Cross-border investments between Latin America and Europe: Opportunities, risks and Europe's role as a safe haven for companies

International companies investing in Latin America face various risks, including political instability, regulatory changes and legal disputes.

This is not just a Latin American issue, but recent cases have brought the region into the spotlight – though not for the most attractive reasons for investors. A key example is First Quantum Minerals in Panama. In November 2023, the country’s supreme court ruled the concession contract for the Cobre Panamá mine unconstitutional, forcing the closure of one of the world's largest copper sources.

Another case is Telefónica in Colombia. The Spanish company was involved in a legal dispute with the Colombian government over measures that affected its investments. In November 2024, the International Centre for Settlement of Investment Disputes (ICSID) ruled in Telefónica’s favor, ordering Colombia to refund approximately €500mn to the company.

To understand how companies can minimize some of these risks, BNamericas spoke with Amaia Rivas, a partner at Pinsent Masons, an international professional services firm with a presence in Spain. From her Madrid office, the firm advises multinational clients in key sectors such as energy, infrastructure, financial services and real estate.

Rivas leads the Public Law Department, providing regulatory support to companies operating internationally, particularly in Latin America, where legal and regulatory challenges are becoming increasingly complex. In this interview, she addresses the importance of the region for the firm, the risks faced by investors and how to mitigate international disputes, such as the growing number of arbitration cases.

BNamericas: How important is Latin America in Pinsent Masons’ global strategy, and what key factors make it a priority for the firm?

Rivas: Many of our clients, not only from Spain but also from Asia and the Middle East, are currently investing in the region – primarily in infrastructure and energy sectors. As a global firm, we always aim to support and advise them, working alongside local lawyers wherever they have economic interests.

Specifically, our Madrid office acts as a bridge between the firm's other international offices and the businesses our clients operate in Latin America, thanks to our shared language and cultural ties.

BNamericas: Many companies see Latin America as a region full of opportunities but also with significant legal and regulatory challenges. How does Pinsent Masons help companies navigate this landscape?

Rivas: It is essential to stay informed about ongoing developments in each country, both economically and politically.

We have a team of lawyers dedicated to monitoring sector-specific news and regulatory updates that could impact our clients. Our approach is not only to anticipate potential problems but also to identify new opportunities that may be of interest to them. Having trusted local professionals is a great advantage, as it allows us to provide comprehensive legal counsel to our clients.

BNamericas: We have seen multiple arbitration cases in recent years involving foreign companies in Latin America (e.g., First Quantum Minerals in Panama, Telefónica in Colombia, ConocoPhillips in Venezuela). Why is this region so exposed to these disputes, and how can investors mitigate their risks?

Rivas: One of the main reasons is the political instability and uncertainty in some countries, which has a negative effect on the economy and foreign investments. Most disputes arise from regulatory changes, particularly in infrastructure and energy sectors. The mitigation strategies available to investors depend on their nationality and the regulatory framework or contractual basis of their investment.

For foreign investors entering a country based on its legal framework or a bilateral agreement with the host state, the first critical step is to analyze the investment treaties signed by the host country. This helps structure the investment through jurisdictions that offer better guarantees and protections under these treaties.

BNamericas: But political changes still pose a risk, even with treaties, which can lead to costly legal battles, right?

Rivas: Yes. That's why the second step is to conduct full due diligence of the legal framework and how national regulatory bodies interpret it, ensuring that the investment is made in an objective and legitimate manner.

Once the investment is made, investors must engage in a proactive communication strategy with the host state's regulatory bodies to strengthen and secure the commitments made.

For investments based on private contracts with state entities, it is crucial to include a clear arbitration clause specifying the fundamental elements of the arbitration process. Additionally, having advisors who continuously monitor political and regulatory developments is key, as it allows investors to anticipate potential changes and take proactive measures in time.

Finally, diversifying investments across different industries and geographic regions is a good strategy to minimize risks.

BNamericas: More companies with investments in Latin America are considering moving their headquarters or relocating operations to Spain or other European countries. What are the main factors behind this trend, and what are the benefits?

Rivas: Indeed, we are increasingly seeing more companies establishing themselves in Spain, especially in Madrid. This relocation of assets and corporate restructuring is due to a combination of legal, economic, and cultural circumstances that make Spain a particularly attractive country for companies with investments in Latin America, in contrast to the political and legislative uncertainty in their countries of origin.

Firstly, Spain has a broad network of investment treaties with the vast majority of Latin American countries, which offer the widest protections available at an international level. These treaties have also been applied in several investment arbitration cases, allowing investors to anticipate how arbitral tribunals may interpret these protections.

Secondly, Spain's political and economic stability is even more appealing, enhanced by regulatory and tax incentives offered by certain autonomous communities to foreign investors. Additionally, Spain has a highly developed infrastructure and transport network, among the most advanced in Europe, making it not only the easiest gateway to Europe and, by extension, Asia, but also a natural bridge to Latin America.

Furthermore, other aspects such as language and culture facilitate the integration and growth of this type of investment. Finally, the combination of all these factors sustains the economic rationale and purpose of these relocations and restructurings, while also serving as additional protection against potential objections (i.e., abuse of process or denial of benefits) in future investment arbitration cases. To help mitigate this risk, at Pinsent Masons, we have been advising companies from the region in their establishment processes in Spain.