If you are from Puerto Rico, or have any ties to the island at all, you know about Diageo. What was once considered a proud corporate partner to the island, contributing almost 200 good-paying jobs to the economy and millions in revenues and taxes, has become quite the pariah in the eyes of Puerto Ricans everywhere.
The issue revolves around Diageo’s (a British-owned liquor conglomerate) decision to move its operations from the U.S. territory to another nearby territory, The U.S. Virgin Islands, all at U.S. Taxpayers’ expense.
A little background on the deal as posted by Politico.com:
“For decades, Congress has been giving Puerto Rico and the Virgin Islands most of the excise taxes the islands’ rum-makers pay for each proof gallon of rum they sell within the United States. Puerto Rico, which has four rum-makers, gets about $400 million a year. The Virgin Islands, which has one, gets about $80 million. The federal government keeps about $9 million. . .
. . .Under the [new] deal, the Virgin Islands is to build Diageo a $165 million, state-of-the-art plant on the island of St. Croix. After assuming a $500 million debt obligation associated with the plant’s construction, the Virgin Islands will hand over the keys and title to Diageo. The Virgin Islands will tap its portion of the rum tax revenue to pay the $18.4 million in annual financing costs.
The 30-year agreement also gives Diageo a $2.1 billion marketing subsidy, a 90 percent break in its income taxes and a complete exemption from property taxes. ”
To put it in a nutshell, Congress is funding the move of a foreign corporation from one U.S. territory to another, substantially bruising the fragile economy of Puerto Rico (who is approaching 33% real unemployment), while adding a minor economic boost to the U.S. Virgin Islands (merely 40 jobs will be created, which to be fair, is quite the jolt considering the size of St. Croix).
While many have called for the demise of Diageo, we cannot fault a corporation for doing what is best for their bottom line. But we can fault our elected officials for making poor decisions that directly affect the U.S. economy. Considering the fact that estranged Congressman Charlie Rangel, as head of the ways and means committee, may have been at the center of the Diageo deal only adds fuel to the fire. At the very least, clear evidence of the power of lobby efforts was demonstrated in this deal, a deal which will, in the end, be detrimental to job creation and economic growth for U.S. citizens.
Total cost to U.S. Taxpayers to lose American Jobs and Tax Revenues and support the efficient operations (hence profitability) of a foreign corporation: $2.7 BILLION.