require the deployment of legal resources that are tailored to the region's needs.

Looking Ahead: Generally, the region is modeling its response to global challenges, such as cyberattacks and corruption, by following the steps of the European Union ("EU") and the United States, making the region more attractive to foreign investment.

Coronavirus Disease (COVID-19)

Although as of March 10, 2020, Latin America is not at the center of the coronavirus epidemic, China's slowdown has already affected the region, which counts China as its largest trade partner. Prices for the commodities South America produces have tumbled, and the currencies of Brazil, Mexico, Colombia, and Chile have weakened since January. In response to the epidemic, companies should develop employee-related policies and protocols taking into account that the public healthcare systems in most countries would be seriously compromised in the event of a severe outbreak.

Companies may also consider establishing a centralized team to manage the flow of information and deal exclusively with the issues arising out of the outbreak. As of the date of this article, cases have been confirmed in a dozen countries in Latin America, including the five largest economies. Policies or protocols that cover different countries in the region should take into account their particularities so that, for example, challenges on internet access or the ability to easy relocate don't truncate the implementation of remote working, emergency notification systems, or relocating policies.

In addition, companies should consider whether disruptions to their or their counterparties' ability to fulfill contractual obligations as a result of the outbreak are sufficient to trigger force majeure or other remedies that excuse performance and to identify any notification and mitigation requirements that might apply. A review of existing finance documents to assess the potential consequences of the situation should also be completed, including with respect to representations (have they become untrue?), covenants (is compliance still possible?), and events of default (have they been triggered?). Companies should also consider evaluating the extent to which insurance can mitigate losses and protecting themselves from potential liability risks.

Data Privacy

The different Latin American countries tackle data privacy in very distinct ways, which is a challenge for companies operating throughout the region. Recently Latin American countries have been debating and enacting amendments to existing legislation or new laws modeled after the EU's General Data Protection Regulation. Leading the way is Brazil, which passed in 2018 its new General Data Protection Law which goes into effect in 2020. Companies will be required to update their regional data privacy policies in order to comply with these new regulations. Failure to comply with data privacy regulations is subject in most countries to significant fines.

Cybersecurity Attacks

As cyberattacks become the new normal in Latin America and reporting requirements increase for companies experiencing data breaches, companies should consider creating and maintaining a solid incident response plan which is tailored to the specific legal requirements of each affected jurisdiction, including security awareness training for employees. In addition, companies should consider purchasing cyber liability coverage to protect their business. To put this risk in perspective, note that pursuant to a September 2019 report from the International Telecommunications Union ("ITU"), in 2018 Brazil was the second worst affected nation in terms of economic losses due to cyberattacks. The Mexican government also suffered two high-profile cyberattacks in the past six months. According to the 2018 Global Cybersecurity Index published by the ITU, Mexico and Brazil are ranked as the second and fourth countries, respectively, most committed to cybersecurity in the Latin American region. Uruguay and Paraguay were ranked first and third, respectively.


2019 was a banner year for U.S.-led anticorruption enforcement activities in Latin America, and there is every indication that corporate and individual enforcement will not be waning in 2020. At this point, most companies have a functioning compliance program in place that complies with applicable laws; however, recent guidance from both the Department of Justice and Securities and Exchange Commission indicates that the key to an effective compliance program is to ensure that top management is supporting the program and that compliance professionals are given the training, tools, and resources to perform compliance work. Companies should continue to onboard compliance professionals into their companies and enhance their compliance teams with new hires. In addition, companies should consider dedicating a specialized team to evaluate compliance efforts before an acquisition to ensure that possible compliance breaches are evaluated before closing.

Trade and Sanctions

In August 2019, President Trump signed an executive order which stated that property and interests in property of the Government of Venezuela that are in the United States are blocked and may not be transferred, paid, exported, or otherwise dealt in. The "Government of Venezuela" is defined as all persons owned or controlled by the Government of Venezuela and any person who has acted or purported to act directly or indirectly for or on behalf of the Government of Venezuela. As a result, U.S. persons generally are prohibited from engaging in any transactions or other activities with or involving the Government of Venezuela, except as authorized under relevant exemptions or general licenses. In addition, the U.S. government has targeted the Maduro regime's perceived enablers, both within Venezuela and abroad. With respect to Cuba, the Trump administration continued to reverse the Obama administration's easing of certain restrictions, including imposing restrictions on certain travel and remittances and opening U.S. federal courts to civil suits brought by U.S. nationals whose property was confiscated by the Cuban government against persons and entities that traffic in such property.

The U.S. government also added a number of Nicaraguan government officials to the Specially Designated Nationals and Blocked Persons List ("SDN List") in 2019, under the authority of an executive order issued in late November 2018. U.S. persons generally are prohibited from engaging in any transactions or other activities with or involving such persons, even when such persons are acting in their official role within the Nicaraguan government. With respect to Mexico, Guatemala, Honduras, and El Salvador, in 2019 the administration used aid cuts and threats of increased U.S. tariffs and taxes on remittances to compel these countries to curb unauthorized migration to the United States. All of these countries have free trade agreements with the United States.

In 2020, the United States-Mexico-Canada Agreement, the North American Free Trade Agreement's replacement, is expected to be implemented in the United States, Mexico, and Canada. Against this background, companies in Latin America with strong economic linkages to the United States should closely monitor U.S. policy toward the region and prepare for potential disruptions of the status quo. Further, such companies should screen their customers, business partners, and parties to any agreements, including parties involved in negotiating such agreements, to determine whether they are on the SDN List. Transactions or other activities with such persons can raise risks to companies in Latin America, particularly if the transactions or activities have a nexus to the United States or a U.S. person, even if such nexus is indirect. In addition, any interactions with the governments of Venezuela or Nicaragua should be reviewed to determine risks under the U.S. sanctions.  

Four Key Takeaways

  1. New developments in data privacy throughout Latin America are expected in 2020.
  2. The Trump administration's use of aid cuts, tariffs, and taxes to curb unauthorized migration to the United States, particularly from Central America, may require monitoring in 2020.
  3. U.S. anticorruption enforcement activities in the region are expected to continue. 
  4. The potential economic toll on Latin America from the coronavirus, which counts China as its largest trade partner, requires careful review of force majeure clauses and other contractual provisions as the region prepares for production slowdowns and faces lower commodity prices.
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