Puerto Rico Daily Sun

by Michelle Kantrow Vázquez

The Private Sector Coalition on Wednesday threw its support behind the island’s rum industry and asked authorities to take the necessary steps to prevent “excessive and unfair competition” if the Captain Morgan operations are transferred to the U.S. Virgin Islands, which they said will have a devastating effect on the economy.

Coalition Spokesman Francisco Rodríguez Castro said Puerto Rico relies heavily on the profits from the  taxes paid by the Puerto Rico’s rum manufacturers. The USVI’s rum industry is  “incipient and can afford to provide subsidies of up to 50 percent of the profits to attract investment.”

“But this is not possible in the case of Puerto Rico, whose coffers depend on these revenues and can only provide a 10 percent subsidy,” said Rodríguez Castro.

It is the belief of the Coalition that the negotiation between British conglomerate Diageo, which makes Captain Morgan on the island, with the USVI government is based on an incentive “never seen before and totally unreasonable.”

The USVI, the group said, is offering the company federal tax incentives that are “disproportionate” to the earnings that it will receive, and which will represents a savings for Diageo of $2.4 billion during the next 30 years.

The Coalition issued a resolution that explains that transferring the Captain Morgan production operation from Ponce to the USVI will represent the loss of 380 direct jobs. The multiplier effect of that move, the group said, will mean the loss of 2,832 direct, indirect and induced jobs.

“This incentive represents an unfair competitive advantage over other rum distilleries in Puerto Rico and other jurisdictions,” Rodríguez Castro said. “As a result the local distilleries will be crippled.”

Puerto Rico boasts several rum producers, including Bacardí Corp. and Destilerías Serrallés. The first employs 250 people and has annual sales of $20 million that in turn  generate nearly $265 million in excise taxes for the government.

If it had to offer an incentive similar to the USVI, the local industry could not compete and would eventually be forced to close operations. The impact of a closure of local rum industry companies would result in more than 10,258 layoffs.

“Puerto Rico relies heavily on the profits that are produced by the excise paid by consumers outside of Puerto Rico to buy local rums,” Rodríguez Castro said of the amount that reaches about $434 million a year.

The USVI’s offer, he said, “is a bad precedent that Puerto Rico can not allow to happen.”

Rodríguez Castro said federal authorities should establish that U.S. jurisdictions be allowed to offer a maximum 10 percent incentive to attract manufacturing operations.

The Private Sector Coalition is a local organization representing 23 trade groups   that generate thousands of jobs on the island.

This entry was posted on Thursday, February 11, 2010 at 11:25 am and is filed under In the News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.