PRIDCO Provides Congress with Breakdown of FY 2006-FY 2010 Rums of Puerto Rico Budget Allocation

SAN JUAN, Puerto Rico, April 14 /PRNewswire-USNewswire/ -- Following a letter sent to a key congressional committee, Puerto Rico Industrial Development Company (PRIDCO) Executive Director Javier Vazquez today provided detailed information regarding the funds invested over the past five years in Puerto Rico's rum industry by the territory's Rums of Puerto Rico (ROPR) program, a division of PRIDCO.

Vazquez confirmed that consistent with local law and true to the original intent of the federal rum tax program, the Government of Puerto Rico allocates almost all of the rum tax grant funds it receives -- approximately 94 percent -- directly to government services that benefit the islands' residents.  Approximately 66 percent of the funding goes into the Puerto Rico government's General Fund for education and health care costs, 23 percent is used for public infrastructure, 4 percent goes to the Puerto Rico Land Conservation Trust to conserve land for environmental purposes, and 1 percent goes to the Puerto Rican Science and Technology Trust to promote research and innovation.  The remaining 6 percent is used to develop and promote Puerto Rico's rum industry.  

"The U.S. Virgin Islands plans to give the world's largest liquor company an estimated $2.6 billion in federal rum tax grants over 30 years to locate the company's rum production in that territory. The USVI also wants to provide another multibillion dollar conglomerate a similar subsidy to expand its rum production in the islands," Vazquez wrote to Senate Finance Committee members.  

"By contrast, Puerto Rico only uses 6 percent of the rum tax grants it receives to assist its centuries-old rum industry and related jobs.  Allegations that Puerto Rico supports the industry to a greater degree are blatantly false," he wrote.

Vazquez pointed to FY 2006-2010 data that substantiates what Puerto Rican officials have said: assistance to the industry averages only 6.1 percent of federal rum tax grants each year (ranging from 5.5 percent to 6.6 percent).  "This is a significant difference from subsidy of more than 50 percent of the federal tax grants that the Virgin Islands has promised the company that would move from Puerto Rico," Vazquez wrote.

"If Congress does not take action, Puerto Rico may be forced to take action and consider all options available to level the playing field to ultimately save its rum industry," Vazquez wrote. "Puerto Rico respectfully requests legislation, like H.R. 2122, that would provide a cap on the amount that companies can be given equal to but no greater than 10 percent of federal rum tax grants."

From FY 2006 to FY 2010, the Government of Puerto Rico has allocated $25 million a year in the ROPR program, totals that were set by the Puerto Rico Office of Budget and Management and approved by the Puerto Rico Legislative Assembly.(1)  The expenditures are broken into three categories:

• Administration and marketing for PRIDCO's ROPR program – The ROPR program develops, creates and places advertising that highlights rums produced in Puerto Rico, in the context of promoting the island's entire rum industry.  
• Marketing incentives – The ROPR program grants marketing incentives which are used by the brands to advertise and promote events as part of co-branding campaigns with ROPR.  In order to participate in the program, each brand must submit a marketing plan that must be approved by the ROPR Program Director and its Board of Directors. All ads produced in this category contain the branding of both the individual rum and the Rums of Puerto Rico.  Most of the marketing support provided to the rum industry is channeled through the ROPR program and its advertising agency.
• Production incentives – Because Puerto Rico lacks some raw materials used in the production of rum, the ROPR program provides some incentives to help reduce the cost of imported ingredients.

Over the past five years, the marketing and/or production incentives, based on an average 6 percent of the total cover-over funds, were provided to six companies: Bacardi (Bacardi and Ron Castillo), Diageo (Captain Morgan), Destileria Serralles (Don Q), Trigo Corporation (Reserva Aneja), Heaven Hill (Ron Llave) and Edmundo B. Fernandez (Ron del Barrilito).  The totals are determined by a formula based on the volume of rum each company produces in Puerto Rico.  A full break down of the investments during this period is included below, and is also available at http://www.pridco.com/rums.  

The rum tax grants program dates back to 1917, when the federal government enacted a law that granted the federal taxes collected on Puerto Rican products to the Government of Puerto Rico to help pay for government services in the U.S. territory.  Current law grants the territory most of the tax on rum produced in the islands and in foreign countries. In 1969, the Government of Puerto Rico enacted a law capping the amount of federal rum tax grants to support and market rum production at 10 percent.  

"For more than 60 years, the Rums of Puerto Rico program has effectively developed and promoted this important industry for the economy of Puerto Rico," Vazquez said.   "We work closely with our local producers to support the Puerto Rican rum industry, and help improve the lives of the citizens on the island."

The budget of the Rums of Puerto Rico program is approved by the Office of Budget and Management and the Legislative Assembly of Puerto Rico, and is publicly available.  

About PRIDCO

The Puerto Rico Industrial Development Company (PRIDCO: www.pridco.com) is a public corporation dedicated to promoting Puerto Rico as an investment destination for companies and industries worldwide. Since its establishment in the 1950s, PRIDCO has led the efforts in the industrialization of the island. PRIDCO continues to be a catalyst for Puerto Rico's economic development, leading the transformation from a traditional industrial economy to an economy based on knowledge. PRIDCO emphasizes on promoting high technology industries among sectors such as the life sciences, technology, computing and services that leverage on Puerto Rico's unique combination of tax incentives, skilled workforce, strong infrastructure and excellent business climate.

About the Rums of Puerto Rico Program (ROPR)

Rums of Puerto Rico (rumcapital.com), a division of the Puerto Rico Industrial Development Company (PRIDCO), was created in 1948 to administrate the advertising and promotional programs that encourage the consumption of Puerto Rican rum and uphold its leadership in the United States market. The quality brands produced in Puerto Rico are aged at least one year by law. This sets the standard of excellence that includes only the finest rums and offers an extensive choice in the rum category including Bacardi, Don Q, Ron Llave, Ron del Barrilito and Palo Viejo, among others.

Rums of Puerto Rico

Marketing and Production Incentive Summary by Brands

Marketing incentives – The ROPR program grants marketing incentives which are used by the brands to advertise and promote events as part of co-branding campaigns with ROPR. In order to participate in the program, each brand must submit a marketing plan that must be approved by the ROPR Program Director and its Board of Directors. All ads produced in this category contain the branding of both the individual rum and the Rums of Puerto Rico.

Production incentives – Because Puerto Rico lacks some raw materials used in the production of rum, the ROPR program provides some incentives to help reduce the cost of imported ingredients.

Rums of Puerto Rico

ROPR Allocation of Total Rum Tax Grants

**The Rums of Puerto Rico program rolled over $4 million in unused funds from FY 2009 to FY 2010.

(1) In FY 2010, the Rums of Puerto Rico program rolled over $4 million in unspent funds from FY 2009.  As a result, the FY 2010 budget totals $29 million.

SOURCE Puerto Rico Industrial Development Company