PUERTO RICO Law and Practice Contributed by: Dianette Rivera-Melendez, Oreste Ramos, Maria Trelles-Hernandez and Rosangela Sanfilippo, Pietrantoni Mendez & Alvarez LLC
2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Historically, the Puerto Rican government has promot - ed investment in Puerto Rico through a mix of financial and tax incentives, aimed at promoting the establish - ment of new businesses and promoting job creation. However, fiscal and economic challenges arising from the prolonged recession from 2007 to 2017, as well as fragile infrastructure and unstable public utilities, have created a complex economic landscape in recent years for investments in Puerto Rico. The island has faced challenges such as natural dis - asters, a significant public debt burden and the ongo - ing recovery from the aftermath of Hurricane Maria in 2017. However, significant developments and emerg - ing trends are shedding light on the current state of Puerto Rico’s economy, which finally appears to be turning a corner after almost two decades of contrac - tion, challenges and setbacks. One trend worth noting is the continued effort to diver - sify Puerto Rico’s economy. Traditionally dependent on sectors like manufacturing and pharmaceuticals, there has been a push to attract investment in emerg - ing industries. Efforts to position Puerto Rico as a hub for technology, renewable energy and tourism have gained momentum, and investors and businesses are now exploring opportunities in these sectors, drawn by tax incentives and the potential for growth. In the aftermath of Hurricane Maria, both the public and private sectors have focused on rebuilding and fortify - ing the island’s infrastructure, particularly its electric power system. Investments in resilient infrastructure, including energy, transportation and telecommunica - tions, have become key components of Puerto Rico’s economic development strategy. These initiatives aim to enhance the island’s ability to withstand future nat - ural disasters while fostering economic growth. Puerto Rico’s economy has gradually been recovering since 2018, aided in part by the large amount of federal disaster relief and recovery assistance funds injected into the Puerto Rican economy following Hurricane María and other recent natural disasters.
The tourism sector is a vital component of Puerto Rico’s economy, and recent trends suggest a renewed focus on expanding and enhancing this industry. Efforts to promote the island as a premier tourist destination, coupled with investments in hospitality infrastructure, aim to boost visitor numbers and drive economic activity. Although the Puerto Rican economy is still subject to external shocks, and US federal fiscal policy contin - ues to have a material impact on Puerto Rico’s eco - nomic outlook, Puerto Rico continues to show signs of a decoupling from the US mainland. While chal - lenges persist, there are encouraging signs of eco - nomic diversification, infrastructure development and strategic initiatives to attract investment. The path for - ward involves a delicate balance of addressing fiscal challenges, leveraging economic incentives and fos - tering industries with growth potential. As Puerto Rico navigates this economic trajectory, continuous moni - toring of these trends will be crucial for policymakers, investors and businesses seeking to participate in and contribute to Puerto Rico’s economic resurgence. Most Puerto Rican companies are privately held enti - ties, with only a handful of local companies having shares listed on a national stock exchange, primarily consisting of bank holding companies. The structures for transactions in Puerto Rico can vary depending on the nature of the transaction, the parties involved, and the legal and regulatory requirements, as follows. • Asset purchase agreement: in an asset purchase transaction, the buyer acquires specific assets of a business rather than the entire business itself. This can include tangible assets such as inventory and equipment, as well as intangible assets like intellectual property. Asset purchase agreements outline the terms and conditions of the transaction. • Stock purchase agreement: in a stock purchase transaction, the buyer acquires the ownership interest (stock) of a company. This means the 3. Mergers and Acquisitions 3.1 Transaction Structures
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