Your humble correspondent has just returned from the Caribbean paradise of Culebra. Politics were far from my mind as I snorkled the Culebran reefs. However, on my way home, I picked up a copy of the Puerto Rico Daily Sun in the western outskirts of San Juan and a certain story by Robert Friedman of their Washington, D.C. bureau caught my eye because it had the word "rum" in the title: "Debate heats up in D.C. over rum rebate." As a lover of that delightful beverage, I naturally scanned the story which, much to my amusement, illustrated the state of Washington politics without exactly spelling out what the problem is.
So let us now join Robert Friedman as he lays out the situation in which Captain Morgan rum (one of my favorites) is planning to move its production from Puerto Rico to the U.S. Virgin Islands:
The three stateside Puerto Rican House members have escalated the billion-dollars battle over rum rebates with a letter to Speaker Nancy Pelosi, D-Calif., indicating that the recent deal to move the production of Captain Morgan rum from Puerto Rico to the U.S. Virgin Islands could set the stage for corporate ripoffs of taxpayers.
Oh yes! Nancy Pelosi. She who loved to sing the dulcit tunes about the "culture of corruption," meaning Republicans of course. But let us continue as Friedman begins to point out certain disturbing facts in this rum deal:
The deal could also damage Puerto Rico’s rum producing industry with unfair competition from the USVI, the lawmakers told the House leader.The Captain Morgan deal could set the stage for “providing corporate largesse at the expense of the taxpayer,” wrote fellow Democratic Reps. Nydia Velázquez and José Serrano of New York and Luis Gutiérrez of Illinois.The three lawmakers asked for a meeting with Pelosi to discuss the issue, which earlier had been in the hands of House Ways and Means Chairman Charles Rangel, D-N.Y., who so far has not acceded to requests to have his committee hold a hearing on the matter.Velázquez, Serrano and Gutiérrez had also joined Resident Commissioner Pedro Pierluisi is sending a letter this week to Rangel, urging him to call the hearing on a bill by Pierluisi addressing the issue. The measure is meant to both nix the move of Captain Morgan from Ponce to St. Croix and to set a limit on how much of the tax rebate that goes to the islands for rum sold in the states could be returned as an “incentive”to the rum producer.
While Puerto Rico uses about 6 percent of its annual rum rebate — which most recently totaled $370 million — to promote island-produced rum, the British-owned Diageo that produces Captain Morgan will get subsidies up to 50 percent in U.S. tax dollars from the USVI. Pierluisi’s bill would cap the amount of the money that could go to the private liquor interests at 10 percent. The rum-tax rebate is supposed to be used to support the budget of the territories.
“The end result of this massive subsidy,” which supposedly will amount to $2.7 billion to Diageo over 30 years, “is an uneven playing field for rum producers elsewhere, including in Puerto Rico, who will have trouble remaining competitive with Diageo unless they also receive significant subsidies.” they wrote.
After the bill was filed, Rangel had said he would not interfere in what he said was a fight between “friends.” But on Friday, Pierluisi said that the matter “goes beyond a feud between two territories. This is a federal program that, in my view, is being abused,” said the resident commissioner, who said he has informed all the Democrats on Ways and Means about his request to Rangel.Rangel has been close to both Puerto Rico and the USVI for many years in supporting their funding needs. He has also counted on the two territories to contribute generously to his campaign coffers.
The Hill reported on Thursday that contributions to Rangel from the Virgin Islands totaled more than $167,000 between 1999 and 2008, and more than half of that — $84,800 — was given during the 2007-08 election cycle, just as the islands were finalizing the deal to relocate Diageo’s rum operations.
The newspaper, which circulates in Congress, noted: “Since Puerto Ricans found out about the deal, their giving to Rangel also has shot up. Puerto Rico now ranks second only to New York this cycle in places from which Rangel has collected contributions … Donors in Puerto Rico have written $36,600 in checks to Rangel this cycle.
Sheiner said the donations do not play a part in the congressman’s decisions in matters involving the two territories.