In the space of 16 years, Luis Castro transformed BLP from a seven-lawyer shop into one of Costa Rica’s largest firms and a major regional player in all five Central American jurisdictions. He tells Tom Muskett-Ford how he did it.
The year was 2001 and Luis Castro was newly settled into his managerial role at KPMG’s San José legal division, having been made partner two years earlier. At just 29, he was leading the prestigious accounting firm’s legal operations in Costa Rica, supported by a team of 20 lawyers. Things were going well for the young Georgetown graduate. “Then Enron happened,” he recalls. In December that year, the US energy company filed for bankruptcy amid mounting allegations of systemic accounting fraud. The US$23 billion meltdown of the former blue-chip company sent shockwaves throughout the business world and resulted in the collapse of Enron’s accounting firm, Arthur Andersen. As the Big Five became the Big Four, KPMG kicked into damage limitation mode, implementing a raft of measures so it would never face the same fate as its rival. These changes altered Castro’s career path for good. “We were under tremendous pressure to implement [compliance] controls,” he says. “It became apparent very quickly that the firm’s lawyers were to become second-class citizens as KPMG focused on its core activities and we decided it was time to leave.”
Taking the plunge
Together with long-term friend and colleague Davíd Gutiérrez, Castro left KPMG with five associates to co-found BLP in 2003. Over the next 10 years, BLP grew from a seven-lawyer shop to one of Costa Rica’s biggest players. From the start, Castro worked hard to distinguish his firm from the competition. To help with the branding, he hired US consultancy Porter Novelli and ultimately settled on Business Law Partners, or BLP for short. The decision not to include his and Gutiérrez’s name on the letterhead was unusual. “BLP is just a set of values that we decided would be central to the way we wanted to do things,” he explains. “We wanted to become lawyers that watch over our clients’ business and who are a key part in making things happen; not the lawyers who say something can’t be done.”
Much of Castro’s formative experience at KPMG was channelled into building the firm. This included the firm’s remuneration scheme. Rather than adopting the eat-what-you-kill compensation model common among Central American firms at the time, BLP opted for the modified lockstep approach. “I think that really created a huge advantage for us,” says Castro.
The advantages BLP gained from the lockstep were twofold. Rather than promoting a structure where lawyers closely guard their clients to ensure a steady stream of income, the model encouraged cross-selling and teamwork. Having gained first-hand experience working within a system that encouraged rainmakers, Castro was convinced that implementing a system that encouraged collegiality would help ensure the firm’s longevity. “One of the most destructive factors…is trying to working alongside someone who’s the smartest guy in the world and knows everything about his area, but is really tough to work with,” he notes, adding that such character traits would not make a good fit with BLP’s working style. “When someone like that comes on board, they usually end up leaving, or getting fired.”
Despite losing some lawyers at the beginning, the model has helped ensure that most of those who joined over the next 10 years stayed for the long term. Castro attributes this to the firm’s emphasis on talent-based promotion. Today, two-thirds of BLP’s partners were promoted and onethird are women (compared with an average of 13% in Costa Rica – one of the lowest rates in Latin America). Moreover, Castro’s long-held belief in the importance of lawyers at all levels of seniority being able to freely discuss their ideas has also contributed to an open culture that encourages members of the firm to recognise authority, but not be afraid to challenge received opinion. “Certainly, there are partners and associates, but in the world of law firms, I think we have a pretty flat structure insofar as a partner isn’t just right because he is a partner and people are recognised by their knowledge and value, not their title,” he says.
Creating an enjoyable and rewarding work environment was another important factor in BLP’s rapid growth. “If you consider how much time you spend in an office, work isn’t just a way to making a living,” says Castro. “But if you provide an atmosphere where you are surrounded by people that you like, where you do very interesting work, where you’re compensated, and where you’re not just providing traditional legal advice, people stay.”
Making pro bono legal services essential for variable compensation is an example of what made
BLP different to some of its competitors and has long been a practice Castro has championed. For BLP’s lawyers to qualify for a bonus, they must provide at least 20 hours of free legal advice per year, as well meeting a range of more conventional criteria. Besides actively encouraging greater participation, the firm also established its own pro bono clearing house, Fundación BLP. Both this commitment and foundation proved to be a hit, with many lawyers exceeding the 20-hour thresholds necessary for variable compensation. “It became something that people liked to do, because it was rewarding for them on a personal level,” notes Castro. “These sorts of things may seem peripheral, but young generations care about them and they are becoming a key element in business.”
Achieving a respectable gender ratio and establishing a strong pro bono offering were not only tools for attracting and retaining Costa Rica’s best talent. These measures also helped win the firm clients. “It used to be that clients selected law firms through relationships and if you were friends with the general counsel, you would have that client forever,” explains Castro, adding that this is no longer the case and firms today are often selected by a new generation of more procurement specialists. “Certainly, there are pressures on costs and service quality, but these intangibles can give you the edge in a highly competitive market,” he affirms.
By 2008, Castro’s efforts had help BLP grow rapidly to become one of the leading firms in the Costa Rican market, but it was yet to extend its reach beyond the country’s borders. This was a problem. Many multinational companies had been grouping Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua into a single commercial bloc for decades, making a multi-jurisdictional presence a must-have for the region’s biggest deals. “There were already plenty of transactions, especially in the banking sector, where the parties involved wanted regional firms to do it,” explains Castro. “But we weren’t even on the radar for these deals, simply because we lacked an office in each jurisdiction.”
That year, the partnership held a series of strategy sessions and explored its options. A merger was considered to be the best option and the firm made several attempts at completing this. However, although BLP’s partners agreed expansion was important, many were concerned that a hasty merger with a foreign firm could damage the firm’s unique culture and reduce the quality of service. “It was about finding the right fit for us, not going in and opening an office because we could,” says Castro. Regionalisation was placed firmly on the backburner.
Over the next six years, BLP consolidated its dominant position in Costa Rica, but made no further moves to expand. In the end, it was the opportunity to add a recognised practitioner to the firm’s ranks that kicked off the regionalisation process once again. In 2014, Ernesto Rizo, a longstanding contact at Managua-based Nuñez Rizo Zambrana Abogados, told BLP’s partners he was ready to leave the firm he helped found. Rizo suggested he join BLP and the firm open a branch in Nicaragua’s capital. “We had been working with Ernesto for about eight or nine years, we knew exactly the way he worked and were sure he shared the same culture as us,” recalls Castro, adding that this shared outlook made it easier for BLP’s partners to give the green light.
Within weeks of Rizo making his proposal, BLP opened its first office outside Costa Rica. News of the development spread quickly across Central America and it was not long before the newly expanded firm was presented with another opportunity that was too good to miss. Two months after opening its doors in Managua, Ricardo Cevallos, a former managing partner at Consortium Legal’s El Salvador branch, gave the firm a call. “Ricardo was our go-to guy in San Salvador during the KPMG years and we did some work with him during the early days of the BLP effort,” says Castro. “We knew his reputation, we knew his capabilities and we very quickly came to an agreement in May 2014 to open an office in the country.”
With boots on the ground in El Salvador and Nicaragua, BLP’s partnership decided to take advantage of the momentum and began actively searching for potential partners in Honduras and Guatemala. In the former, the firm entered talks with several players. But it was newly minted partner Cevallos who provided the contact that would eventually lead to a new office, after reaching out to a group of former Consortium Legal colleagues, who were now working at the Tegucigalpa offices of regional firm Lexincorp. “They were young lawyers that had made their career largely in Consortium and had joined Lexincorp, which was going through a tough time after a series of departures,” recalls Castro. “They were looking for something that was more compatible and long-term.”
Although the Lexincorp partners were eager to get on board, BLP’s partnership proceeded with caution. Several meetings were scheduled in the Honduran capital and San José. Eventually, the board agreed with Cevallos (“They were good friends of Ricardo and he said these guys were the perfect fit,” says Castro), approving the tie-up in June 2015. The merger brought five partners and several associates from Lexincorp. This line-up was further complemented by the arrival of an IP lawyer who left a boutique he established to join the newly minted firm.
The final stop on the BLP regional expansion drive was Guatemala. “We realised Guatemala was a very important market: it’s the largest economy in Central America and a key jurisdiction we were missing,” says Castro. However, opening in one of the region’s most sophisticated legal markets was no easy task. At the time, Guatemala’s legal market was dominated by several local firms, which won the lion’s share of the work on offer. This meant BLP needed to hit the ground running.
In the end, BLP’s office opening in the country was similar to its experiences elsewhere in Central America. Although the firm had entered talks with several local outfits, its future partners, once again, approached them. “This was a group of lawyers at Arenales Skinner-Kleé, who came to us during a time of turmoil at their firm,” says Castro. “I think younger members of the firm were convinced that the structure and culture at BLP represented a better fit.” Approvals for the merger back in San José were soon forthcoming and the tie-up was approved in September last year; completing BLP’s sweep of the region.
BLP opened in all five Central American countries in the space of two years and eight months. Looking back on the process, Castro believes the same factors that made it a success in Costa Rica made it such a desirable partner abroad. “Many of these people were coming from what are perceived to be successful firms and practices, but [the firms] were lacking the intangibles that have become such a key part of our culture,” says Castro. “Being structured as a true firm and not a shared cost centre, or running operations like a company are some of the elements people were missing.”
While BLP’s regional sweep was rapid compared to some players in Central America, such as El Salvador-based Sáenz & Asociados or Nicaragua’s García & Bodán, Castro does not think the process was rushed. “When we started the regional effort, we stayed true to our premise which was finding the right partner,” he says. “In every instance [when we’ve opened abroad], there’s been an immediate recognition of shared values and it’s been very easy to reach an agreement,” he adds.
Nearly a year has passed since BLP’s regional expansion came to an end and Castro is now working on consolidating the firm’s gains. Going forward, he believes the biggest challenge is ensuring the firm uses its newfound regional presence as effectively as possible. His goal is to have lawyers moving seamlessly between offices, ensuring the best attorney is always on the job, giving as an example BLP’s Tegucigalpa office, which has a lot of experience managing renewables projects in Honduras. Castro’s vision is to have a structure in place that would allow those lawyers to quickly join their colleagues in BLP’s other offices in Central America and offer their experience, should they land a major renewables deal.
To further these efforts, the firm’s executive committee, which is composed of Castro, Gutierrez and corporate practitioner Eduardo Calderón, is working with BLP’s various office heads to step up cross-border integration. Several practice areas, such as corporate and M&A, and banking and finance, now have their own regional coordinator. Finally, associate exchange schemes and partner retreats are encouraged by Castro to create a sense of camaraderie. “We did the last partner retreat in Antigua, Guatemala, and the partners there were great hosts,” he says.
In addition, Castro is also overhauling the firm’s corporate governance structure to ensure BLP’s meritocratic culture is maintained and its leadership doesn’t get stale. A consultancy is currently overseeing these efforts. Although a list of recommendations is yet to be published, the final version may include term limits on senior positions, including Castro’s own.
Turning to the firm’s future, Castro believes BLP is entering a new stage in its development “We’re now competing in a class we weren’t competing in before,” he says. “We were just a large Costa Rican firm, now we are clearly part of the regional map.”
In this new battle for regional dominance, Castro believes maintaining and promoting BLP’s culture will continue to give his firm the edge. “If I had to explain our success, I think our people would be number one,” he says. “At the end of the day, we’re a services company and it’s all about attracting talent and creating the right environment so they can provide the best results. We’ve been very successful at doing that.”