TTR DealMaker Q&A with Rebaza, Alcazar & De Las Casas Partner Alberto Rebaza
Alberto Rebaza is founding partner and managing partner of Rebaza, Alcazar & De Las Casas law firm. Partner leads to mergers and acquisitions and corporate areas. In addition to his masters, he has studies at Georgetown University and England. He has also been director in several companies and organizations such as Edegel (Energy), Rigel Peru (Insurance), Liderman (Services), Amrop (Services), IPAE, Pesquera Alexandra (Fishing), YPO, among others.
TTR: Mr. Rebaza, firstly we would like to get your expert opinion, in a brief analysis, on the progress of the Peruvian M&A market in the first four months of the year.
AR: The Peruvian legal market has experienced an unusual volume of M&A closings in 1Q19 for all type and sizes of transactions. From the small/medium size deals with a strong strategic focus, to the multimillion dollar/cross-border deals that cover most of our newspapers. Our team has participated in 7 closings in 2019 so far (including strategic deals such as the sale of Papelsa to Grupo Gloria, the sale of Holding Plaza to Parque Arauco or the purchase of Duraplast and Novatec by Wenco). We are thrilled and have high expectations with our pipeline of transactions for 2Q19.
TTR: According to our data, Peru allocated a significant part of its investments to other Latin American countries, mainly Colombia and Chile. What attracts the interest of Peruvian investors?
AR: There are several factors that may explain this phenomenon. First, Colombia and Chile are two countries with lots of social, historic, cultural and legal similarities with Peru. A regional expansion within those countries is normally catalogued as a soft landing for foreign investors.
Second, since the launching of the Pacific Alliance (Latin American trade bloc, formed by Peru, Chile, Colombia and Mexico) in 2011, Peruvian investors are taking a close look to the participant countries of the Pacific Alliance to diversify or expand their businesses. It is worth noting that, despite certain tax benefits (agreements to avoid double taxation or tax reductions, among others), the founding members of the Pacific Alliance executed an agreement to abolish all tariffs of merchandise trade by January 2020, making this integration a unique Latin American marketplace for producers.
TTR: Similarly, Colombia appears so far in 2019 as one of the main investors in the country. How do you think this reciprocal business relationship between the two countries will evolve? How does it benefit their economies?
AR: Colombian investors have been major players in the M&A industry in the recent years and I wouldn’t expect that to change in the near future. They are the third major foreign investors in Peru, after Spain and Chile.
Back in 2018, the Colombian Business Council in Peru announced fresh investments for over US$ 2B in Peru for the years 2018 and 2019. Their main focus is on projects related to the infrastructure, electricity, hospitality, transport and in the cosmetic industry.
In addition to the investment projections of Colombian players, I think the real deal will come once the corruption crisis in Peru is overcome. The Colombians experience in public-private partnerships and Public Works Tax Deduction projects will for sure contribute our economy in a positive way. Their input and investment will boost public projects (and therefore our economy) and increase our employment rate considerably.
TTR: Meanwhile, transactions in Agriculture, Agribusiness, Farming and Fishing have increased in Peru, compared with previous years when that subsector wasn’t as prominent. What could you tell us about that? Do you think the tendency will remain?
AR: The fishing industry in Peru is now consolidated, however, the government has been debating the last months certain legislative modifications that may heavily impact the industry, such as the increase of the fishing rights.
On the other hand, we have viewed a transactional boom related to shrimp-based business like the purchase of La Fragata by Marinazul (affiliated to Grupo Camposol).
Furthermore, the agricultural-related industries are facing an unusual increase in their sectors due to the international demand for agricultural products. We have notice the peculiar interest of foreign investments funds and, particularly, private investors from Chile in the purchase of estates in the north of Peru to develop agribusiness and farming companies. Peru is a privileged country for the agribusiness, making it one of the most suitable natural producers. The progressive increase of the worldwide demand, followed by a friendly legal framework that includes income tax reductions and special depreciation conditions are the perfect match for this boost.
TTR: Lastly, Peru has recently suffered and been involved in certain corruption scandals. How do you think those scandals affect the country’s economy today? What is your outlook on the matter?
AR: Thankfully, the political crisis experienced in Peru last year and the current corruption cases have not prevented the unstoppable growth of our economy and, specifically, of the M&A players’ appetite.
However, it is important to note that all major infrastructure projects have been stopped and their continuity is under analysis. This has deeply affected our economy and the governmental stability, lowering the Peruvian employment rate. I believe this corruption turmoil may only be disregarded by a strong political force that needs to convey economic trust and decision-making features. Furthermore, we are now facing an exchange in the players or the main public projects. The typical powerful Brazilian and local companies are been replaced by international actors of various backgrounds.
Should the current government be unable to revert this situation, I believe the presidential elections in 2021 will be the right moment to overcome this scenario.