Despite China’s hunger for energy resources and raw materials, deal flows into Latin America have been hampered by rampant legal risks in the region, warned lawyers from Miami-based firm Diaz Reus & Targ.
"Speaking from experience, Chinese companies looking to invest in Latin America should be aware of the key legal risks including fraud and breach of contract, protectionist laws, as well as the political, regulatory, economic and operational risks,” said Vincent Li, a lawyer based in the firm’s Shanghai office.
Total trade volumes between China and the Latin America amounted to US$10 billion during the period 2007 to 2009—far lower than the US$10 billion annual target that Chinese president Hu Jintao projected in 2004.
Li cautioned other interested Chinese parties to carefully assess the credit and transactional history of their potential business partners; familiarize themselves with local Latin American laws, and include a choice of law and forum selection clause in their drafted contracts and seek arbitration in a neutral third-party venue as part of the dispute resolution mechanism.
Li’s firm has represented a Mexican lithium mine and a handful of Columbia gold mines in their efforts to attract investors from China. The firm also acted as legal counsel for Mexico’s National Pavilion at the 2010 World Expo held in Shanghai. ALB
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