Stop Massive Rum Subsidies in the USVI and Puerto Rico

[Capn Jimbo]

Things are often not what they seem...


Recently, da'Rum, jank and yes, Moi, have all noted what we thought was a lack of unaminity by CARICOM to jointly approach the WTO regarding what they strongly felt were three serious viloations of the WTO Rules on Fair Trade. The countries most affected included Barbados, Jamica, the Dominican Republic and Guyana. The DR and Barbados were ready to go, but Jamaican and Guyana were holding back.

This simply didn't make sense. But we were wrong - now it does...

The sense of it is this. First of all the import tax situation is far worse than we thought. A number of observers had the attitude that all the distillers paid import taxes, and had done so for years, so big deal, right? Wrong.

The USVI and Puerto Rico pay nearly $500 Million USD per year - but - they get 98% of it back, and most of this is directed back to the Big Three (Diageo, Bacardi and Fortune). The rest of the Caribbean producers - much smaller - also pay taxes, about $40 Million per year and not only NOT get it back, guess who does? Yup, even those taxes are returned - but again - to the USVI and Puerto Rico, who funnel these too to the Big Three.

Now THAT is outrageous. Add to that the $4 billion in special subsidies given directly to Diageo and Fortune by the USVI, again under the auspices of the United States and it's clear that 2012 has been a horror story. Our dear Caribbean rums will be squeezed out of business and soon.

So again, why not unaminity among Barbados, the DR. Jamaican and Guyana. Barbados and DR are ready to pull the trigger and engate the WTO - a serious and effective move, but Jamaica and Guyana are hedging. Why?


Because Diageo is threatening them...

Here's the deal. According to Sir Ronald, Diageo buys many millions of dollars of bulk rum from Jamaica and Guyana. In fact, Diageo has an interest in Jamaica's Clarendon Distillers who benefits from these bulk sales. Make no mistake this is a direct threat. Per Sir Ronald:

"Diageo may also feel that because it buys bulk rum from producers in several non-US Caribbean countries, those countries would be well advised to accept the situation and be content with negotiating the best sales contracts they can.

But, the effect of accepting the situation would be to harm the rum industry in the non-US Caribbean gravely if not fatally. Very quickly, the already fragile rum industry would be crippled, significantly reducing the US$500m foreign exchange it earns for these economies and shrinking the US$250 million tax revenues to governments.

A further fall out for non-US Caribbean countries is cultural. Rum production and the use of rum in a variety of ways, including in making Christmas cakes, is ingrained in the Caribbean culture. It is as Caribbean as sunshine and sea. So too is the rivalry between Caribbean countries over which one produces the best rums. The loyalty to national brands among rum users is renowned. No Caribbean citizen would forgive the disappearance of national brands."

In other words, Diageo's position seems to be "''...either shut up, or we stop buying millions of dollars of your bulk rum.". The truth: Jamaica and Guyana are fucked coming or going in that deal. It's like when the only jobs left in America are greeters at Walmart. The good news is this: it only takes one country to engage the WTO, and that is a very serious and effective step. As so well put by Sir Ronald: "That’s what the WTO is for – it will open the door for institutional consultation with the US government that cannot be ignored. "

I feel better now, and you should too...

[jankdc]

Here is the article that Capn Jimbo was referring to in the above post.

It is important to recall that the rum ‘cover over’ programme under which the US government returns excise tax on rum to Puerto Rico and the USVI was always intended to be used for improving infrastructure such as schools, roads and other public facilities. It was never intended to subsidise privately-owned companies or to finance unfair trade. No one in CARICOM or the Dominican Republic questions the original intention of the ‘cover over’ programme.

My understanding is that in Puerto Rico 90% of the money has been used this way. With "only" 10% going back to the rum producers. The problem with the Virgin Islands and with Diageo is that their sweet deal represent 50% of the money going back to them. Again this is 10 and 50% of the taxes collected on all rum imported and produced that is then consumed in the United States, not just the percentage of the taxes collected on rum produced in the USVI and PR.


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Capn's Log: The real problem in both - but especially the USVI - is that there are so many indirect benefits to the Big Three that evade these percentages. Example: Diageo will get a new plant built at taxpayer expense, exemption from all property and gross receipt taxes for the length of the deal, a 90 percent reduction in corporate taxes, plus marketing support and production incentives totaling tens of millions a year. Some of these (the plant) are direct benefits, others are not and may not count in the 50%. Another: Fortune Brands gets $1 Billion USD to improve their plant (direct) but gets a sweet deal to buy molasses for 16 cents/gallon instead of the $2.00/gal. market price (indirect?).

The point - no matter how you cut it, the benefits - direct and indirect - are absolutlely humongous,- in the multiple billions of dollars, and especially when you realize that the Caribbean producers get back nothing. Worse yet the taxes they pay are recycled to the Big Three. It's a horror story.

[jankdc]

This is actually a good article explaining the change in subsidies. The link on the American Rum Association's site wasn't working so I did a search for it.

US rum subsidies hammer Caribbean producers

"The amounts that are being doled out now are staggering," said Frank Ward, chairman of the West Indies Rum & Spirits Producers' Association. "We were able to live with the level of U.S. subsidies as they once were. But the massive increases, we believe, have skewed the market."

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Capn's Log: As far as Puerto Rico's "10%" is concerned, this articles states this:

"Puerto Rico, in response, has increased the amount it spends to promote its rum industry, from 10 percent to 25 percent of the excise tax money it gets back. It has also awarded Bacardi a $95 million grant to renovate its production plant in exchange for maintaining a minimum level of production for the next 20 years. That translates into more than $230 million in yearly revenue from excise taxes".

And again, we will never really know how much indirect support flows back to Bacardi. Still, the USVI deals are so sweet as to even upset Puerto Rico's Seralles, for example.

[Capn Jimbo]

Kiddies, it's time for the cartoons! Except this is real...


http://www.youtube.com/watch?v=2tV156LZj3I

This will give you some idea of how and why the Big Three, already capturing 90% of the market - and already making huge profits - get another $4 Billion dollars of taxpayer money. What's especially disturbing is how little the payoff is for our dear legistlators who got the 150 page bill just 3 minutes before the vote! I'm serious. According to the Fresno Bee (California) newpaper:

Bee: "Then there is the $200 million toast to Puerto Rico and the U.S. Virgin Islands for their rum industries. Rum producers are grateful. The Bacardi family of rum fame gave no less than $260,000 to federal campaigns in 2011-12, mostly to Republicans. Diageo, another rum producer, spread its campaign money equally among Democrats and Republicans."

Sad but true. Next up: who sold out Caribbean rum? Don't laugh too loud...

[Capn Jimbo]

Today's Homework for Save Caribbean Rum!


From a Caribbean source, "Caribbean Business", (here).

Just published yesterday, and gives the Caribbean view of the "fiscal cliff" goodies, particularly to the USVI/PR. Very well worth the read, and we learn these facts...

1. The rum subsidies found disfavor with most American media, and even the Conservative think tanks.

2. It identifies a "Rum War" between Puerto Rico (Bacardi) and the USVI (Diageo and Fortune), with the USVI winning bigger, and all other Caribbean distillers losing.

3. Check this out!

"In response, Puerto Rico passed basic incentives worth 46 percent of the rum-rebate revenue generated from branded-rum sales and 25 percent from bulk-rum sales, which is rum produced for third parties. The USVI sweetened its deal with Cruzan to keep the company on a competitive footing with Puerto Rico-based producers after local incentives kicked in."

The USVI and PR are going back and forth, each sweetening the deal for their favorite butt buddy, and the Big Three are laughing all the way to the bank.

4. CARICOM met with the US Trade Representative way back in June. So far... silence.

5. This is BIG news: the Dominican Republic - who apparently has the only working cajones in the region - has finally stepped up to the plate and asked the WTO for an "opinion". This is a first and important step to filing a formal complaint.

That my friends, is big! BIG!! I say. The humongous subsidies have been met by the DR's equally large cajones. Go DR!

6. Last, a PR legislator named Pierluisi - and who actually has a seat in the US Congress, has once again stated he feels the subsidies are unfair (to PR) and has - once again - introduced legistlation in the US not to end the subsidies, but to "cap" them. And once again, it has not gotten out of committee. Yet.

But even if that passes, it will only stabilize the "Rum War" between the USVI and PR, and to hell with the Caribbean producers.

[Capn Jimbo]

The Rum Petition keeps growing...


Those of you who post anywhere know well that few threads really take off. Most end after a handful of replies. When a thread goes past 10, then 20, then 30 replies - something is happening.

The petiion will soon hit 40 signatures.

Considering that has occured in just a few days is heartening. Better yet, almost all of the signers thought enough of themselves and the issue to sign their names. Impressive. So in a strange way I am both pleased and displeased. I'd have preferred we'd have immediately and magically garnered 10,000 signatures in our first three days.

But the truth is that 40 is a good number, as are the type of signatures, who signed (at least five are well known in the spirits world), and the fact that the list keeps growing. Something about the tortoise and the hare.

Next: the rum webmasters will be challenged. Thanks for your support and remember - it's a marathon, not a sprint...

[RT]

Number 38


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Capn's Log: And now 39, continuing to grow. And you'd better be one of them!

[da'rum]

The molasses and cane supply to Fortune spirits is a real worry. As has been mentioned the supply of cane juice and molasses is a very limited resource and if Fortune are allowed to buy it at a pittance and distil neutral alcohol from it to use in their other products this could be very detrimental to the small rum distilleries as the supply will become harder to come by and the price per gallon will soar.

This whole deal in all its facets stinks.

[Capn Jimbo]

Update... this just in!


I don't know whether to laugh or cry. Some of you may remember the John Belushi Saturday Night Live skit where he played Pete the Greek, owner of The Olympia Greek restaurant. After a supposed fire that destroyed his restaurant, his and his employees multiple claims that they each lost a set of new golf clubs in the fire led to the insurance company denying the whole claim. There was a moment of silence as Pete/John did one of his slow burns leading to an expected Pete outburst. When one employee fearfully crept up to the silently steaming volcano, fearfully tapped him on the shoulder and meekly said "So what do we do now, Pete?". There was a moment of silence, then Pete says...

"What do we do now? (steaming) What do we do now? (long pause) We dance!"

Whereupon the whole crew began a joyous Greek circle dance to loud Greek music. Fellow idiots, this is that moment. The petition seems stuck at 42, this after what I consider a truly heroic effort by several of us, who followed and contributed to the thread and who reached out to their friends. Sue Sea has a huge downlist of friends. I reached out to my list, to several distillers and to one key industry member who in turn, reached out to his industry list of hundreds more.


What does this mean?

1. Is 42 bad?

No. In marketing we used to say that for every responder who took action, there were a hundred more who simply didn't take the time. That would equate to 4200 Friends of Caribbean Rum.

2. Is 42 good?

No number is "good enough". It was certainly possible that no one would really care and the list could have languished in the single digits. That 42 people cared enough not only to "sign" but to reveal their names is quite meaningful. At least three rum webmasters and one well known industry insider signed. Signatures were received from all over the world. The signers had an option to add personal, pop-up comments, and more than a few did. Was this good enough? No. Was it good? Yes.


How did the World of Rum react?

1. Surprisingly the MOR was the only other site where a thread appeared, although Eddie decided - for once - to keep out of it. Does this indicate his private support? Perhaps. OTOH, although at least two posters expressed very strong support, and one other reluctantly admitted concern, the mass of monkeys have avoided the thread. For a site dedicated to lovers of rum, pretty shocking.

2. Not so surprisingly the Artic owner of the Canooky conveyor belt of freebies kept at least three threads away. Like Eddie, he is terrified of offending the Big Three and the local Canookie distributors upon which his chilly existence depends. No support or mention at his spirits PR site either.

3. Three webmasters supported the effort: Tiare of A Mountain of Ice, Scotte, and very large site from Italy, Rum Club Italiano. One industry insider, well known in the industry promoted the petition to his huge mailing list, which includes several spirits journalists. These latter understood the issue, but declined to write as their publications are heavily dependent on Big Three advertising.

4. The issue appeared all over the media, including the NY Times and many other national outlets. The most effective was Steven Colbert (The Colbert Report) whose slashing humour promoted his "Captain Colbert's Original Pond Water Rum" - a direct hit on Diageo.

But all in all these were one-offs, and/or limited to the news cycle of the New Year, and based on the "fiscal cliff" legislation.


What was learned?

1. This is a marathon, not a sprint. Actually the initial reaction was much more favorable than the overwhelmining negative initial response to the Z-23 myth. It took about a year for the Zee Myth to be generally busted, and it would not be surprising if this did too. Still the project to Save Caribbean Rum has a leg up, because no one is being asked to reject their favorite rums, but to protect them. This is good, but - it's still a marathon.

2. We came to understand that (a) the basis of the threat to Caribbean rum was really a "rum war" between the USVI and Puerto Rico, with the effect of rapidly rising and absolutely massive subsidies to the Big Three, especially those to/of the USVI (Diageo and Fortune), but also Puerto Rico (Bacardi, Seralles) - and (b) that the threat to all other Caribbean rums is real, significant and immediate. We will, in fact lose rums from especially (but not limited to) the most affected: Barbados, Jamaica, Guyana, Dominican Republic and the Bahamas.

3. The best statement of the situation is the petition itself, which is complete, concise and effective. A plea to "Save Caribbean Rum" and a link to the petition is plenty. Also effective is joining threads or comments about various Caribbean rums, and include something like "Great rum... but did you know we may lose it?"

4. Although support was received by five rum webmasters, only two other rum sites had petition threads. Without revealing any private communications I expect at least four well known sites to go public and support the petition/issue on their own sites. More later.

So what do we do now my fellow idiots? We...

Dance! Observations welcomed and encouraged....

[da'rum]

The response on the Ministry of Rum site is pathetic and speaks volumes about that site.

(in Jimbo schoolteacher style)

What does it show us?

It shows that their aren't any real rum fans there. There are people who like to show that they have bought expensive rums and then write reviews on them using every cliché flavour descriptor known to man finishing with how hard it is to find and how much it will cost you if you are 'lucky' enough to find it.

It shows that the site is inhabited by people who have very little love or knowledge of rum, care little about it's history and care even less about it's future.

It shows that these people are willingly playing into the marketing bastards hands and would rather blow 60+ bucks on sugared pisswater in a fancy bottle than support the people who make the worlds best rum and have done since rum was first made.

This goes for the other blog running turds there, they are spineless, self serving commercial sycophants with an eye on the $ and no heart for rum.

Disgraceful.




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Capn's Log: How dare you accuse me of using "school teacher style"?! Please report to the principal's office now - and take this note to your mother... As for "spineless websites" I could not agree more. How stupid can you be when you can't or won't defend true Caribbean rum and their wonderful people? I must give Hamilton a shred of credit though for allowing the thread at all. But he could do so much more...

[Capn Jimbo]

Kudos to the Rum Pundit, who has joined the fight to Save Caribbean Rum...


Rum Pundit - check it out!




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Sign the Petition

[Capn Jimbo]

Expert's Corner: Tapdancing on NPR AND at the MOR...


Up until now I have been aware of the appearance of this issue at the MOR, as raised by at least one alpha monkey, but really by two newbie beta's who apparently don't understand the rules at the compound. These two raised the issue of the massive subsidies, and the real and serious risk to Caribbean Rums. They linked a number of good articles, and linked the petition which has been established to demonstrate public support.

I have made it clear here that this is not about our petty differences, but about a need for all rum webmasters to vigorously expose these threats and to fight in every way possible against them. In this we should be united. An interview on NPR (National Public Radio) in early January was sensitive to the inclusion of favoratistic rebates and subsidies included in the "fiscal cliff" legislation.

NPR interviews a famous rum webmaster

In this interview the expert:

1. Does his best to bypass Barbados or Brazil, and to promote Puerto Rico and Guyana as the Caribbean sources of rum. Amazingly, he claims that Puerto Rico as making rum since the 1500's (!), and Guyana as the oldest continuing producer, from 1670. At other times he has implied Brazil was the home (NPR). None of the authors I respect - Broom, Coulombe, Smith, Williams or Curtis seem to agree. Puerto Rico is really quite a curious stretch, apparently based on Columbus bringing sugar cane to the Caribbean, which was fermented (but not distilled) to make Guarapo. Was this an undeserved plug for Puerto Rico?

2. He tried to focus on what he calls the $500M annual "rebates" to the USVI and PR, and fails to mention the roughly $4 Billion USD in subsidies and advantage recently given to Diageo and Fortune by the USVI.

3. To his credit he notes that Diageo receives more money than the rum costs to make, and thus don't even really have to sell it, just produce it and shove it out the door.

4. But when asked directly if the other Caribbean rums can compete, his answer: yes! In a whirling dervish of tap dancing, he paints a picture of auto, clothing and yes, rum consumers being more concerned with "authenticity and something he calls "transparency", then claims that accordingly there are "lots of things" the Caribbean rum producers can do to compete. But doesn't name a single one.

5. Last, and in the manner of product placements he ends his appearance by promoting that he starts every day with a rum from Martinique, and often ends it with a heavy rum from Guyana. Of course this has nothing to do with the rums he reps. Pure coincidence.


And at the MOR...

A thread appeared some weeks back (see above). A couple of newbies from Germany were very concerned over the subsidies, posted some good references and articles, and solicited opinions and later, support. The petition was actually linked. Although the site purports to be the home of lovers of rum, the "noble spirit", only one lone alpha monkey - Lance of Liquorature (who goes under Ruminsky) bit. He initially fought the notion but when challenged, reluctantly concurred. What amazed me?

With Caribbean rum under serious threat - particularly from Barbados, Jamaica and Guyana - you would think that a goodly number of the MOR's claimed 4000+ members - not to mention the management - would jump in and either agree or disagree. So what actually happened?

Nada. Crickets. The two Germans have not given up, and as yesterday have asked the management and the other webmasters extant at the MOR, to express their opinions. So far nothing but to be honest, I for one am not particularly surprised. Commercial rum sites and the wannabees are highly dependent on the Big Three and the many large distributors who handle nearly all rum products, who supply all the freebies and who buy all the tables and goody bags. The bottom line...

It's one thing to occupy the "Expert's Corner". It's quite another to have cajones and to express the hard, non-commercial truth...

[Capn Jimbo]

All we need now are a million typewriters...


The more cogent amoung us will remember one of my favorite sayings, to wit: "Give a million monkeys a million typewriters and sooner or later one of them will reproduce the works of Shakespeare".

The home of the monkeys is well known: the Shillery. And type and type as they will we still await even a few paragraphs by William. Is this because there's only about 4000 of registered simians? Or more likely that only a handful of them and an inner cageful of alpha monkeys are too focused on the one or two really brilliant threads like "What I drank today..."? One thing is for sure:

They don't give a shit about the future of the rum they profess to love. You know, their pretend "noble spirit".

A couple of tough newbies from Germany named "1%" and "Spinner" noted the rum crisis and established a thread soliciting opinions about the extreme and damaging effects of the multi-billion dollar subsidies to the USVI's Diageo and Fortune - better known as the owners of Captain Morgan and Cruzan. After three agonizing pages of accumulating data, good links and - gulp - even links to the petition only one alpha - Lance of Liquorature - reluctantly agreed while one other - Rutherford of Count Silvio's site - tried to downplay the crisis as just "noise".

His premise was quickly overwhelmed - in great detail - by "1%", who offered a laundry list of qualified opinions, even including references to the monkey Minister himself. And even then, the response...

Nada. The chattering furballs are more interested in crumbling corks, and their most recent purchases. Apparently they don't give a flying fig that the rums they chatter about may soon go out of business. These are very sad, very stupid creatures. I wish the two Germans well, as it appears they are very commited to saving Caribbean rum.

I surely hope it won't take the loss of some valued labels to wake these somnolent simian sycophants up...


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http://www.gopetition.com/petitions/sto ... uerto.html
... total signatures now 44.

[NCyankee]

45 now, I added my girlfriend's name since she drinks a lot of my rum.

Any chance you can go back and correct the typo I made on my name? #10 - Thomas(s)? LOL


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Capn's Log: Because this petition is a formal one, only minor corrections are allowed by the Go Petition website. I believe this can be done without changing the intent of either the petition or your signature. Will try...

[Capn Jimbo]

Luis Ayala of "Got Rum?" mention:


Luis Ayala is a very knowledgable rum insider and consultant. His book "The Rum Experience" is and remains a very competent resource. Luis preceeded even the Preacher who is really a prophet-come-lately. Ayala publishes a e-pistle called "Got Rum?". This was his 2012 wrap up...

Luis: "2012: Year End Review

I am always amazed when December rolls in and I sit down to summarize the year’s highlights. It seems it was only a couple of weeks ago that I was recapping 2011! Fortunately for me, each year is full of new product launches, rum festivals, consumer trends, books and much more.

2012 saw the largest number of micro distilleries being established worldwide. Unfortunately, many of the American owners lack the technical skills needed to produce good rum and what they are producing could not be sold as rum in many countries outside the USA. Fortunately for USA-based companies, the American Rum Association was recently launched to address these and other issues. We applaud the initiative and encourage distillers to join the association.

We also saw an increase in the intensity of the debate pro and against the American subsidies for Puerto Rican and USVI rums. Like pieces on a chessboard, both sides are preparing their strategies and defenses as the issue is taken to the World Trade Organization.

I was also very happy to see that several new rum festivals around the world had their debut in 2012. We hope the events were successful for the organizers, the exhibitors and for the respective domestic rum consumers. I’m particularly proud of those events that took the time to promote rum as a quality distilled spirit that can be enjoyed outside of a cocktail.

2012 also saw the emergence of hundreds of bloggers worldwide, passing themselves as rum experts when their only veritable skill is the ability to say if they like a particular rum or not. Much like food critics who don’t know how to cook, many of these rum “experts” are doing the industry a disservice by voicing their uneducated opinions. I can only hope that 2013 will see many of these aficionados picking up technical books and spending time fermenting and distilling rum, not just critiquing it.

Rum?” and wish you and your family a very safe and successful 2013.

Happy Holidays!

Luis Ayala, Editor and Publisher

"

Sadly Luis glosses over the issue as if it were little more important than just another rum release. His position is notably neutral and downplayed which I consider a real copout, as surely he understands that the survival of rum as we know it is at issue.

The Artic Fackup has studiously avoided even a single word of the threat, either on his own or at the Preacher's Shillery. This is really curious as the Frozen One tends to post frequently there. It is commendable that the Preacher has allowed a long thread and other comments - normally any negatives are disallowed. Clearly he agrees with the issue but has chosen to maintain a silence mimicked by the obedient monkeys.

Still progress is being made. Three well known websites may soon publish, and our new Press Kit has been well received. Signatures keep creeping in, now up to 48. If a few more websites get on board this should change rapidly...

It is important to raise the issue everywhere, and the best way is to enter threads that mention fine rums we may lose, note that it may well be lost and briefly why, plus posting a link to the petition...

Cheers!

http://www.gopetition.com/petitions/sto ... uerto.html