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Page 2 of 3 While the ardour of many Canadian investors in the region has cooled in recent months due to the political and social unrest in some countries — plus the relentless sabre-rattling of Chávez in Venezuela — many big-name money experts share Harper’s upbeat assessment of the region. “Sure there are risks, [but] there are many more good reasons to invest in South America,” says Donald Coxe, a onetime Ontario lawyer who is now a well-known international business writer and global portfolio strategist for BMO Capital Markets, one of North America’s leading full-service investment firms. In addition to a having a large and increasingly educated population, Coxe lauds the long constitutional history of most countries in South America, all of which (except French Guiana, which remains a colony of France) have earned their independence over the past 200 years. “Apart from Venezuela,” he says, “their constitutions are relatively stable, [and] there have been terrific improvements in regards to the respect of rule and law.” Coxe also believes that South America’s European-based laws and languages are an added charm — plus a competitive advantage over Asia — when it comes to attracting North American and European investors. “Spanish and Portuguese are a lot easier to learn than Chinese or Hindi,” he says. “You can pick them up in one winter visit, which isn’t the case for complex languages based on characters.” More important, he adds, is the fact that South America is teeming with proven and hoped-for deposits of natural resources like gold, copper, and other precious metals that have already attracted dozens of Canadian mining companies, from junior exploration companies, like B.C.-based Rusoro Mining, to this country’s two giants in the field: Barrick Gold and Teck Cominco. “It’s difficult to find mining properties in Asia,” says Coxe. “There’s really only Russia; but, with everything that’s going on there these days, nobody’s too eager to get involved.” To be sure, the exploration and development of natural resources is the main interest of most Canadian businesses operating in South America. And their activities, which drive, define, and dictate the bulk of the work being done by Canadian lawyers on behalf of their clients, often require and involve the financing and/or merger and acquisition of resource-based companies and their assets in the region. “We’ve seen a real interest for resource properties there,” says Stuart Olley, a partner in Stikeman Elliott LLP’s corporate securities group in the firm’s Calgary office. Olley works almost exclusively with Canadian public companies involved in mining. “It’s mostly oil and gas, but also mining.” Although Stikeman Elliott doesn’t have an office in South America, Olley says it hasn’t prevented the firm from getting work in the area — through occasional visits to attend conferences and, more often, through referrals from other law firms and clients with assets in the region. Earlier this year, for example, he did a disposition for Trafigura, a private European company and one of the world’s biggest base-metal traders (its crude oil assets in Alberta led to a relationship with Stikeman Elliott), as part of a $200-million sale of its mining assets in Peru to Toronto-based Iberian Minerals Corp. Because Stikeman Elliott is not registered in South America either, Olley relies on local counsel to perform the legal tasks related to such deals, like the registration of documents and conveyance. “We only go [to South America] for due diligence and to meet [clients],” he says, adding the major problem with these types of deals tends to be getting disclosure of foreign assets, such as reserve reports, in a format that meets Canadian standards. “From a practical standpoint, that’s the biggest hurdle.” Things have improved greatly, however, since Fred Pletcher first started representing Borden Ladner Gervais LLP on transactions involving mostly mining properties in Chile, Brazil, Peru, and Argentina back in 1993. “It used to require a lot of due diligence [and] work on the ground,” recalls Pletcher, a partner at his firm’s Vancouver office, where he practises in the areas of securities and capital markets, M&A, mining, and corporate-commercial law. “A lot of transactions involved option arrangements with local owners of mining concessions [or] maybe mine sites or companies were family-owned. There used to be a lot of private companies because the capital markets are not as developed down there.” Despite speaking what he calls “pretty horrible” Spanish and Portuguese, Pletcher says he has never encountered any serious language-related problems in South America. “Pretty much every mining lawyer worth their salt down there speaks excellent English.” He notes that as the volume and intensity of his relationships have grown with local firms, which tend to be smaller than in Canada and located in big cities, so too has his confidence in the level of service they provide. “Business transactions have become routine. I only go down there now if we’re moving to a jurisdiction where we have no previous experience, or if there are quirks that require more hands-on attention from Canadian lawyers.” To be sure, quirks can arise unexpectedly in South America, like the mining mandate proclaimed by Ecuador’s left-of-centre government last spring, in which it declared an outright moratorium on mining projects for six months (until a new mining code is issued) and imposed a limit of three concessions for every mining project, cancelling many concessions overnight. “It was basically expropriation,” says Don Collie, a corporate lawyer and partner in Davis LLP’s Vancouver office who has extensive experience representing all levels of public companies, as well as a local property owner and prospector in Ecuador who has dealings with a Canadian company in copper and gold projects. “It threw the entire industry into a tizzy [and] was a big shock to stock prices.” He adds that such unexpected events, together with fears of corruption and influence-peddling in some South American countries, are among the big reasons why most Canadian, and even many South American companies, choose Canadian, U.S., or British jurisdictions and laws to govern contracts involving properties in the region. “They have indicated to me that they prefer the stability of our court system in case of disputes,” says Collie. Despite the risks, he predicts South America will continue to be a hot spot for Canadian investors and, as a result, Canadian lawyers. “Money goes where the resources are; [and] where investments go, lawyers go,” he says. “You just have to take precautions.”
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