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Old 06-25-2008, 09:55 AM   #11
Bill
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What I'd like to know is what concessions were made to Diageo, ie tax breaks and the like? Here in the midwest, sometimes these are such that you have to give away the farm to grow some corn. Persons who might otherwise have been in ownership or management of smaller enterprises may find themselves as lower paid employees as a huge corporation grabs a bunch of land, resources and employees no longer available to local businesses. Politicians cut deals that sound great but the devil is in the details. Here in the states large employers (or baseball teams for that matter) often play one state or city against another. The "winner" often finds they are the loser financially and can find themselves held hostage to such mobile companies.

Moving or establishing a large business is a very costly and time consuming and I just have to believe political incentives were offered.

Does anyone know?
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Old 06-25-2008, 10:32 AM   #12
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What I'd like to know is what concessions were made to Diageo, ie tax breaks and the like? Here in the midwest, sometimes these are such that you have to give away the farm to grow some corn. Persons who might otherwise have been in ownership or management of smaller enterprises may find themselves as lower paid employees as a huge corporation grabs a bunch of land, resources and employees no longer available to local businesses. Politicians cut deals that sound great but the devil is in the details. Here in the states large employers (or baseball teams for that matter) often play one state or city against another. The "winner" often finds they are the loser financially and can find themselves held hostage to such mobile companies.

Moving or establishing a large business is a very costly and time consuming and I just have to believe political incentives were offered.

Does anyone know?
The Governor stated that this is a joint Public/Private venture, so I am sure that a substantial economic incentive package was offered to Diageo to get them to make such a large and long commitment to the USVI. What is unique for the USVI in this deal is the fact that product coming from this new facility will be exported to the USA. This is important because of the rum tax rebate which the USVI (as well as Puerto Rico) enjoys by way of the US Congress. This means the tax the US Federal government imposes on each gallon of imported spirit is given back to the USVI government. At full production capacity that would amount to around $100,000,000.00 annually.

This project will need to be approved by the USVI legislature, so I'm sure details of concessions made to Diageo will come to light over time.
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Old 06-25-2008, 06:04 PM   #13
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Better stock up on The Captain before the taste changes!

And why would we want to do that. A change would be welcomed.

I'm sorry I couldn't resist.
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Old 06-25-2008, 09:18 PM   #14
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Better stock up on The Captain before the taste changes!

Thanks for the reminder, Scott! I have over 40 cases of Tattoo already, but need another 20 cases of the Parrot Bay. But, personally, I don't think that they'll mess too much with the formula given that it is liquid perfection.
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Old 06-25-2008, 11:44 PM   #15
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Diageo has a reputation for making deals that are very good for Diageo. However, the economic impact of the crumbs left over from such a venture are quite substantial. USVI could not say no. The only downside is that they become even more heavily dependent on a single source of revenue. They may find that 35% of their country's GNP is the eggs in these two baskets - Cruzan and Captain Morgan.
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Old 06-26-2008, 04:12 PM   #16
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Diageo has a reputation for making deals that are very good for Diageo. However, the economic impact of the crumbs left over from such a venture are quite substantial. USVI could not say no. The only downside is that they become even more heavily dependent on a single source of revenue. They may find that 35% of their country's GNP is the eggs in these two baskets - Cruzan and Captain Morgan.
Good points Robert. As you know, many of the Islands are heavily dependant on one or two sources of revenue. Tourism and Booze.

With fuel prices soaring the tourism industry is feeling the pinch due to increased airline and cruise ship costs. Even at the destination level tourist related activities, such as charter fishing, chartered/barefoot yacht cruises, jetskiis and car rentals are taking a hit too.

When times get tough the booze keeps flowing. Especially when one's price point is right.

At least the two eggs of Cruzan and Captain Morgan seem to be well feathered in their baskets for the near term.

One interesting tidbit that came from the press conference held today in the USVI, with the Governor introducing the Diageo suit heading up this new project, was that Diageo has been buying bulk rum from Cruzan for a long time.

As a minor point (but a sensitive subject down here) the USVI as well as Puerto Rico are unincorporated Territories of the USA..Not countries.
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Old 06-27-2008, 01:17 PM   #17
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Diageo has a reputation for making deals that are very good for Diageo. However, the economic impact of the crumbs left over from such a venture are quite substantial. USVI could not say no. The only downside is that they become even more heavily dependent on a single source of revenue. They may find that 35% of their country's GNP is the eggs in these two baskets - Cruzan and Captain Morgan.
As a Virgin Islander, and a Cruzan, the rum industry will be great. However the rum industry will still be 3rd to tourism and Hovensa, the oil refinerey.
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Old 07-07-2008, 09:36 PM   #18
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As a Virgin Islander, and a Cruzan, the rum industry will be great. However the rum industry will still be 3rd to tourism and Hovensa, the oil refinerey.
Actually, I believe that rum may be the fourth largest source of revenue. As here in Puerto Rico, I believe the USVI "Government" is the largest source of revenue.
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Old 07-08-2008, 06:01 PM   #19
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Originally Posted by RobertBurr View Post
Diageo has a reputation for making deals that are very good for Diageo. However, the economic impact of the crumbs left over from such a venture are quite substantial. USVI could not say no. The only downside is that they become even more heavily dependent on a single source of revenue. They may find that 35% of their country's GNP is the eggs in these two baskets - Cruzan and Captain Morgan.
Rum revenue is no where close to 35% of the Virgin Islands GDP even after ratification of the Diageo agreement.

Tourism remains the number one industry and tourism arrivals continue at record levels this year. While one poster was concerned that rising fuel costs would negatively impact tourism, so far we have seen the exact opposite effect. The impact of the weaker U.S. dollar has seen many U.S. residents switch their European vacation plans for a stay in the Virgin Islands.

And then we have the Hovensa refinery, the largest in the Western Hemisphere, 3rd largest in the world and the only U.S. sourcing plant that can handle the heavy Venezuelan and Cuban crude oil. As the single source supplier for fuel, tar and plastic needs for the Eastern United States, that economic base is incredibly stable.

Remember, also, that St. Croix boasts the largest ethanol production facility in the world. This is a source of tax revenue separate and apart from Hovensa's dependency on Venezuelan and Cuban oil.

Rum currently ranks far down the list as a revenue source, but hardly a stable one historically. The excise tax rebate revenue received by the Government of the Virgin Island from rum sales has fluctuated in the past depending upon the whims of Congress. Right now the Virgin Islands receives $13.25 per barrel but historically, Congress has taken the rebate as low as $10.50.

For clarification, the Virgin Islands Government is not spending a dime on bringing Captain Morgan to the Territory, nor is it obligating itself through bond issuance. The Virgin Islands is providing its bond rating as a carrier to the financing of the distillery construction as a grant to Diageo. However, the Virgin Islands does not have any obligation to repay the bond. That obligation remains with Diageo and its investors.

Over 30 years the estimated revenue gain to the Virgin Islands Government through excise tax rebates alone is estimated at over $3 billion. This averages out to a MINIMUM of $100 million a year. I see it then as no wonder that Puerto Ricans flew to St. Thomas and last evening engaged in criminal activities, littering the town of Charlotte Amalie with stick-on posters that are now defacing historic buildings, monuments, street signs, power poles, walls, etc. These posters are shouting down the Diageo agreement but basically have done nothing more than anger St. Thomas residents and caused our Waste Management Authority to issue an all points bulletin. The fine for littering here is $1,000 per item.

The Virgin Islands looks forward to a long and equitable relationship with Diageo. The agreement as drafted provides numerous protections for the people of the Virgin Islands and, upon passage today or tomorrow, will be a benefit to all parties concerned.
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Old 07-09-2008, 08:45 PM   #20
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Rum revenue is no where close to 35% of the Virgin Islands GDP even after ratification of the Diageo agreement.

Remember, also, that St. Croix boasts the largest ethanol production facility in the world. This is a source of tax revenue separate and apart from Hovensa's dependency on Venezuelan and Cuban oil.

Rum currently ranks far down the list as a revenue source, but hardly a stable one historically. The excise tax rebate revenue received by the Government of the Virgin Island from rum sales has fluctuated in the past depending upon the whims of Congress. Right now the Virgin Islands receives $13.25 per barrel but historically, Congress has taken the rebate as low as $10.50.
Welcome to the forums Caribgoodies. I appreciate your well written first post but am surprised that St Croix boasts the largest ethanol production facility in the world is just that.

Do you have any idea of the production? Nicaragua has a new ethanol plant that came on line in Jan that is one of the largest in the region.
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