Subsidies spike Puerto Rican rum war

Captain Morgan of Captain Morgan rum fame.

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Steve Chiotakis: The alcoholic beverage rum conjures up images of pirate boats and the high seas. But it's not that much of a stretch these days. The $12 billion industry is giving "rum wars" new meaning. Christopher Werth reports.


Captain Morgan Ad: They've got a little captain in them, get a little captain in you. Drink responsibly.

Christopher Werth: Puerto Rico has a lot of captain in it. It's currently home to Captain Morgan, and its rum rival Bacardi. And because the U.S. sends most of the taxes it collects on the sale of rum
back to where it was produced, it's thought Puerto Rico receives roughly $400 million in tax rebates for the honor.

But the U.S. Virgin Islands is luring Diageo with $2.7 billion in subsidies and tax breaks. A move Bacardi says is unfair.

Richard Murphy of the U.K. firm Tax Research says it's not that Bacardi doesn't like subsidies:

Richard Murphy: What they don't like is the fact that Diageo may get a very much bigger subsidy than any that Bacardi have enjoyed to date.

Both Puerto Rico and Bacardi would like to see Congress limit how much of those tax breaks can go towards subsidies. For its part, Diageo accuses Bacardi of trying to push it out of the U.S.

I'm Christopher Werth for Marketplace.

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