On Puerto Rico, government officials have little hope of replacing the $120 million in annual revenue that will leave with Diageo in 2012. It will cost the island 340 jobs, as well. Mr. Pierluisi has pushed a bill in Congress that would forbid either entity from offering more than 10 percent of its rum tax revenue as subsidies.
But the measure has languished, in part because of opposition by Donna M. Christensen, the delegate for the Virgin Islands. Others accuse Puerto Rico of opposing the deal to favor its biggest distillery, Bacardi, which has government ties.
Roberto Serralles, whose family distillery stands to lose millions in business, called the moves by the Virgin Islands an underhanded raid.
“If Tennessee got G.M. to relocate by offering a subsidy that was more than the cost of making a car, wouldn’t the people in Michigan be upset?” asked Mr. Serralles, whose family has produced rum on Puerto Rico for six generations. “And you have to wonder — why is the government in the business of using federal funds to guarantee profits of a huge multinational corporation?”
The dispute extends beyond Caribbean sands. Distillers on the mainland are concerned about a $1 billion subsidy the Virgin Islands recently awarded Fortune Brands , the American company that makes Cruzan Rum, Jim Beam Bourbon and other spirits.
Fortune will receive an assortment of tax-financed incentives, including $100 million for improvements to its distillery on the island and a wastewater treatment program. The agreement also ensures that the company will pay no more than 16 cents a gallon for molasses, the main ingredient of rum, now selling for more than $2 on the open market.
According to Treasury records, the company won approval to bottle three blended whiskeys using molasses-based cane spirits rather than grain spirits.
A Fortune spokesman said the company merely wanted to preserve its “flexibility” and had no plans to use cane spirits in other products. Some distillers worry, though, that cane spirits — filtered into a nearly flavorless alcohol — may be used to make vodka, gin and other liquors.
“If our own federal government is also letting its taxes subsidize foreign corporations and offshore producers, it makes it harder to survive,” said Philip E. Prichard, whose independent distillery in Tennessee makes rum and bourbon. “It flies in the face of entrepreneurship.”