‘Subsidies would damage region’s rum producers’

The managing director of Jamaican rum producer, J Wray & Nephew, has dismissed claims that bulk rum exported by Caribbean producers to the United States is not being affected by the subsidies being granted to the world's largest spirits producer Diageo Plc. Diageo has argued that as a supplier of branded rum, its operations would not impact on the US market for bulk rum.

But in a report in yesterday’s Jamaica Gleaner, Paul Henriques, said: "We do not agree with this statement as much of the region's bulk rum trades on price, and so, over time, purchasers of this rum will naturally seek out the least expensive option. The subsidies received by the multinationals make their pricing artificially low, and create an unfair trade advantage."

J Wray and Nephew is a subsidiary of Jamaican conglomerate Lascelles deMercado, which means that the company is majority owned by CL Financial, the Trinidadian conglomerate, but is controlled by the T&T government, whose nominee, Gerry Yetming is the chairman of Lascelles deMercado.

Diageo told the Business Guardian last month that it would re-evaluate its Caribbean operations, if its position in the US Virgin Islands were a challenge to be launched at the WTO by the Caribbean rum producers. The Caribbean rum producers have complained that the tax and other incentives received by Diageo for constructing a new distillery in the US Virgin Islands allows the London-based multinational to produce and export Captain Morgan Rum to the US at much cheaper rates than many of the spirits made by them.

Henriques, in e-mailed responses to the Jamaica Gleaner, said: "These subsidies dramatically reduce the cost of production to these large multinationals when compared to other Caribbean distillers, which leaves them with artificially low costs of production, and/or huge additional sums with which to promote their own brands."

"In Jamaica, the fact that the other smaller distillers are being asked to compete against large multinationals (which) are being subsidised by the American taxpayer is a cause for great concern." In November 2011, Diageo US Virgin Islands opened its rum distillery in St Croix, according to the company's 2011 financial statements.

It said the distillery is part of a 30-year public-private initiative between Diageo and the government of the US Virgin Islands "that allows Diageo to construct and operate a state-of-the-art, environmentally-sound, high-capacity rum distillery" that will produce all bulk rum for Captain Morgan products in the United States starting this year.