Where FTI Consulting sees business growth opportunities in Latin America

Winds of change are whipping through Latin America. While capital has left the region and the revenue flow of some companies has slowed to a trickle, governments are pumping out cash to support both the private and public sectors and private equity players with deep pockets are looking to grab a bargain. On top of this, cash-strapped governments hoping to spur their economies via infrastructure investment will likely have to embrace public-private partnerships to get projects built.

For global management consultancy FTI Consulting, this should support growth in three main business areas in Latin America: corruption investigation, dispute resolution and business intelligence. 

Globally, the company offers a wide range of services, drawing on a pool of over 5,700 experts, seasoned practitioners in areas such as accounting, arbitration, strategic crisis management, antitrust, M&A and computer forensics. 

To find out more, BNamericas spoke with Michael Cullen, an expert in forensic investigations, cross-border deals, disputes and arbitrations who recently joined FTI Consulting’s Colombia office as a managing director. 

Cullen was previously a senior partner at Control Risks, a global risk consultancy, for 20 years.

BNamericas: To kick off, can we talk a little about Latin America, which is going through a sticky patch. What’s your view on the region?

Cullen: At FTI Consulting, the way we think about business is that we’re in this for the long term. Our belief and focus in Latin America at FTI goes right the way across the organization, all the way from our global CEO to the regional investigative, corporate finance, construction, economic, political and strategic communication experts here on the ground in Colombia, Mexico, Brazil, Argentina, et cetera. 

The investment in me and the significant investment the company is making in Latin America at the moment is an indication that we believe there is huge short-, medium- and long-term potential here.

BNamericas: You told us that, at FTI, you don’t work in silos. 

Cullen: We’re multidisciplinary, so we’re not just ex-media people dealing with a media issue; we’re not just a group of lawyers dealing with disputes; we’re not just a group of accountants dealing with forensic accounting. I think the real strength of our team is the international and cross-disciplinary nature of our approach. In my team I have ex-law enforcement and intelligence officers, lawyers, economists, accountants, crisis management specialists and regional political experts.  

BNamericas: In terms of business growth, where do you see this coming from? 

Cullen: The three areas that we think are really going to expand over the next couple of years are, first of all, cases of corruption. There’s a lot of money being handed out by governments at the moment to help authorities which doesn’t have the checks and balances you’d expect but it’s understandable given the urgency of the medical crisis that we’re in. We feel that in the medical space there’s going to be some significant corruption investigations that we hope to assist on, working with large international and Latin American law firms to uncover those. 

And also, it’s worth noting that difficult economic times often uncover corruption scandals that were covered previously by good economic conditions. The Bernie Madoff Ponzi scheme, one of the major investigations that FTI Consulting worked on in the Americas, wasn’t uncovered by a government investigation. That was largely uncovered by the global financial crisis.

And that’s an example of that old Warren Buffet quote of ‘Only when the tide goes out do you discover who’s been swimming naked.’ The same applies to corruption and fraud and we foresee using our forensic investigative abilities in Colombia, Peru, Chile, Argentina, Ecuador, Panama – the entire region – over the coming 6-24 months.

The second area is the disputes area. We think there will be a sharp increase in international arbitration around everything from large infrastructure projects, all the way through to disputes about damages in large business deals that have fallen apart, whether that be airline related or travel agency related, any of the industries that are going to be adversely affected by the economic conditions.

The third area where we think there will be a marked increase in interest is in business intelligence. It’s estimated that private equity funds have a couple of trillion dollars of dry powder capital that they would like to invest and obviously, as distressed assets are uncovered as potential portfolio companies in Latin America, we want to help those big private equity players from the US, Europe and Asia, et cetera, get a better understanding of, first of all, the macro, geopolitical situation in Latin America and also the track records of the entities and the people behind those organizations. 

BNamericas: Are there any sectors blinking brightly on the radars of private equity investors?

Cullen: Obviously the distressed markets, the ones most adversely affected by the immediate quarantines imposed here in Latin America [such as tourism]. They are going to be on everyone’s radar; they are going to be obtainable at extraordinarily low prices. But there’s obviously a risk associated with that, which is the continuation of the COVID-19 crisis.

But I think the more mainstream industries that we’re seeing private equity take an interest in are infrastructure, energy and mining. All three of these industries at the moment are priced low. Oil and gas has obviously taken a hit and that’s raising the antenna of some private equity players. But I think gas, in particular, has not been as adversely affected and there’s a belief there could be a strong rebound in gas, so there’s interest there. 

And obviously alternative energy is a real interest area. Here in Colombia, for example, the hydroelectricity space is a very prominent one. Wind farms up in Mexico. 

And obviously more mainstream infrastructure, such as 4G roads, ports; all those things that Latin America is crying out for. It’s tied into the stimulus packages that governments are looking at in each country. Governments have gone back to John Maynard Keynes’ thinking that the panacea for getting out of the inevitable economic calamity that we’re about to confront will be spending on major infrastructure projects. Governments here in Latin America don’t have the necessary capital. There will be a requirement to PPP on those projects and governments will make the terms of those public-private partnerships very attractive for foreign investors. 

BNamericas: What about risks?

Cullen: Not only do you have to worry about the normal reputational risks you face here in Latin America but on top of that you have still got some of the residual Odebrecht corruption risks that have never been properly resolved, for example, here in the Andean region some of those scandals are still playing their way out. 

But you need to step carefully into those projects to ensure that you don’t take on risks that you weren’t aware of when you sign the contract.