U.S. Virgin Islands Gov. deJongh Asks Sen. Menendez to Reconsider Legislation Harming Territory's Economic Future

Proposal Could Retroactively Undo USVI Economic Development Deals at Behest of Puerto Rican Leaders

Puerto Rico Discloses Its Secret Rum Company Subsidies

WASHINGTON, April 12 /PRNewswire-USNewswire/ -- U.S. Virgin Islands (USVI) Governor John J. deJongh, Jr., has written to Senator Robert Menendez (D-NJ) regarding Sen. Menendez's criticism of two beneficial, long-term economic development agreements secured by the USVI government. The USVI's partnerships will keep a global company in the United States, create jobs and significantly strengthen the territory's finances. Sen. Menendez is pursuing legislation that aligns with the Puerto Rican campaign to retroactively undo these deals with Diageo, owner of Captain Morgan, and Fortune Brands, maker of Cruzan Rum.

Sen. Menendez previously agreed that this is a local business issue between the USVI and Puerto Rico, which is demanding a hard cap on the level of investment the USVI makes in its rum companies. Gov. deJongh highlighted Sen. Menendez's reversal, asserting in his letter that "you stated would not get involved in what you said was essentially a commercial dispute and that you would not 'second-guess' the decisions of my administration on how to spend our rum tax revenues or how to build our rum industry."

The disclosure of Puerto Rico's massive hidden rum subsidies completely shifts the debate regarding the USVI's beneficial agreements. Puerto Rican leaders and lobbyists have targeted the USVI's partnerships, which were approved through an open and public process, but have refused to be fully transparent about Puerto Rico's secret support for its own rum makers. Gov. deJongh raised his serious concerns about the new revelation that Puerto Rico has provided off-the-record payments to Puerto Rican rum makers.

"Yesterday's article by The Hill brings one of the most important pieces regarding their misinformation campaign to light: that tens of millions of dollars are secretly given to Puerto Rican rum companies beyond its supposed 10 percent subsidy cap," stated Gov. deJongh. This fact damages Puerto Rico's credibility in Washington, D.C., by "completely destroying the legitimacy of their efforts to obstruct our economic development deals and necessitating that Puerto Rico look inward at its own misdeeds," Gov. deJongh continued.

The full text of the letter from Gov. deJongh to Sen. Menendez follows.

April 8, 2010

The Honorable Robert Menendez

SH-528 Senate Hart Office Building

United States Senate

Washington, D.C.  20510-3001

Dear Senator Menendez:

I was somewhat bewildered to read comments attributed to you in the April 7, 2010, article by The Hill newspaper about the U.S. Virgin Islands' long-term economic development partnerships with Diageo and Fortune Brands.  These agreements will help our citizens, strengthen our government's finances and grow our business base.  In that article, it was reported that you oppose the Diageo deal because "it won't benefit the Virgin Islands economy."  

With all due respect, nothing could be further from the truth.  The agreement between the Government of the Virgin Islands and Diageo is an extraordinary collaboration that will secure the U.S. Virgin Islands' revenue base and create good, high-paying union jobs on U.S. soil for at least 30 years.  The revenues generated for the U.S. Virgin Islands government by this agreement will allow the government to invest in economic development, fix our badly underfunded Government Employees Retirement System, improve our public services and public infrastructure, and protect our priceless natural resources and environment.  Already, in anticipation of future revenues generated by this transaction, the government last year, at the nadir of the economic recession, was able to successfully access the U.S. capital markets to secure emergency financing to keep the government operating and avoid massive lay-offs of public employees.  

In our meeting in your office last December 16, you stated that you would not get involved in what you said was essentially a commercial dispute and that you would not "second-guess" the decisions of my administration on how to spend our rum tax revenues or how to build our rum industry.  The Hill article reports that you are now planning to introduce legislation that would effectively kill the Diageo deal and also could harm the current sole surviving rum distillery in the U.S. Virgin Islands.  Such a result would be an economic and financial disaster of unparalleled and historic proportions.

A small but vocal group of Puerto Rican opponents to these partnerships have spread false statements about our partnerships, which were approved and signed through a fully transparent and open process, and the rum cover-over program's historical intentions.  Yesterday's article by The Hill brings one of the most important pieces regarding their misinformation campaign to light: that tens of millions of dollars are secretly given to Puerto Rican rum companies beyond its supposed 10 percent subsidy cap.  This fact comes from an executive in Puerto Rico's rum industry, completely destroying the legitimacy of their efforts to obstruct our economic development deals and necessitating that Puerto Rico look inward at its misdeeds before falsely attacking the U.S. Virgin Islands' legitimate and beneficial agreements.

As has been clearly demonstrated as a matter of public record, Diageo was not "lured" away from Puerto Rico by the Government of the Virgin Islands and will not, in any event, remain in Puerto Rico after its current supply agreement with a Puerto Rico distillery ends in 2011.  If these Puerto Rican leaders are successful in convincing Congress to retroactively change the rules of the cover-over program and overturn the Diageo agreement, Diageo will, as it has publicly stated, seek lower-cost supply alternatives elsewhere in the Caribbean region or in South America.  But Diageo will not return to Puerto Rico.  Thus, the choice for policymakers who are considering legislation is not whether Diageo should renew its supply agreement with a Puerto Rican rum producer or build its own distillery in the Virgin Islands, but rather whether Diageo will produce rum and create jobs on American soil or in a foreign jurisdiction.

I hope you will reconsider your plan to introduce legislation that would directly harm the U.S. Virgin Islands.  Our public-private partnerships, as the Congressional Research Service recognized, follow the original intent of the cover-over program to strengthen business activity in the U.S. Virgin Islands. The success of our economy and the well-being of the territory's residents depend on these unique and mutually beneficial agreements.

Very truly yours,

John P. de Jongh, Jr.

Governor

SOURCE Office of U.S. Virgin Islands Governor John P. deJongh, Jr.