The Virgin Islands government's precarious financial position is now well known and is exacerbated by debt in operating expenses which continues to rise unabated.
Naturally, the remedy for relief cannot be a simplistic one. The Virgin Islands is fortunate to possess a native product which has done extremely well in yielding solid dollars for the territorial treasury. I refer to the rum industry of the Virgin Islands. While everything else has had its ups and downs in the Virgin Islands economy, including tourism, rum has been a steady revenue earner.
One of the most impressive legislative acts passed by Congress was the amendment to the Organic Act which facilitated the federal taxes on rum shipped from the Virgin Islands to the U.S. mainland to be covered into the territorial treasury. That was then and is even now referred to as "internal matching funds."
These funds originally were used for capital improvements (construction of schools, hospitals, roads, etc.). Later on, a portion of the funds was used for operating expenses, with the balance used to retire general obligation bonds.
Today, the internal revenue matching funds are used almost exclusively for operating expenses, with just enough set aside for retirement of general obligation bonds.
Up to 1993-94, rum revenues did not exceed $29 million annually. But with the recruitment of Todhunter Industries from Palm Beach, Fla., and the movement of its principal operations to St. Croix, rum tax revenues skyrocketed to $50 million annually.
There is still more room for the growth of rum taxes. For every million gallons of rum shipped to the U.S. mainland using the lowest tax yield of $10.30, the territory will yield $10.3 million.
Considering the dire straits of the finances, the government should do all in its power to grow this industry by promoting rum in cooperation with Virgin Islands Rum Industries (Cruzan Rum), using all means and pulling out all stops.
For years, the U.S. Environmental Protection Agency has scrutinized the rum industry on St. Croix with regard to the effluent pumped to the South Shore. To date, there is no conclusive evidence that the effluent in question has caused any harm to marine life in that area. Yet the EPA continues to hold the Damocles sword over the rum industry of the Virgin Islands.
The V.I. government and public should rally around Cruzan Rum to support and ensure its survival. There should be no hesitation to support this vital industry.
Indeed, the Virgin Islands should enact legislation to designate the V.I. rum industry as a protected industry. It should be given perpetual tax exemption with a proviso to always support its promotion.
Historically, the industry has relied almost exclusively on the shipping of bulk rum, and that has served the territory very well. But in view of the North American Free Trade Act and the market implications on the U.S. mainland, another strategy must be devised and employed. The Virgin Islands should have no fear in competing with other well-known and well-promoted brands of rum.
The V.I. rum industry can be expanded to produce more revenue if the Cruzan brand is promoted nationwide. Every gallon of Cruzan Rum, whether shipped in tanks or glass bottles, yields not less than $10.30 per proof gallon.
It would seem that a government strapped for cash would explore every means to produce enhanced revenue. Bulk sales have done very well and will continue to do well in producing revenue, but the addition of the bottle trade could produce even more.
Another reason to commence promoting the Cruzan brand is the inevitable impact of the NAFTA, which became effective in 1991. The agreement commenced the phasing out of the tariff on Mexican rum over 10 years. In 2001, there will be virtually no barriers to the price advantage of Cruzan bulk rum over Mexican rum. In other words, Mexican rum will roll across the border without any restrictions while Virgin Islands rum must ride the seas and overland when it reaches the mainland.
It behooves the executive branch, the V.I. Legislature, the Chambers of Commerce and other civic organizations with public influence to rally behind the V.I. rum industry and not take it for granted. There are major threats to this vital industry, and everyone must help to secure it for generations to come. It will require astuteness and vigilance by all.
The Virgin Islands is fortunate that the Nelthropp family has nurtured Cruzan Rum for generations and has never compromised the quality of the rum for anyone or for any cause. Through the ingenuity of Donald "Hardy" Nelthropp, the product has maintained its high quality.
The best selling point of Cruzan Rum is the undisputed fact that it is the best rum in the world, and that has been proven time and time again.
Eric E. Dawson