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Charlotte Amalie
Monday, January 30, 2023
HomeNewsArchivesV.I. Economic Development and Puerto Rico's Cash Grab

V.I. Economic Development and Puerto Rico's Cash Grab

Getting America’s economy back on track is Washington’s top priority. Democrats and Republicans are looking to keep companies in America, create jobs and stabilize local economies – particularly in economically fragile places. The U.S. Virgin Islands is one of those fragile locations, fighting through the recession with long-term agreements that prevent outsourcing to foreign countries and strengthen our economy.

Right now, a manipulative Puerto Rican attack campaign is working to discredit these agreements, our government and the companies that agreed to partner with the Virgin Islands. If Puerto Rican leaders and their hired guns can overturn our public-private partnerships and destroy our rum industry, Puerto Rico will steal hundreds of millions of dollars each year from the Virgin Islands.

In the past two years, the Virgin Islands signed economic development partnerships with rum makers Fortune Brands (based in Illinois) and Diageo (U.S. headquarters in Connecticut). These companies, which employ thousands of Americans nationwide, have committed to producing Cruzan Rum and Captain Morgan, respectively, in the territory for the next 30 years. The result is a major new revenue stream for the Virgin Islands government that can be used to construct schools and roads, fix the underfunded pension system and prevent thousands of government layoffs. These results clearly are good for Virgin Islanders and America.

Congress told the Virgin Islands government to use the rum excise tax cover-over program to strengthen our economy. Rum producers pay excise taxes when they import rum from the territories to the mainland United States. A majority of that money is rebated, or “covered-over,” to the territories’ governments. The Virgin Islands’ agreements invest cover-over revenue, which the Congressional Research Service declared as under full local control and not considered federal tax dollars, to grow rum production and generate even higher levels of new cover-over revenue.


These agreements are smart and are already reshaping the Virgin Islands’ future. After years of depending on federal handouts and suffering from budget deficits, the Virgin Islands is on the path to fiscal health.

The Congressional Research Service exposed the real motives of Puerto Rico’s “pirates of the Caribbean.” Under a provision in the cover-over law, Puerto Rico receives nearly all excise tax revenue on rum imported from countries in the Caribbean Basin Initiative, a 1983 trade agreement. Puerto Rican leaders now want to restrict the Virgin Islands’ economic development efforts, in the form of a hard cap on our investments, to retroactively undo legitimate business agreements and force Diageo and Fortune Brands to leave the United States for a CBI country. That would divert nearly all cover-over revenue generated by Diageo and Fortune Brands’ rum production into Puerto Rico’s coffers.

It is important to understand what this means. The United States is facing job losses in domestic industries, outsourcing to foreign countries with minimal labor, environmental and product safety regulations, and a recession that has left far too many Americans hurting. Yet Puerto Rico wants to force companies to leave America. This is cynical, self-interested politics at its worst.

Puerto Rico depicts everyone as the “bad guy.” Their lobbyists lie to Congress about the Virgin Islands’ government’s efforts to stabilize our economy. Their public relations attack dogs lie about our partner companies, who are creating jobs and have made unprecedented 30-year pledges to stay in the territory. And their front groups lie about the history, intentions and local control of cover-over revenue to distort the Virgin Islands’ right to invest in its own economy.

A few years ago, our governor looked at the Virgin Islands’ economic landscape and realized we needed to act. Governor deJongh negotiated hard – using his background in business and economic development – to secure a generation’s worth of benefits for our territory. An independent review by Global Insight, the economic consulting firm, declared our investments to be highly effective compared to many other states’ economic development programs. Together, the government, Diageo and Fortune Brands will clean up our environment, modernize our rum industry and grow our local government’s share of cover-over revenue from $90 million to $240 million. Falsely claiming our government was manipulated, unable to represent the best interests of its citizens or a hapless victim is insulting to all Virgin Islanders.

Puerto Rico needs to look in the mirror, rather than blame others for its troubles.

Puerto Rico refused to negotiate fairly with Diageo, when that company planned to renew its existing supply agreement with a Puerto Rican rum company. Puerto Rico habitually ignored a string of environmental problems that forced the EPA to levy hundreds of thousands of dollars in fines. And Puerto Rico has waged a smear campaign that has made much of Washington blush. No wonder their credibility problem has left them making desperate and misleading arguments.

Puerto Rico’s efforts underscore their historical attitude toward the Virgin Islands. They have long treated us as inferior, using their size, wealth and political clout to limit our economic opportunities. Now that the Virgin Islands is stronger and smarter, Puerto Rico will stop at nothing to protect the power structure between America’s two Caribbean territories.

Officials in Washington have chosen to stay on the sidelines for the right reasons. The Virgin Islands has full local control of cover-over revenue to grow our economy, as stated by the Congressional Research Service. The cover-over program primarily was intended to promote business growth and economic activity, according to the Congressional Research Service, not fund humanitarian purposes, as Puerto Rico claims.

Puerto Rico’s attempt to pass legislation that would retroactively overturn these public-private partnerships years after the fact would establish a dangerous precedent for state and territory governments and all businesses. And most important, perpetuating Puerto Rico’s near-monopoly in rum production by killing the Virgin Islands rum industry is bad for all involved. There simply is no reason for intervention – legally, philosophically, or economically.

The Virgin Islands’ agreements are fully transparent and are already producing results. Bonds have been issued, new employees have been hired, construction is nearly complete on new facilities, and Diageo will start making rum at the start of 2011. In the face of poverty, local infrastructure needs and the threat of government layoffs, the Virgin Islands has solutions. While staring down the same challenges, Puerto Rico has nasty rhetoric supporting a cash grab. Virgin Islanders are excited by the benefits that our partnerships are already bringing. And the more that leaders in Washington – on both sides of the aisle, representing all regions and backgrounds – understand these partnerships, the more they agree we are doing good for the Virgin Islands and United States.

Keith O’Neale is the Secretary and Treasurer of the Virgin Islands Economic Leadership Council.

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