June 23, 2004 — An agreement that brings the production of Captain Morgan rum to St. Croix will create a $100 million-a-year industry that will spur new construction, jobs and economic development, along with a constant revenue stream that could alleviate some of the territory's long-term debts, according to Gov. John deJongh Jr.
The landmark 30-year agreement between the V.I. government and U.K.-based Diageo PLC — the world's largest beer, wine and spirits company with brands such as Guinness, Jose Cuervo, Johnnie Walker, Baileys and Tanqueray — was announced by deJongh in a public radio and television address Monday evening.
The public-private partnership has been in the works for about a year, after the governor learned the company was looking to move its Captain Morgan headquarters from the mainland to a location in Central America or the Caribbean. Diageo was first referred to the V.I. government by Delegate Donna M.Christensen, deJongh said.
"This was a once-in-a-generation opportunity to once again establish the Virgin Islands as a major rum producing locale," deJongh said. "The agreement that I entered into will bring to the Virgin Islands a $165 million manufacturing facility on St. Croix, that, when it's completed in about three years, will produce on St. Croix all the rum used in Captain Morgan brand products. This agreement marks the greatest single financial step forward that we have taken in this territory in 50 years, since the time when Gov. (Ralph) Paiewonsky brought Harvey Alumina and Hess Oil to St. Croix."
The new "environmentally sound" distillery — which the government will help finance — will be able to produce 20 million proof gallons of rum, making it one of the largest facilities in the Caribbean, he added. The agreement with Diageo would also strengthen the territory's relationships with global partners such as Hovensa and Stanford Financial, and let other major companies throughout the world know that the territory is "open for business," the governor said.
The agreement doesn't negate the government's efforts to continue building the territory's Cruzan Rum industry, deJongh said. The need to keep Cruzan VIRIL's new parent company Pernod Ricard focused on growing the brand on St. Croix is especially important as bulk rum products become more vulnerable to competition from across the Caribbean and South America, he explained.
"That is why I went to Paris some weeks ago to meet with Pernod Ricard," the governor said. "Not only did I seek assurances that Cruzan would remain a V.I. rum, and that the new owners would continue to produce bulk rum here in the territory, but I initiated discussions that I hope in the future will lead to an expansion of rum production on St. Croix by Pernod Ricard. For rum production in the Virgin Islands is the primary competitive tool given to us by the U.S. Congress with which we can foster economic growth and achieve our own financial stability."
However, most of the excise-tax revenues garnered from Cruzan are either pledged against government bonds or have been put toward capital improvement efforts, leaving only about $18 million for the General Fund each year, deJongh explained.
The agreement with Diageo will generate a whole new set of rum revenues, which among other things will help reduce the unfunded liability plaguing the Government Employees' Retirement System, build a new school on St. John and a new junior high school on St. Thomas, establish "new modern" elderly-living facilities and repair local roads, he added.
"For many years we have not had enough money in our General Fund to meet our present obligations, let alone build for the future," the governor said. "Now we will be able to do both."
Also included in the agreement with Diageo is the creation of a Community Facilities Trust Fund, which will receive an allocation from the company for community and sports facilities, the governor said.
"Today the Virgin Islands has the highest per-person debt anywhere — yes, anywhere — under the U.S. flag," deJongh added. "Now, at last, we will be in a position to reverse this and begin to let our debt service pay down our debt over time and thus lessen this unfair burden that has been placed on our children and grandchildren. We can begin to better prepare the way for our next generation — as it should be."
The agreement must come before the Legislature for approval, deJongh said. Meanwhile, a press conference with Diageo representatives is scheduled for Wednesday.
Back Talk
Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.
