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HomeNewsArchivesDeJongh: U.S. Senator’s Rum Amendment Would "Destroy" V.I. Economy

DeJongh: U.S. Senator’s Rum Amendment Would "Destroy" V.I. Economy

A proposed amendment recently offered by a Florida senator to change the way rum cover-over funds are allocated to the territories would “destroy the economy of the Virgin Islands,” according to Gov. John deJongh Jr. in a press release issued Thursday.

Last week Florida Sen. George LeMieux (R), offered an amendment to a Senate jobs bill that would completely remake the way the cover-over funds are allocated, giving the vast majority of them to Puerto Rico.

The rum cover-over is currently based on the production of rum in the territories. According to a report in the Miami Herald, Lemieux’s proposal would instead base the allocation on population. The population of Puerto Rico is 3.9 million, according to data from the World Bank, compared to almost 110,000 for the territory.

"We need a better methodology for distributing assistance," LeMieux spokesman Ken Lundberg said. "Right now, the formula doesn’t make sense. Providing assistance based on population instead of the amount of rum produced is a better course."

In a statement issued Thursday night by Government House, Gov. deJongh said the proposal ignores almost 100 years of federal precedent and clear Congressional intent, would severely harm the V.I. economy and overtly favors Puerto Rico.

“The proposed amendment takes excise tax revenue paid by Virgin Islands rum makers on rum produced in the Virgin Islands and directly transfers it to Puerto Rico’s government coffers,” deJongh’s statement said. “Puerto Rico would end up with billions of dollars generated by rum production in the Virgin Islands. … Sen. LeMieux is directly attacking his fellow Americans in the Virgin Islands by doing Puerto Rico’s bidding.”

LeMieux’s amendment is the latest salvo in the increasingly vituperative feud between the two territories. Puerto Rico is angered that liquor giant Diageo is not renewing an agreement with a distillery in that territory to produce rum for the company’s Captain Morgan’s label. Diageo later began constructing its own distillery on St. Croix under an agreement with the V.I. government that provides benefits to the company from the cover-over funds.
Puerto Rico claims it is an inappropriate use of the cover-over money and excessively awards a foreign company. The V.I. government counters that the next benefit will far outweigh the costs and ensure that the territory’s rum industry will remain strong for 30 years.

DeJongh later made a similar arrangement with Famous Brands, the company that owns Cruzan Rum, to make sure that company remains and continues to grow on the island.

“Sen. LeMieux’s plan could cause us to default on hundreds of millions of dollars in bonds, which would stop progress on infrastructure projects and environmental improvements, and would force the government of the Virgin Islands to the brink of receivership,” the governor said.

DeJongh said Puerto Rico no longer is even pretending to want to work out the difficulties with its Caribbean neighbor.

“By promoting this amendment, Puerto Rico has not only given up any pretense of negotiating their concerns with the Virgin Islands as we have been asked to do by Congressional leaders,” he said. “But Puerto Rico now also seems willing to walk away from the long history of friendship and collaboration, which has linked America’s two Caribbean possessions."

LeMieux was appointed senator to fill the vacant seat of Mel Martinez in September 2009. The seat is up for re-election this year, and LeMieux is not seeking his own term. Instead he is supporting Gov. Charlie Crist, who appointed him. Puerto Ricans, though a minority in Florida, make up an important swing block of votes.

In response to the latest proposal, the National Black Chamber of Commerce (NBCC) and the Florida Black Chamber of Commerce sent stern letters both to LeMieux and Florida’s Democratic Sen. Bill Nelson asking both to stay out of the dispute between the territories.

Harry Alford, president and CEO of the NBCC, said, ”Puerto Rico’s legislation is about retaliation … It would push Diageo to leave America and take jobs and economic impact with it. But why would anyone in Washington want to overturn deals that keeps a company in the United States?”

”We don’t understand why Sen. Nelson and Sen. LeMieux would target the Virgin Islands when they’ve played by the rules that Congress itself established,” said Eugene Franklin, president of the Florida Black Chamber of Commerce. ”Our senators need to focus on the challenges facing Florida, not jump into a local issue between two territories.”

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