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Christensen: Rum Rift Threatens V.I., Puerto Rico 'Cover-Over' Funds

The rift between the Virgin Islands and Puerto Rico over the rum industry is threatening not only the V.I.’s economic development plans but the economies of both territories, Congresswoman Donna Christensen said Friday.

Christensen said the bill introduced by PR Resident Commissioner Pedro Pierluisi actually threatens the continuation of the rum cover over, the money returned to the two territories for rum produced in the territories and purchased in the states.

Ever since Diageo decided to end its relationship with a Puerto Rican distiller, which contracted to produce Captain Morgan’s Rum for the British company, representatives of Puerto Rico have complained that the V.I. misused the rum cover-over money. Pierluisi’s bill, HR 2122, has been characterized in the media as capping the percentage of rum cover-over money a territory can use to directly support the industry at 10 percent, but in fact, the wording of the bill is much stronger.

Under the terms of the bill, if the Secretary of the Treasury finds that more than 10 percent of the money being transferred to the V.I. is directly supporting the industry and if it "has the effect of encouraging the transfer of the production of such articles from the jurisdiction of the other specified government" then the secretary not only cannot give that money to the V.I, but must to give it to Puerto Rico.

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In other words, if Puerto Rico can’t have Diageo’s production, it wants the money the V.I. was using to get the company to locate here in the first place.

In letters to Rep. Charles Rangel, chairman of the House Ways & Means Committee, which has jurisdiction over the bill, and in a meeting this week with House Speaker Nancy Pelosi, Christensen and Gov. John deJongh Jr. explained strenuously that the V.I. did not "steal" Diageo from Puerto Rico. Diageo has never produced rum on Puerto Rico, but contracted with an existing company to produce its Captain Morgan brand. When Diageo could not reach a satisfactory long-term agreement with that company, it decided to look elsewhere, and in fact had explored sites to build its own distillery in Guyana, Guatemala and Jamaica before the Virgin Islands got into the picture.

Pelosi did not make a commitment one way or the other on the bill, Christensen said, but "she listened, and she was very open to the argument."

Christensen said she didn’t think HR 2122 would get a hearing.

"There’s a lot of pressure from members of Congress of Puerto Rican heritage to hold hearings, but right now there’s not a lot of other interest," she said. "They (most members of Congress) see this as an inter-territorial issue, like if two states were quarrelling over something, and they don’t like to get involved in that."

She said Puerto Rico needs to look at itself and ask why Diageo wasn’t able to continue its relationship and went looking for a new home.

"We don’t tell Puerto Rico how to spend their money, and they don’t get to tell us how to spend ours," she said.

More troubling, she said, is the effect this brouhaha is having on the renewal of the rum cover over itself.

The program must be renewed periodically, and the extension of the payment from $10.50 per proof gallon to $13.25 must be continued by the end of the year. It’s something Christensen has been working on all session and thought was all but a done deal. Then the Puerto Rican complaints started getting aired and now the whole question is open again.

"Time is not on our side," Christensen said. "What’s immediately at risk is the extension."

Congress might already be recessed if it weren’t for the ongoing health-care reform debate, she said, but even with that holding the lawmakers in D.C., the clock is ticking.

The way Puerto Rico has phrased the issue has also created confusion, giving some the idea that the V.I. is passing taxpayer money to private industry. That’s not the case at all, Christensen said, it’s money generated by the industry itself. But members of Congress who aren’t regularly involved in the issue are beginning to wonder why they’re giving "taxpayer money" to the territories and creating doubts about the entire cover-over program.

"The Virgin Islands and Puerto Rico have enjoyed a long, mutually friendly relationship," Christensen said. "This is undermining that relationship."

The congresswoman said she and deJongh are planning a meeting with Pierluisi and Puerto Rican Gov. Luis Fortuño.

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The rift between the Virgin Islands and Puerto Rico over the rum industry is threatening not only the V.I.'s economic development plans but the economies of both territories, Congresswoman Donna Christensen said Friday.

Christensen said the bill introduced by PR Resident Commissioner Pedro Pierluisi actually threatens the continuation of the rum cover over, the money returned to the two territories for rum produced in the territories and purchased in the states.

Ever since Diageo decided to end its relationship with a Puerto Rican distiller, which contracted to produce Captain Morgan's Rum for the British company, representatives of Puerto Rico have complained that the V.I. misused the rum cover-over money. Pierluisi's bill, HR 2122, has been characterized in the media as capping the percentage of rum cover-over money a territory can use to directly support the industry at 10 percent, but in fact, the wording of the bill is much stronger.

Under the terms of the bill, if the Secretary of the Treasury finds that more than 10 percent of the money being transferred to the V.I. is directly supporting the industry and if it "has the effect of encouraging the transfer of the production of such articles from the jurisdiction of the other specified government" then the secretary not only cannot give that money to the V.I, but must to give it to Puerto Rico.

In other words, if Puerto Rico can't have Diageo's production, it wants the money the V.I. was using to get the company to locate here in the first place.

In letters to Rep. Charles Rangel, chairman of the House Ways & Means Committee, which has jurisdiction over the bill, and in a meeting this week with House Speaker Nancy Pelosi, Christensen and Gov. John deJongh Jr. explained strenuously that the V.I. did not "steal" Diageo from Puerto Rico. Diageo has never produced rum on Puerto Rico, but contracted with an existing company to produce its Captain Morgan brand. When Diageo could not reach a satisfactory long-term agreement with that company, it decided to look elsewhere, and in fact had explored sites to build its own distillery in Guyana, Guatemala and Jamaica before the Virgin Islands got into the picture.

Pelosi did not make a commitment one way or the other on the bill, Christensen said, but "she listened, and she was very open to the argument."

Christensen said she didn't think HR 2122 would get a hearing.

"There's a lot of pressure from members of Congress of Puerto Rican heritage to hold hearings, but right now there's not a lot of other interest," she said. "They (most members of Congress) see this as an inter-territorial issue, like if two states were quarrelling over something, and they don't like to get involved in that."

She said Puerto Rico needs to look at itself and ask why Diageo wasn't able to continue its relationship and went looking for a new home.

"We don't tell Puerto Rico how to spend their money, and they don't get to tell us how to spend ours," she said.

More troubling, she said, is the effect this brouhaha is having on the renewal of the rum cover over itself.

The program must be renewed periodically, and the extension of the payment from $10.50 per proof gallon to $13.25 must be continued by the end of the year. It's something Christensen has been working on all session and thought was all but a done deal. Then the Puerto Rican complaints started getting aired and now the whole question is open again.

"Time is not on our side," Christensen said. "What's immediately at risk is the extension."

Congress might already be recessed if it weren't for the ongoing health-care reform debate, she said, but even with that holding the lawmakers in D.C., the clock is ticking.

The way Puerto Rico has phrased the issue has also created confusion, giving some the idea that the V.I. is passing taxpayer money to private industry. That's not the case at all, Christensen said, it's money generated by the industry itself. But members of Congress who aren't regularly involved in the issue are beginning to wonder why they're giving "taxpayer money" to the territories and creating doubts about the entire cover-over program.

"The Virgin Islands and Puerto Rico have enjoyed a long, mutually friendly relationship," Christensen said. "This is undermining that relationship."

The congresswoman said she and deJongh are planning a meeting with Pierluisi and Puerto Rican Gov. Luis Fortuño.