In Black-Brown Economic War: Virgin Islands Governor Tells How He is Winning – So Far

by March 26, 2010 0 comments

U. S Virgin Islands Governor John deJongh is proclaiming at least a temporary victory this week as he tells how he steered his island out of the brink of bankruptcy into economic stability despite relentless political attacks from Puerto Rico over the Island’s strategic use of a federal excise tax program to create public private partnerships with two major rum producers.

“We think that we put ourselves in a position that we’ll be able to ride out this economic storm for this period of time,” said deJongh in an interview with the NNPA News Service. Puerto Rico and its allies have been threatening the Virgin Islands, the U. S.’s only majority Black territorial holding, with legislation that, deJongh said, would derail the island’s already battered economic structure.

“Even with everything that is taking place now, based on the strength of our rum industry, we’ve been able to borrow [in a way that has enabled us to] not layoff government employees and allowed us to keep all of our services in the health department and law enforcement going,” deJongh said. At the same time, the governor said that the Virgin Island was able to borrow for capital projects that have supplemented money they’ve received under President Obama’s stimulus program. That money – to help the U. S. and its territories through the economic crisis – was for road construction projects, refurbishing of educational institutions and making needed governmental purchases.

The tourism industry makes up as much as 80 percent of the island’s gross domestic product. But because of the global-wide recession the revenue from people visiting the Caribbean island has been almost crippled. To offset the crisis, deJongh, a former businessman, has been redeveloping the Virgin Islands’ two biggest industries. They are tourism and rum. The governor has worked to re-establish local tourism relationships to bring back much of the island’s main revenue source. He has also leveraged the income from a federal program that returns a majority of excise (manufacturer) tax revenue from rum sales to the U.S. interrogatory that produced the product.

deJongh cut deals with two producers that make some of world’s top-selling rum brands to create a public-private enterprise that will last 30 years and benefit the territory tremendously. Those two producers are the locallybased Cruzan rum and Diageo, LLC, which produces Captain Morgan Rum. “It’s a win-win situation as the visibility of those brands will give us a greater return on excise taxes that we will be able to use for schools, government services and capital,” deJongh said. “That is how we’ve approached, sort of, filling in the gaps when we don’t get federal monies but, at the same time, saving our economy in the shortfall.”

Puerto Rico has been adamantly against Diageo’s deal with their sister territory because, deJongh said, it cuts into their dominating control of the rum market. Puerto Rican officials have introduced a bill in congress that would make deals like what the U.S. Virgin Islands has cut almost impossible.

“Diageo is not going to purchase rum from Puerto Rico after its current supply agreement terminates,” wrote Diageo executive vice president Guy Smith in a statement. “Everyone knows that. If the U.S. 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.” HR 2122, the bill introduced by Puerto Rico’s delegate Pedro Pierluisi (D- P.R.), has been sitting in the House Ways and Means committee since last April. No action has been taken since it’s been introduced. Ways and Means Committee Chairman Charles Rangel (D-N.Y.) has recently stepped down
because of ethics charges.

“So far that bill hasn’t gotten any support other than from [Pierluisi] and some of the Hispanic representatives,” deJongh said. “They will continue to push it. Our position is that we don’t know why they are doing this to the detriment of our economy.” Florida Sen. George LeMieux (RFla.) filed an amendment that would drastically alter the rum program in a way that would change how the coverover revenue is split. Right now the cover-over split is about 80-20 with the majority going to Puerto Rico. But LeMieux’s amendment would alter the payout to be population-based instead of production-based. The change would give Puerto Rico almost 97 percent of the cover- over revenue, according to published reports. It is not certain the LeMieux amendment will get a vote.

“We will not stand by while these special interests undermine our corporate reputation and jeopardize the economic future of the U.S. Virgin Islands,” Smith said. The National Black Chamber of Commerce has raised the question of why Florida senators are intervening in what many consider a territorial matter. “This assault on the people and livelihood of the U.S. Virgin Islands overturns more than 90 years of policy toward the U.S. territories,” wrote National Black Chamber of Commerce president and CEO Harry Alford in a statement.

“It completely changes the nature of the rum cover-over program. It is a naked and reprehensible money grab by Puerto Rico – a cynial nod to special interests that would put the U.S. Virgin Islands into receivership.” Alford called out LeMieux, saying that his duty is to represent the residents of his state and Puerto Rican special interests. Though it has not become an overt issue, some have hinted that race is possibly at the root of Puerto Rican’s actions. Alford wrote in a recent column for the NNPA News Service that, “Puerto Rico’s allies are trying to incite racial politics through a nationwide Hispanic boycott of Diageo.”

In his statement Alford wrote, “All of America should be offended by this plantation-era treatment of the U.S. Virgin Islands…His amendment would make Virgin Islanders produce rum but let Puerto Rico reap the benefits of those Virgin Islanders’ hard work.” deJongh has said that the mere fact that Florida politicians are willing to undermine his island’s economy for their political objectives
is “dangerous”.

“This is a U.S. territory,” deJongh said. “There is no need to undermine our programs. Getting between two territories is not to their advantage… When a company goes from Florida to Pennsylvania, the senator from Florida doesn’t undercut the senator from Pennsylvania. Why are they doing that in this situation?” In a statement posted on, the governor implies that LeMieux is in business with Puerto Rico:

“Senator LeMieux’s amendment looks like it was developed alongside Puerto Rican lobbyists. The proposed amendment takes excise tax revenue paid by U.S. Virgin Islands rum makers on rum produced in the U.S. Virgin Islands and directly transfers it to Puerto Rico’s government coffers. Puerto Rico would end up with billions of dollars generated by rum production in the U.S. Virgin Islands.” He continues, “As we search for solutions to the economic downturn, America needs smart, thoughtful leadership – not desperate attempts to pander to powerful special interests. Senator LeMieux is directly attacking his fellow Americans in the U.S. Virgin Islands by doing Puerto Rico’s bidding.”


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