PR Tells Obama: Diageo Deal May Trigger World Trade Backlash
President Is Told The Subsidies To Diageo Are Nearly Double The Cost Of Producing The Rum
Scrutiny of the deal with Diageo, LLC, to produce Captain Morgan Rum in the Virgin Islands has gone international, and President Barack Obama has been cautioned that the $2.7 billion subsidy to the rum producer may result in allegations of unfair trade practices from the global community.
And whatever your opinion of the deal, most would agree that the maintenance of the current cover-over structure, from which Diageo will receive its’ $2.7 billion payout, is a critical factor in the financial future of the US Virgin Islands.
The message was delivered to President Obama by Miguel Lausell, Chairman of the National Puerto Rican Coalition. He told the President that the deal with the Virgin Islands, which will return nearly 50% of the cover over revenues generated from the sale of Captain Morgan Rum in the United States to Diageo, could open the country up to accusations of unfair trade practices from the World Trade Organization (WTO) and create an imbalance in the competitive rum market.
Felix Serralles, president of the family owned Peurto Rico based Serralles distillery that has produced Captain Morgan in the past, added that the size of the subsidy seemed out of proportion to good business practice, stating, “The subsidies will be almost twice the price of the production of the rum.”
Proponents of the deal have dismissed Puerto Rico’s objection to the deal as “sour grapes” at the loss of cover over revenue to their economy. Puerto Rican law restricts the use of more than 10% of carry over revenues to any producer. But as pressure mounts and visibility escalates about the deal, more and more voices are entering the discussion.
In Florida, the deal has become a campaign issue for opposing senators vying for the estimated 750,000 votes in the Puerto Rican community resident in the state.
And no matter what your view on the arrangement, the perception on the mainland is that US taxpayer dollars are being paid to enrich and subsidize the profit of a foreign company, British owned Diageo. The subsidy is separate and apart from the $250 million in bonds floated by the VI Government to finance the construction of the distillery and the molasses subsidy that is also part of the deal.
Throw in the political power of the Puerto Rican community residing in the states (2003 figures showed that more Puerto Ricans live now in the US than in Puerto Rico) and the battle may just have begun.
The discussion will continue…
Diageo really got a SWEETHEART deal:
- 100% grant financing for facility building
- 90-100% Corporate income tax reduction
- 100% exemption on property taxes, gross receipt taxes, and excise taxes
- Almost 50% of the Cover Over Revenues goes back to Diageo…. See More
The Virgin Islands will be lucky if we even break even on this deal! Diageo is going to create 40-70 jobs…..and that’s if they hire “real” local people.
The govt really have to be IDIOTS or CROOKS in order to have broker an inept deal like this.
Thank God the deal is going to last at least 30 years!If the people get stupid and elect a clown in the future, we can be assured that no governor will get a chance to disrupt the plan to receive rum rebates by the production of rum. The Governor’s legacy will live long after he is called home by the Lord.
Sorry Hooray, there’s no need to assume that we might elect a clown in the future when we have a clown right there in Government House as we speak. We’re good for it.
The Gov’s legacy will be defined by how many Federal indictments he has to defend in court.