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U.S. Virgin Islands Governor, Kenneth Mapp
said on Wednesday night that he refused to do business with two rum companies, because
the companies wanted an agreement similar to Diageo USVI’s and Cruzan Rum’s,
and that was something the governor said he was not willing to do.The response to Mr. Johnson’s revelation that
Mr. Mapp had turned down rum companies came during the governor’s Virgin
Islands Political Consortium interview on Wednesday, held at Government House,
where the governor fielded questions on a number of matters of importance to
the Virgin Islands.
“We don’t have any interest because we’re
not in the business of giving away the revenues of the treasury and then
putting the burden on the citizens that live and work in the Virgin Islands and
conduct business here”.Mr. Mapp,
though expressing no intention of revisiting the deal, has nonetheless spoken
vehemently against the agreement, contending that the administration
of John de Jongh gave up too many concessions, which he contends has cost
the local government dearly.
Internal Revenue Matching Fund, known as
the rum cover-over funds that the territory receives annually from the U.S.
Treasury, hover between $225 million to $250 million, most of which go towards
paying the territory’s bondholders. Of the remaining funds, Diageo USVI and
Cruzan Rum receive the lion’s share for promotional fees and molasses subsidies,
as per the government’s agreement with the companies.That does not benefit the USVI, and he would
not offer any other rum company a deal that mirrors the current. He also
reminded that the local government paid $250 million to build the Diageo plant.
Diageo Plant on St. Croix
This year, the governor said the rum-cover
funds to be received from the federal government jumped from $227 million to
$251 million. He said the rum revenues to the general fund this year will be
$24 million, $20 million of which will go to the rum companies, while $4
million will remain with the local government.
molasses subsidy on rum is 16 cents a gallon by the rum company, and the people
of the Virgin Islands pay the difference. It takes one gallon of molasses to
produce one gallon of rum. When the Diageo deal was ratified in 2008, one
gallon of molasses was $1.68, so when you took out the 16 cents, the people of
the Virgin Islands paid $1.52 for molasses. You multiple that by Diageo’s 9
million gallons of rum, and that’s about $13 million a year in rum subsidy,”
Mr. Mapp explained. “Today in 2018, a gallon of molasses on the spot market to
produce one gallon of rum is $2.98. Diageo pays 16 cents, and the people of the
Virgin Islands pay $2.82 for that gallon of rum… So when you bring rum
companies to the territory under that regimen, we, with the rum companies that
exist today, could find ourselves going to the general fund to take money out
to pay to the rum companies.”
I can understand his position, things are
tight enough there in St. Croix and to add more negative cash flow to the
territories is not something of a real benefit.They have had some issues with Diageo as well during its tenure on the
Read More at https://viconsortium.com/business/governor-mapp-says-he-refused-new-rum-companies-because-they-wanted-similar-deal-to-diageo-cruzan-rum/