Rum Rebates to the UPR?

Highlights

  • The un-elected Fiscal Control Board, together with Puerto Rico Governor Ricardo Rossello decided to cut $450,000,000 from the annual commonwealth formula appropriation of $834,000,000 to the University of Puerto Rico (UPR) (http://newsismybusiness.com/moodys-difficult-absorb/)
  • In 2016 Puerto Rico received a tax rebate of $414,000,000 for the sale of locally produced rum in the US.
  • On threats that they might leave, in 2011 a law was signed that increased from 10% to 46% the amount that could be directly reimbursed to the rum producers. (http://sincomillas.com/generosidad-sin-limites-de-la-isla-del-encanto-hacia-las-empresas-de-ron/)
  • Reversing this law could provide more than $200,000,000 per year to the Puerto Rico government, which could be directed towards reduction of the proposed budget cuts to the UPR.

Comments:

The benefits to the Puerto Rican population of providing hundreds of millions of dollars annually to the rum producers are highly questionable. The benefits of this law seem not to be in proportion to its costs. The law should immediately be revised locally in Puerto Rico to significantly decrease giveaways to the rum producers. The “Captain Morgan” brand moved its production to the US Virgin Islands due to their offer to provide similarly high cashbacks before the 2011 Puerto Rico law was in effect. An agreement with the USVI to reduce these cashbacks will provide a windfall for both governments. Alternatively, a Federal law could limit payments to the rum producers to around 10% as they were before.

CONCLUSION:

The Puerto Rico government subsidizes the local Rum producers to an excessive amount. $100,000,000’s could be saved and destined to areas of need such as the avoidance of major budget cuts to the UPR to avoid its demise.

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