Diageo blasts Bacardi over Captain Morgan rum saga

24 February, 2010

Diageo has launched a scathing attack on Bacardi over the Captain Morgan rum, US Virgin Islands saga. Diageo has accused Bacardi of scheming to protect subsidies at the expense of the economic stability of the US Virgin Islands.  Bacardi has insisted the dispute is about the appropriate use of taxpayers’ money.

Diageo North America has released the following statement from Guy L. Smith, executive vice president:

“An historic and innovative public-private initiative forged by the US Virgin Islands that would lift the US Virgin Islands’ economy out of crisis is under attack by the entrenched corporate interests of a wealthy family seeking to maintain their decades-long grip on rum subsidies.

"Bacardi Limited, which receives tens of millions of dollars a year in annual government rum subsidies, has made a calculated decision to try to drive a competitor out of the United States even though it would be a disaster for the US citizens of the Virgin Islands. And why is Bacardi doing this? They know that because of a quirk in federal law they can protect their huge government subsidies by driving Captain Morgan rum production anywhere rather than the US Virgin Islands.

"The company has been working behind the scenes in collaboration with other self-interested constituents and corporations and has used front groups and Puerto Rico politicians to make spurious claims about the US Virgin Islands initiative.

"Nearly two years ago, the government of the US Virgin Islands seized an historic opportunity to modernize the centuries-old Caribbean rum industry through a landmark public-private initiative that both protects the environment and provides 30 years of economic stability for the US citizens of the Virgin Islands.

"The resulting agreement between the US Virgin Islands and Diageo is crucial to the U.S. Virgin Islands’ long-term economic stability and benefits the U.S. economy by keeping Diageo’s rum production in the United States. This public-private initiative will be the US Virgin Islands’ economic engine for the next three decades and beyond.

"The media has written a lot about the US Virgin Islands' initiative, and much of it has been based on misleading attacks by Puerto Rico officials, their entrenched corporate allies, and several front groups. The media has largely disregarded the fact that the US Virgin Islands has the same right to rum cover-over revenue as Puerto Rico under long-established federal law. Nor has the media asked the most basic journalistic question: 'Who stands to benefit from overturning the US Virgin Islands initiative?'”

Smith went on to talk about ‘hidden corporate interests’. He also said Diageo has been “informed reliably that Bacardi is a backer of the National Puerto Rican Coalition (NPRC), the leading critic of the US Virgin Islands initiative, and recently orchestrated a sham poll announced by the NPRC alleging strong opposition among Puerto Ricans in Florida to the US Virgin Islands initiative”.

The National Puerto Rican Coalition hit back at this section of the statement with the following comment:

NPRC Chairman Miguel Lausell:  "Puerto Rico isn't a 'special interest' nor is the National Puerto Rican Coalition a 'front group' – but we appreciate Diageo's recognition of our role in shining public attention on their diversion of $2.7 billion in US tax dollars to their shareholders.  Diageo's corporate lawyers may have been able to trick the US Virgin Islands out of half of every dollar meant to meet their social needs, but their public relations team can't cover up facts.  Diageo stands to pocket more in US tax dollars than it paid for Captain Morgan in the first place, and almost twice as much as it costs them to produce their product.  It's excessive, unreasonable and wrong, and even 13-page press releases can't change that."

Added NPRC president Rafael Fantauzzi: "As the voice of Puerto Ricans both on the Island and the mainland, we are proud of our role in leading the fight against this reckless and short-sighted scheme, which pits poor people against giant corporations so billions can be diverted from a place where one in three lives in poverty and one in six is out of work.  Captain Morgan may have raided the Caribbean for British interests once, but those days are over: Diageo's disproportionate subsidies will be set aside, either by Congress or the World Trade Organization – or both."

Diageo's statement continued:  “The National Black Chamber of Commerce and the Florida Black Chamber of Commerce have raised the question of why Florida senators and senate candidates are intervening in a local economic dispute between Puerto Rico and the US Virgin Islands. In our opinion the answer lies in the fact that the most powerful Cuban rum-producing family in Florida is engaged in this local dispute and lobbying Florida politicians to overturn the US Virgin Islands agreement for its own commercial ends.

“While these parties have chosen to work largely hidden from public view, they share a single self-interested aim: they want to drive Diageo out of the US for their own commercial benefit. And they are willing to devastate the economy of the US Virgin Islands to achieve their goal.

“Let me put this another way so we are all clear: these hidden corporate interests and Puerto Rico politicians are financially and competitively much better off if they can kill the US Virgin Islands initiative and force Diageo to move its rum production outside the US Puerto Rico and these various corporate interests stand to gain billions of dollars in rum cover-over revenues at the expense of the US Virgin Islands. That is what they care about. They don’t care if the US loses jobs; they don’t care if they wreck the US Virgin Islands economy; they don’t care about the harm to US citizens in the Virgin Islands. That is what the media and Congress should be concerned about.

“Neither Diageo nor any other major public corporation wants to be put in the position of having to speak out so bluntly against its critics. But enough is enough. We will not stand by while these special interests undermine our corporate reputation and jeopardize the economic future of the US Virgin Islands.

“From the beginning of this project, the US Virgin Islands and Diageo have pursued this important initiative openly and transparently. After extensive public hearings, the US Virgin Islands legislature ratified the agreement. As the Congressional Research Service reported recently, our agreement followed the letter and the spirit of a 62-year-old federal law designed to help the US Virgin Islands build an economically sustainable future.

"As we have demonstrated from the beginning, we are ready and willing to address any questions about our long-term commitment to the US citizens of the Virgin Islands.

"In contrast, those seeking to quash the US Virgin Islands initiative have conducted a veiled effort designed to manipulate the US legislative process to upset the agreement – and, defying well-settled precedent, they are urging Congress to reverse the US Virgin Islands agreement retroactively. To this end, they have conducted a campaign of misinformation directed toward the media and Washington policy-makers.

"Last week the National Black Chamber of Commerce and the Florida Black Chamber of Commerce called the Puerto Rican effort a “smear campaign” and we think that is an apt description.

"This entire misinformation campaign is built on a fundamental falsehood: that Diageo can be bullied into staying in Puerto Rico. Let me underscore the truth clearly and directly. That door has long been closed. Diageo is not going to purchase rum from Puerto Rico after its current supply agreement terminates. Everyone knows that. If the US Virgin Islands agreement is destroyed, we will be forced to leave the United States. And that is exactly what the leaders of Puerto Rico and their corporate allies want.

“We ask the media and leaders in Washington to examine the false claims being made by self interested commercial parties and Puerto Rico politicians, and recognize the real motivations and forces driving this attack.”

Patricia M Neal, on behalf of the Bacardi Corporation, said: “This issue is about one point — the appropriate use of approximately 2.7 billion dollars in taxpayer money. This isn’t about where Diageo receives a free distillery, but about the proper use of federal tax dollars. Diageo has some explaining to do to the US Congress and American people.”

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