30 August 2011

Puerto Rico House to probe rum industry incentives


By Caribbean Business Online Staff

(Puerto Rico) House Speaker Jenniffer González (has) introduced legislation...ordering an investigation into the government’s handling of the local rum incentives program amid complaints by Destilería Serrallés that the Fortuño administration has given Bacardi Corp. an unfair advantage over other producers in Puerto Rico.

House Resolution 1779 states that Law 178, the new rum incentives law, calls for the government to take the needed actions to make sure the rum industry remains strong and retains jobs amid a rum war with the U.S. Virgin Islands.

“Nonetheless, there have been stories denouncing that the incentives granted by Economic Development & Commerce Department (DDEC) to liquor distillers has not been equal for all of the companies,” the resolution reads.

CARIBBEAN BUSINESS has reported that DDEC Secretary José Pérez-Riera has refused to grant Destilería Serrallés an incentives package similar to the one granted to Bacardi Corp. through a deal in February. Serralles President & CEO Felix Serrallés has complained that DDEC agreed to give Bacardi 46 percent of federal rum rebate revenues generated by its rum sales starting in July 2012. The DDEC has offered Serralles 25 percent of federal rum rebate funds on its bulk rum sales, the lion’s share of its business, and 46 percent on its bottled-rum sales.

The local incentives were launched against the backdrop of a rum war between Puerto Rico and the USVI. That fight was sparked by the USVI’s move to grant huge incentives based on federal rum rebates to British-liquor giant Diageo to start producing there.

Diageo’s Captain Morgan rum has been made under contract by Serrallés, but production is being moved to St. Croix after Diageo landed the incentives from the USVI, including a new cutting-edge distillery. While Diageo’s departure will affect Puerto Rico’s entire rum industry because of the potential decrease in federal rum rebates, a government study conducted by Applied Research says Serrallés will be hurt most, since it will lose as much as 70 percent of its sales volume.

The contract with Bacardi includes other benefits, such as $95 million to refurbish its Cataño plant and expand its aging warehouse.

In return, the company has to maintain a minimum level of production in Puerto Rico for the next 20 years, an agreement that translates into more than $230 million in yearly revenue for Puerto Rico through federal rum excise taxes, according to Economic Development & Commerce Secretary José Pérez-Riera.

Bacardi President Joaquín Bacardí has said he doesn’t sell bulk rum other than to Trigo Corp. and Edmundo B. Fernández, the latter which makes Barrilito rum.

Pérez-Riera told Serrallés in a letter that if Bacardi were ever to compete in the bulk-rum business with Serrallés, the DDEC would increase Serrallés’ incentives. A massive bipartisan tax package inked by President Barack Obama in December included the temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the U.S. Virgin Islands.

The temporary increase, which has been approved every year since the early 1990s, boosts the territories’ shares of federal rum taxes. Puerto Rico and the U.S. Virgin Islands currently get $13.25 of the $13.50 tax slapped on each proof gallon of rum. Lawmakers must renew the increase or the rebate will drop back to $10.50.

The federal government returns most of the $13.50 per proof gallon tax on rum distilled in each territory and in foreign countries to Puerto Rico and the U.S. Virgin Islands. The territories keep the revenue produced in their jurisdiction, and taxes collected on foreign rum are split between the two jurisdictions based on their ratio of the U.S. market. That’s what makes the move from one territory to the other so painful: the U.S. Virgin Islands share of foreign tax rebates also goes up at Puerto Rico’s expense.

In 2008, Puerto Rico received about $370 million and the U.S. Virgin Islands some $80 million under the program. Puerto Rico currently has an 86 percent share to the U.S Virgin Island’s 14 percent, but after Captain Morgan’s move, the proportion will change to a 60 percent-40 percent split, according to industry experts.

The USVI government also entered into a similar deal that will use federal rum tax-rebate proceeds to finance $105 million in improvements to the Cruzan rum facilities on St. Croix and provide other benefits.

In response to the USVI moves, Puerto Rico passed legislation this year that gives the island government a range of tools to boost producers.The legislation increased from 10 percent to 25 percent the portion of the monies from the federal rum rebate that the island government can invest to provide incentives to and promote Puerto Rican rums. That amount had been capped at 10 percent by local legislation. In addition, it gives the government of Puerto Rico the ability to work directly with rum producers to develop incentives and promotional strategies that will enhance their competitiveness and, therefore, their potential for growth in the future.

The measure also gives the governor the discretion to increase this percentage up to 46 percent if the U.S. Congress does not impose, before December 31, 2011, a cap on the amount of subsidies that a U.S. jurisdiction can give a rum producer out of the federal rum excise tax cover-over program.

Inconsistencies continue under British direct rule in Turks & Caicos


UK Governor of Turks and Caicos Lies About Delay in Corruption Investigation, Blames Labour Party

Exposing the truth behind Turks and Caicos Corruption Investigation, and the most recent lies by the British

by AnselLoya
ground report

Governor, Gordon Wetherell, just put out another interview as he is set to depart as the UK-appointed governor of Turks and Caicos Islands (TCI). He oversaw the British occupation regime in Turks and Caicos after the UK takeover of the islands on August 9, 2009.

The topic of his interview this week was to address the dragging corruption investigation for which the Turks and Caicos people and parliament have grown increasingly impatient for its conclusion. Wetherell blamed the delayed and lengthy (so far, 2 years) corruption investigation of Helen Garlick’s Special Investigation and Prosecution Team (SIPT) on the former British Labour government.

Wetherell said in an interview this week, “the former British Labour government has delayed the investigative process.” Therefore, he said, SIPT could not progress properly because of inadequate funding, he continued, “SIPT was funded one year late and only after the government in Britain changed in May 2010.”

TCI people are shocked to hear Wetherell make such a claim of a delay or lack of funding. The truth is, there was no delay. “Helen Garlick was appointed as the Special Prosecutor to the Turks and Caicos Islands on 10 August 2009” (House of Commons report). Helen Garlick’s team was installed one day after the British takeover (August 9, 2009) and has been installed in TCI continually ever since.

The truth is that SIPT was working continually, thanks to funding by the TCI government treasury. A report by the Foreign Commonwealth Office (FCO) noted that Helen Garlick herself expressed concern that her investigation had become a burden on the budget of TCI Government.

On March 10, 2011, Gordon Wetherell himself admitted that the TCI Government had been funding SIPT. It wasn’t until March 2011 that the British government finally agreed to fund SIPT to take the burden from the TCI treasury. It was Wetherell who made a statement on March 10, 2011 stating that “a $10.6 million discretionary grant will reimburse the government for the “full costs” for fiscal year 2010-11 for the Special Investigation and Prosecution Team (SIPT) and the Civil Recovery Team.” Wetherell acknowledged just there that the Turks and Caicos government was paying for the corruption investigation the entire time and further revealed the amount already paid by the TCI treasury, $10.6 million! How can he lie now that the investigation was not funded, which he says caused a delay?

If Wetherell’s lie is to be believed, that there was no funding for SIPT causing a delay, what was SIPT doing in TCI? They are continually installed in TCI on an expense account, living the high life in TCI in luxury whilst TCIslanders are waiting to have democracy restored pending this investigation. 2 years without democracy so that a poorly planned corruption investigation can proceed is an abusive of power. What is going on with SIPT? Why are the British now lying about a delay, and why is it being paid by a loan to TCI, and why is it taking so long, and why is democracy being withheld during this never-ending investigation?

Something quite amusing, the British say that the Turks and Caicos Islands are in a fiscal crisis requiring loans by the UK, VAT and more taxes. But this week Wetherell pointed out, “Colin Roberts visited the TCI and in a press conference said that (UK) assistance would not be forthcoming because the TCI was ‘rich’.” The British can’t get their story straight, is the TCI rich or is it in need of burdensome UK loans and taxes due to the PNP government’s (former local government) poor fiscal legacy?

Another amusing fact is in December 2009, MP Chris Bryant said that the FCO will not provide a loan or funding for the investigation because, “It has always been our view that the former TCI Government is responsible for its present financial crisis. It is therefore correct that the Territory pays to sort out these matters. It is not appropriate to ask the British taxpayer to do so.” Therefore, TCI treasury was required to pay the investigation even though the TCI people didn't ask for the investigation, nor did they get a vote on it.

None of the British bureaucrats know what they are talking about. Chris Bryant said he believed that the former PNP administration should pay for the corruption investigation, even while the TCI treasury was paying it, because the PNP (random people who have not even faced trials nor have had the benefit of a completed corruption investigation) had been forcibly removed from office by the British.

The people of TCI should not suffer financially, socially or lose their freedoms because of a corruption investigation ordered by the British government, especially the incompetent and delayed circus it has become by both parties in Britain. It is absurd.

The people of TCI are still wondering why there haven't been any results from this ongoing investigation, nor have any persons been identified to stand trials yet. It is curious why the British Governor felt forced to (albeit clumsily and falsely) address the investigation delay. Members of Parliament, including Lord Nigel Jones, have been asking questions about Turks and Caicos' return to democracy and local elections. The corruption investigation is a milestone which must be completed prior to TCI returning to self rule.

In the meantime, the delay caused by the bumbling corruption investigation is suspected to be a calculated means to stall the TCI people while the British installed their new constitution in TCI, a constitution for which the people did not vote.