An updated list provided by the Puerto Rico Department of State revealed that from late Sept. of 2017 until Aug. 2019, the number of foreign companies that received the local government’s approval to establish businesses on the island was 1,777.
Per THE WEEKLY JOURNAL’s request, the deputy secretary of Services and Government of the Department of State, Samuel Wiscovitch Coralí, provided a list of all the companies registered between Sept. 22, 2017—in the immediate aftermath of Hurricane Maria—and Aug. 29, 2019.
Of these, 945 were limited liability companies (LLCs), 800 were corporations and 32 were limited liability partnerships (LLPs). 36 of the LLCs were withdrawn, four had their registration expire, three were cancelled, and two were merged. Excluding merges, 43 of these listed companies are inactive, which means that roughly 95 percent still have an active role on the island.
On the other hand, 32 corporations were withdrawn, two had their registrations expire and one project was cancelled. This encompasses around 4.8 percent of all corporations, so an estimated 95 percent of established corporations are also active.
Meanwhile, LLPs grew inactive at a larger scale than LLCs and corporations—with one withdrawn partnership and 10 expired registrations. That is, 34 percent of all LLPs registered within that timeframe are now inactive and roughly 66 percent of them are active.
In total, 1,686 of foreign companies are listed as active and 95 as inactive under the indicators of withdrawals, cancellations, expirations or merges. All in all, almost 95 percent of these entities are still operational in Puerto Rico.
The most prosperous time in terms of how many foreign companies were registered was between Oct. 2017 and Aug. 2018. On a monthly basis, the slowest was July 2018, with 75 registered entities, whereas Oct. 2017 peaked with 107 foreign companies. The number of companies registered averaged at almost 94 monthly.
After that period, the numbers gradually decreased. With the exception of March 2019—which saw the registration of 86 foreign companies—the monthly figure between Sept. 2018 until Aug. 29 oscillated between 45 and 72, though the average was roughly 60 companies per month.
Due to Hurricane Maria’s devastating impact on Puerto Rico’s telecommunications system, infrastructure, health services and other key areas, most companies that were registered throughout the fourth trimester of 2017 were geared toward providing those services, particularly in construction, communications, logistics, first aid, disaster management, renewable energy and electric utility services.
This trend continued well into the first trimester of 2018, as well as a noticeable growth from companies specialized in financial services, consulting, health services and information technology.
Meanwhile, the foreign companies that registered throughout both the second and last trimesters of 2018 were predominantly invested in engineering, financial services, management, pharmaceuticals, infrastructure, consulting and disaster relief.
Incentives for Foreign Companies
In 2019, there has been more interest in the sectors of culture, entertainment, creative industries, tourism and innovation compared to 2017 and 2018.
These areas are projected to grow in upcoming months due to local government incentives aimed at boosting their development, such as Acts 20 and 22, under which grantees can receive hefty tax exemptions; and the Executive Order 2019-028 to create the Advisory Council on Video Games, Electronic Game Leagues and Sports Betting, signed by then-Governor Ricardo Rosselló, among other measures.
Meanwhile, Puerto Rico also benefits from the Opportunity Zones (O-Zones) incentive included in the U.S. Tax Cuts and Jobs Act of 2017, which essentially encourages long-term investments in low-income communities by allowing investors to defer or even avoid capital gain taxes on asset sales.
The P.R. Opportunity Zones Priority Projects Committee recently unveiled its list of qualified commercial activities by geographical area and it is expected to release a more thorough list of eligible businesses within the next month or so.
Editor's note: This story was published on the September 4 print edition of The Weekly Journal.