Brazil has one of the most advanced economies in Latin America and trading in its capital markets demonstrate this. While some economies show increased trading in one section of the market, Brazil has seen a lot of activity in both the equity and debt. The debt markets are showing longer average maturities, a healthy longer-term indicator that companies believe they will continue to be able to pay their debts. In fact, the current rage is the issuance of perpetual bonds – bonds with no maturity date at all.

The skyrocketing M&A market has contributed to the boom in capital markets activity. Companies are lining up to get their finances in order so that they can be more appealing to buyers. This has helped feed the debt market, as companies restructure their outstanding debts, or tap the markets for new acquisition financing. AmBev, for instance, issued a billion-dollar debenture and then used the proceeds to acquire Argentine brewery Quilmes.

On the equity side, initial public offerings have become a popular way to raise capital, as Brazilian companies bypass bank loans in favour of tapping the public. The largest Brazilian IPO was placed in March 2007, the $750 million-plus listing of JBS. The equity market is becoming more prominent not just for its heights, but also for its breadth – smaller companies are going public that would never have previously considered it. Middle-market banks, companies in previously untapped industries like education, real estate, and biofuel – all are going to market.

Top two pull away

The buoyancy of this market has created a feast for the country's leading financial law firms. Machado Meyer and Mattos Filho both receive unanimous plaudits from clients for their work in the debt and equity markets this past year. In that respect the legal market is fairly stable, since both have been tier one firms for several years in this practice area.

Yet there has been a subtle shift – both firms have pulled away ever so slightly from the rest of the field. Firms like Pinheiro Neto and Barbosa Müssnich continue to come through with top-notch work, but the gap is opening up between them and Machado or Filho. The difference, while also evident in the mandates on Brazil's biggest deals, is subtle, reflected primarily in the quality of work and as such the feedback from clients.

José Roberto Opice is the leader at Machado Meyer's capital markets team, which placed several offerings of bonds totaling $4.5 billion for Companhia Vale do Rio Doce (CVRD) last year. Demonstrating the link between capital markets and M&A, these bonds were used by CVRD to pay off part of a $14.6 billion loan used to acquire Canadian mining company Inco. Machado's capital markets team also includes Carlos José Rolim de Mello, Nei Schilling Zelmanovits and José Ribeiro – all talented partners who participated in nearly every one of the firm's most important capital markets transactions.

But the talent in Brazil is not limited to any one firm, or to firms of any particular size. Henrique Lang is the partner that heads the capital markets team at Pinheiro Neto. It was his team that represented beef producer JBS in the aforementioned IPO that was Brazil's largest in modern history. The demand for new listings has forced firms to find new companies to take public, and Lang's team benefited from this by innovating in its new deals. It was its client Banco PINE that was the first Brazilian middle-market bank to list ordinary shares. Previously, only the largest domestic banks – or multinational banks – would offer shares to trade on the Brazilian stock exchanges. The ability to effectively list smaller companies for trading is perhaps the best indicator of the markets' health.

Newer firms also have competent attorneys that are no less skillful and just as effective. Pinheiro Guimarães is an example of this – a small family-run firm that has excellent connections in the financial world. The firm uses these connections to land deals in a busy capital markets field.

That means that the firm was able to take part in the three largest debt offerings in Brazilian history last year. Francisco José Pinheiro Guimarães led the teams that placed nearly R$11 billion of debentures for CVRD (R$5.5 billion), financial company BV Leasing – Arrendamento Mercantil (R$3.35 billion) and beverage company AmBev (R$2.06 billion).

The newcomers

Such is the volume of work that relative newcomers are also able to participate at the highest levels. Barbosa Müssnich, for example, is barely 12 years old, yet its deals are some of the most important in the country. Paulo Cezar Aragão is highly rated for his work in this field, and leads a team that has sat across from top-tier from Brazilian and international firms.

Levy & Salamão is another relatively new firm; with 18 years' experience, it is the oldest of the Young Turks of the Brazilian capital markets law firms. Like Barbosa, Levy finds itself facing top counselors, and representing leading domestic and international clients, in its deals. They have been able to parlay this into placing debentures for AmBev and a notes offering for Säo Paolo energy company CESP; both were among the largest bond placements in the past year.

It is the rise of Souza Cescon, the youngest of the top firms, that has impressed competitors. In existence only since 2001, the firm has already received high marks for its work, particularly in the equity markets. Several IPOs in the energy industry have raised the firm's profile to match that of competitors who have been around twice as long.

Brazil's capital markets are fiercely competitive, and have the strength to accommodate competitors of every stripe. Neither length of tenure nor size is a handicap to any firm that has the talent to make a mark here. RP