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Outsourcing

Legal services outsourcing, an opportunity for Latin America and the Caribbean

Legal services in the United States are partially being outsourced to other countries to offset high costs. Latin American lawyers can seize this opportunity to carve a niche in this very profitable market. 

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Published by ConnectAmericas

HIGHLIGHTS

  • LAC has similar time zones and is geographically closer to the United States
  • There is cultural affinity between the United States and Latin America
  • The region enjoys cost-effective business prices and stability

CNN Money affirms that according to government sources the legal industry in the United States accounts for 184 billion dollars a year. A legal assistant usually earns 18 dollars an hour and a junior attorney can earn up to 200 dollars an hour, among the most highest salaries in the market for young professionals. These are very high costs in a market that is captive: i.e. companies cannot cease to engage attorneys because otherwise they would end up losing even more money in lawsuits for not having been properly counseled.

However, in recent years, a way of reducing these costs has gained momentum: outsourcing part of the legal tasks to more affordable countries. According to Forbes magazine, this method, known as Legal Services Outsourcing (LSO), refers to “the corporate practice of establishing strategic partnerships with third-party legal service providers to work either directly with general counsel or in a three-way relationship with both the client and its outside counsel.” In other words, LSO offers two services: either partnering with law firms to provide legal assistance in a country where counsel is needed; or working directly with companies to assist the in-house counsel with certain legal tasks.   

In both cases, the participation of local attorneys continues to be essential. An article on CNN Money mentions that, for example, in the United States, “government regulations mandate that only lawyers who are licensed in the U.S. can give legal advice on American law” which makes it difficult for it to be provided by other countries. However, the article continues, “there are, of course, ways to get around the limits. General Electric, for instance, has U.S.-licensed lawyers review the legal work its India-based arm produces, an added measure that experts say could be enough to comply with the law.”

A market that begins to consolidate

According to figures published by Forbes magazine and Financial Times, 43% of companies and 72% of U.S. law firms are “currently outsourcing, planning to do so in the future or are open to the possibility.” 

Like outsourcing generally, “shifting lawyer jobs overseas is still a relatively small phenomenon” notes CNN Money. But large companies like General Electric, the fifth largest corporation in the United States, have established subsidiary legal firms in India – for example in the case of GE, with over 30 employees. In fact, according to information published by the New York Law Journal, over 4 billion dollars currently being spent in the United States in legal services are expected to be relocated to India in 2015.

The main legal services exporter is India and the United States the main importer

In an article published in Outsource magazine, Mark Ross, subject-matter expert, affirms that the legal services outsourcing industry is beginning to consolidate. As proof, it mentions the recent acquisition by Thomson Reuters Inc. –one of the most important law firms in the world – of Pangea3, an LPO provider. “Thomas Reuters’ move validates market acceptance of LPO. Moreover, the acquisition is good news for the legal market as Thomas Reuters will inevitably look to invest in and promote LPO. This will educate law firms and law departments and accelerate growth for the whole market.” 

Why Latin America and the Caribbean?

India is currently the main legal services exporter and the United States is the main importer. However, Marie Christine Sing Umali affirms that Latin America and the Caribbean (LAC) can become “the India of tomorrow” for outsourcing.

Although the article covers other sectors, at least four of the five reasons provided by the author apply to the LSO market. First, says Umali, LAC countries are closer and have similar time zones to the United States than India. Therefore, if an American attorney needs to travel to supervise the outsourced activity, or even if he has to communicate by phone, it is much easier to do so with Latin America than India. Second, the author mentions the cultural affinity between the United States and Latin America: “Everywhere you go in the United States, Hispanics are represented and are considered a vital part of the American labor force, which makes them US  locals, in every respect.” Third, the region has a cost-effective price structure and stability in contrast with the Asian market. Finally, Latin America has a strong infrastructure and inclination towards technology: “It is considered an e-hub with Chile leading the region, with the highest mobile telephony and fiber-optic penetration rates, crucial to business success.”

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