Risks and Opportunities in Cross-Border Trust Structures in Emerging Markets: Assessing Governance and Legal Enforceability in Latin American Private Equity Vehicles

The allure of Latin America’s private equity markets—driven by demographic shifts, digital transformation, and untapped infrastructure—has long captivated global investors. Yet, the region’s legal and governance complexities remain a double-edged sword. Cross-border trust structures, often deployed to manage wealth distribution and asset protection, face unique challenges in jurisdictions where civil law traditions clash with common law norms, and where data protection regimes are still evolving. For investors, the interplay between enforceability, regulatory uncertainty, and geopolitical dynamics demands a nuanced approach.

Legal Frameworks: A Clash of Systems

Latin America’s civil law jurisdictions, such as Brazil, Argentina, and Mexico, prioritize succession laws and forced heirship rules, which can limit the flexibility of trusts designed to defer or avoid estate taxation [2]. In contrast, common law systems like the U.S. offer greater discretion in structuring wealth management vehicles. This divergence creates friction in cross-border transactions. For example, a U.S. investor seeking to establish a trust to hold assets in Brazil must navigate Brazil’s General Data Protection Law (LGPD), which restricts cross-border data transfers unless explicit consent is obtained and adequate protections are in place [1]. Such legal asymmetries force investors to rely on offshore entities or holding companies to mitigate risks [3].

The Trump administration’s mass deportation plans have further complicated this landscape. Latin American governments now grapple with repatriating migrants who may lack the economic infrastructure to reintegrate, while domestic trust in institutions remains low—only 36.3% of the population in the region trusted their governments as of 2022 [3]. These governance challenges underscore the fragility of policy implementation, particularly in contexts where legal frameworks are inconsistently enforced.

Data Protection: A New Layer of Complexity

The rise of data privacy laws in Latin America adds another dimension to cross-border trust enforceability. Argentina’s Personal Data Protection Act (PDPA) and Brazil’s LGPD mandate strict compliance for cross-border data transfers, requiring data protection officers (DPOs) and breach notifications [1]. For private equity vehicles, this means trusts holding sensitive personal data must align with jurisdiction-specific requirements, often necessitating costly compliance measures.

A 2025 systematic review of international compliance standards highlights the fragmentation of data governance, noting that Latin American laws often lack express provisions for privacy-enhancing technologies (PETs) [4]. This gap forces investors to rely on contractual safeguards, such as model clauses under the LGPD, to ensure enforceability. However, the absence of harmonized enforcement mechanisms leaves room for ambiguity, particularly in cases involving multiple jurisdictions.

Case Studies: Navigating the Minefield

Recent legal precedents illustrate both the risks and opportunities in this space. In LARAH v. Uruguay, a private equity firm successfully arbitrated a dispute under the Panama-Uruguay Bilateral Investment Treaty (BIT) after the Uruguayan government allegedly interfered with its portfolio company’s operations [1]. The case underscores the value of BITs in jurisdictions where domestic courts lack independence. Similarly, Mason Capital’s $43 million award under the U.S.-Korea Free Trade Agreement (KORUS FTA) demonstrates how international treaties can shield investors from state overreach [1].

On the flip side, a 2025 case involving a U.S. Fortune 500 firm’s $1.2 billion acquisition of a Latin American cloud solutions company highlights the operational hurdles of cross-border data compliance. Holland & Knight’s involvement in the deal required navigating anti-trust and data privacy issues across three jurisdictions, emphasizing the need for early-stage due diligence [4].

Strategic Implications for Investors

For private equity firms, the key lies in structuring investments with layered protections. This includes:
1. Leveraging International Treaties: BITs and investment agreements provide enforceable rights and access to neutral arbitration, as seen in the LARAH and Mason cases [1].
2. Data-First Compliance: Proactive alignment with LGPD, PDPA, and other regional laws is critical. This may involve appointing DPOs, implementing PETs, and negotiating model contractual clauses [1].
3. Governance Resilience: Given Latin America’s political volatility, investors must incorporate exit clauses, currency hedging, and dispute resolution mechanisms into their structures [4].

Conclusion

Latin America’s private equity markets remain a high-stakes arena where legal and governance risks are as significant as the potential rewards. Cross-border trust structures, while powerful tools for wealth management, require meticulous navigation of divergent legal systems, data protection regimes, and geopolitical currents. For investors willing to invest in robust legal frameworks and adaptive strategies, the region offers a unique blend of opportunity and challenge—a testament to the enduring complexity of global capital flows.

Source:
[1] Protecting Cross-Border Private Equity Investments,
https://www.quinnemanuel.com/the-firm/publications/protecting-cross-border-private-equity-investments-a-practical-guide-to-international-investment-treaties/
[2] Guide to International Estate Planning for Cross Border Families,
https://creativeplanning.com/international/insights/estate-planning/guide-to-international-estate-planning-for-cross-border-families/
[3] Government at a Glance: Latin America and the Caribbean 2024,
https://www.oecd.org/en/publications/government-at-a-glance-latin-america-and-the-caribbean-2024_4abdba16-en.html
[4] CROSS-BORDER DATA PRIVACY AND LEGAL SUPPORT: A SYSTEMATIC REVIEW OF INTERNATIONAL COMPLIANCE STANDARDS AND CYBER LAW PRACTICES,
https://www.researchgate.net/publication/391051129_CROSS-BORDER_DATA_PRIVACY_AND_LEGAL_SUPPORT_A_SYSTEMATIC_REVIEW_OF_INTERNATIONAL_COMPLIANCE_STANDARDS_AND_CYBER_LAW_PRACTICES