A conversation with Kim Arana about Fennemore’s cross-border agribusiness practice

Kim, please tell us a little bit about yourself and your background.

I was born in Tucson, and we moved around a bit, including to Santa Monica and Denver, but I was raised in Scottsdale.  I went to Arizona State University and majored in Spanish. That’s where I met my husband, Hector, also an attorney at Fennemore. I went to the University of Arizona Law School right after I graduated from ASU. We then moved to Nogales, Arizona, where we are now, and raised five kids in Nogales. One of our children, Daniel Arana, is also a Fennemore director in our Nogales office and also represents agribusiness clients.

How did you get into the agribusiness practice?

Nogales is on the border between Arizona and Mexico and is a major port of entry for produce from Mexico. It was a natural tie living in Nogales to start practicing that area of law. When I was a beginning lawyer in 1982 produce cases were the first cases I worked on.

What are the types of matters that you handle in your agribusiness practice?

Quite a few of our clients are produce growers based in Mexico. To export their produce, rather than using unrelated third parties, they will form companies in the United States so they can ship their produce for distribution and sale from Nogales. We draft their distribution, sales and other contracts and form their companies, structuring the same to avoid adverse tax consequences. We also deal with transfer pricing issues, that is the allocation of profits and losses between countries. We also represent U.S. companies that distribute and buy produce sourced from farms located in various States of the United States and other countries, such as Brazil, Chile, Columbia, Mexico and Peru.  For distributors and buyers, whether they have a foreign affiliated company or not, we deal with their contracts relating to the financing of crops.

Tell us about some of the legal issues that you face with contracts relating to the financing of crops

Our niche area is secured transactions to secure loans provided by distributors or buyers to growers in order to grow crops. We work with U.S. distributors and buyers to obtain a first priority security interest in crops and other collateral.  We also deal with disputes relating to priority of our clients’ security interests as to other secured parties.

We work with attorneys in foreign countries to have our clients take security interests under foreign laws. We review records to identify all secured parties and their collateral. We then attempt to have the prior secured party either terminate its security interest because it is no longer needed or subordinate that security interest. In subordination agreements, the first secured party will agree to subordinate its security interest to the security interest of the later secured party.

What are some of the challenges that you’ve encountered in securing those transactions for your U.S.-based clients?

Some of the challenges involve making sure that the client is secured in both countries.  There’s not one security interest that we can absolutely rely on to be recognized in both the United States and the foreign country. Therefore, we must work in conjunction with foreign attorneys to obtain security interests under foreign laws, besides the security interests we create under U.S. law.

Besides agribusiness Kim, your office in Nogales has other practice areas. Tell us a little bit about your manufacturing twin plant operations practice.

We represent maquiladoras also known as twin plants which are manufacturing or processing operations in Mexico that export goods to the United States or Canada. We deal with business formation, manufacturing or service contracts and various legal issues impacting those maquiladoras operations, sometimes in conjunction with Mexican attorneys.

Tell us a little bit about your practice related to Mexican real estate interests held by a Mexican bank trust.

This work comes through our knowledge of Spanish and being able to deal with Mexican attorneys. Some clients want to buy condominiums or residences in Mexico within the restricted zones, that is 50 km. from the coastal areas. Under Mexican law, American citizens cannot purchase those in fee simple.  Rather, the property must be held in a Mexican bank trust. We help with buying and selling those interests and transferring those interests, for instance upon a divorce or death.  We also counsel our clients as to how to hold and provide for succession of those interests.