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January 2010


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From Site Selection magazine, January 2010
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Business Climate Heats
Up In the Tropics

New incentives, combined with new sources of capital, add up to an improving environment for corporate expansion in the Caribbean.

by RON STARNER

TOP CARIBBEAN LOCATIONS
U.S. Virgin Islands
W

hoever said that "money makes the world go round" must have been thinking about current events in the Caribbean.

Flush with new capital investments from banks and other large corporations, the islands of the Tropics are experiencing a wave of expansion unlike any seen in recent years.

As recently reported on SiteSelection.com, the grand-daddies of them all are the twin rum company investments from Diageo and Fortune Brands in the U.S. Virgin Islands. Bolstered by $3.7 billion in incentives, the two spirits giants are delivering some of the largest economic impacts in the storied history of the Caribbean rum industry.

Diageo, a British company, is relocating its Captain Morgan rum production from Puerto Rico to a new distillery that the firm is constructing on St. Croix. Fortune Brands, meanwhile, is doubling the capacity of its St. Croix distillery and converting the plant's primary product mix to Cruzan and Ronrico rums.

Jerry Garcia, director of marketing for the U.S. Virgin Islands Economic Development Authority, tells Site Selection that the rum companies are not the only firms benefiting from his government's pro-business approach.

"There are 152 companies that are taking advantage of our tax benefits programs right now," Garcia says. "These benefits run for a period of time once the company qualifies. This is not a tax haven. They get an exemption certificate for 10 years, and when that expires they can request a renewal for an additional 10 years."

The benefits are substantial and include up to:

  • A 90 percent reduction in local corporate income tax payments.
  • A 90 percent reduction in local personal income tax on corporate dividends, S corporation distributions or partnership distributions paid to qualifying USVI residents.
  • A reduction in the customs duty rate from the standard 6 percent to 1 percent for the value of raw materials and components parts imported from outside the U.S.
  • A 100 percent exemption from excise tax payments on raw materials and component parts.
  • A 100 percent exemption from property taxes and the gross receipts tax.

"We also offer tax benefits for intellectual property developed here," Garcia adds. "If an inventor creates a certain software here, the income received from that is eligible for up to a 90 percent tax reduction."

Investors also enjoy all the benefits of a U.S. location by choosing a site in the Virgin Islands. "We adhere to all the privileges of the USA," he says. "We are very unique. We are actually quite geographically central to North, South and Central America and the Caribbean. We are very accessible from all of the major U.S. markets, with many direct flights daily to and from Miami."

In Barbados, changes are also under way to improve the business climate in a country rated as having the 46th best climate for economic conditions in the world, according to the World Economic Forum.

Barbados will receive a $10 million loan from the Inter-American Development Bank to support economic development policies and business climate improvements designed to enhance the competitiveness of the private sector of the East Caribbean island nation. The IDB loan will support the expansion of private-sector participation in the economy and increase government effectiveness by lowering transportation costs, modernizing trade logistics and trade facilitation services, and providing a better environment for economic development.

The program will also finance new tools for tax policy analysis, enabling the government of Barbados to improve the efficiency and transparency of its business taxes. The IDB loan is for a 25-year term, with a four-year grace and disbursement period, as well as a LIBOR-based interest rate. The government of Barbados is contributing an additional $1.8 million toward the effort.

The Barbados Central Bank estimates that it currently takes 281 to 430 days to start a domestic incorporated business. The goal is to lower that timeframe to 24 to 187 days.

Noted site selection consultant Dennis Donovan of WDG Consulting LLC says that "one major advantage for Barbados is lower labor cost. It is appealing for back offices such as call centers, shared services centers and I.T. help desks."


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