A long-awaited U.S. Senate vote on the extension of the rum cover-over is expected sometime next week, according to Congresswoman Donna Christensen’s office.
Monique Clendinen Watson, Christensen’s chief of staff, said Friday the measure, which was approved by the House of Representatives last December, has been folded into the jobs bill awaiting action in the Senate.
The extension is part of the rum cover-over, which last year brought about $80 million to the territory. The federal government charges a tax of $13.50 per proof gallon of rum sold in the United States. Then, for rum produced in the Virgin Islands and Puerto Rico, the bulk of that money is returned to the territory where the rum was produced.
Under the original act, the territories receive $10.50 per proof gallon. Under a bill passed in 1986 at Puerto Rico’s request, the amount was increased to $13.25, but the extension must be reauthorized periodically or it will fall back to the original level.
Passage of the extension has been one of Christensen’s major goals for the current legislative session. She also had hoped that the extension could be made permanent, foregoing the need to periodically work for its renewal. However, Puerto Rico’s campaign to overturn the Virgin Islands deal with spirits giant Diageo has made that unlikely in the near term, Clendinen Watson said.
Puerto Rico has been lobbying Congress to take action that would overturn the deal which saw Diageo begin construction of a state-of-the-art distillery on St. Croix to manufacture its Captain Morgan’s rum brand. That rum had been produced under contract by a Puerto Rican company, but Diageo decided not to renew the deal and instead looked for a new distillery.
After looking at properties in Jamaica, Guatemala and other countries, the company negotiated a deal with the Virgin Islands government to build a distillery in the territory and operate it here for 30 years. A portion of the rum cover-over revenues has been used to support that deal. The V.I. government later made a second, similar arrangement with the multinational company that owns locally produced Cruzan rum.
Puerto Rican interests have claimed the deals constitute an improper use of the revenues and have been campaigning in Congress to prevent the use of cover-over funds for that purpose. A bill introduced by Resident Commissioner Pedro Pierluisi, Puerto Rico’s counterpart to Delegate Christensen, would award the Virgin Island’s share of the cover-over revenue to his territory if the V.I. used more than 10 percent to support the liquor industry.
No hearing has been set for Pierluisi’s measure, HR 2122, which was assigned to the House Ways & Means Committee, and Christensen and Gov. John deJongh Jr. have lobbied committee chair Charles Rangel (D-N.Y.) to keep it bottled up. Meanwhile, Florida Sen. Bill Nelson has suggested legislation to forbid any use of cover-over funds to directly support the industry that creates them. Christensen has pointed out that this would handcuff both the Virgin islands and Puerto Rico in any effort to diversify or build their economies.
According to Clendinen Watson, Christensen has approached Nelson to discuss the issue.
This week Diageo issued a press release fighting back against what it claims are Puerto Rico’s distortions on the issue, and claiming that the rum giant Bacardi is actually behind the campaign. Diageo said Bacardi, which produces its No. 1 selling rum in Puerto Rico, would be the big winner if the Captain Morgan’s deal unraveled.
Further, if Congressional action changed the terms of the deal and caused Diageo to back out of its Virgin Islands plans and produce its rum in another country, Puerto Rico would continue to reap some of the rum revenue from rum produced overseas and sold in the United States.
Bacardi USA has corporate offices in Miami, which is in Sen. Nelson’s state. Further, the National Puerto Rican Coalition has made the deal an issue in the Senate primary now heating up in Florida. Republican candidate and former Miami Mayor Maurice Ferré has supported Puerto Rico’s position and the NPRC put pressure on the other three candidates to follow his lead. The heavily Puerto Rican I-4 corridor is considered swing vote territory, having favored the winning candidate in the last several elections, and the Florida Senate primary is considered a close contest.
At the same time, the National Black Chamber of Commerce this week took the Virgin Islands’ side in the dispute, urging Congress not to interfere in a battle over the deal.
In a Feb. 16 letter sent to Senate Majority Leader Harry Reid (D-Nev.), the Black Chamber — along with the Florida Black Chamber of Commerce — said the partnerships formed between Diageo and the U.S.V.I. would greatly benefit many black residents.
“These agreements with Diageo and Fortune Brands (owner of Cruzan) significantly help the economy of this African-American-majority U.S. territory at a time of great need, while simultaneously keeping these companies on American soil and preserving their jobs and economic impact,” the letter said. It was signed by Harry Alford, president and CEO of the Black Chamber, and Eugene Franklin, president and CEO of the group’s Florida chapter.
