While some investors are walking away from Ukraine because of corruption and lawlessness, Cargill, the privately-held global agricultural giant, is bucking the trend.
The U.S.-based company has confirmed that it will invest $100 million into Ukraine’s Yuzhniy port to build a grain terminal, near Odesa some 473 kilometers south of Kyiv. Cargill signed an agreement with MV Cargo, a -private stevedoring company registered in Cyprus, on Feb. 24. Construction of the terminal will begin on Feb. 27 and is expected to last a year.
Signing ceremony
The agreement was signed by Martin Schuldt, CEO of Cargill Ukraine, and MV Cargo Director Andrii Stavnitzer at a ceremony in the Cabinet of Ministers. It was signed in the presence of government officials, including Prime Minister Arseniy Yatsenyuk, Agriculture Minister Oleksiy Pavlenko, Infrastructure Minister Andriy Pyvovarsky, Finance Minister Natalie Jaresko and U.S. Ambassador to Ukraine Geoffrey Pyatt.
The Kyiv office of Baker & McKenzie, a multinational law firm, is acting as the Ukrainian legal counsel to Cargill.
Cargill’s new investment also comes in the face of significant losses to the company due to Russia’s war on Ukraine in the east. Back in 2014, one of Cargill’s sunflower seed crushing plants in eastern Donetsk Oblast was taken over by Russian-backed militants, after which operations at the plant stopped.
No questions please
The investment agreement was sealed at the U.S.-Ukraine Business Forum, which took place in Washington, D.C. in July, according to Pyatt.
“This Yuzhniy project is exactly the kind of headline investment that we were talking about when Prime Minister (Yatsenyuk) was with Vice President (Joe) Biden and Secretary of Commerce (Penny) Pritzker in Washington D.C. in July,” the ambassador said at a Feb. 24 agreement signing ceremony rather than a press conference involving the publicity-shy Cargill, which is headquartered in Minnetonka, Minnesota.
Journalists were invited to attend the ceremony only as spectators and only as long as they didn’t ask any questions, according to an organizer.
Developing ports
Much of the credit for the agreement is also attributed to Pyvovarsky, who is a strong proponent of developing Ukraine’s ports and privatizing the country’s 13 stevedoring companies. The Cargill investment is expected to directly employ 350 Ukrainians at the terminal, and will create capacity for five million tons of freight turnover per year.
“Today we’re talking about the development of Ukraine’s export potential; today we’re talking about hundreds of millions in taxes that will go to Ukraine’s budget,” Pyvovarsky said at the ceremony.
But even as he hailed Cargill’s investment, Pyvovarsky blamed parliament for robbing the country of other major investments. Ukrainian lawmakers are frequently accused of serving the vested interests of those who illegally make billions from state-owned companies.
As an example of this, Pyvovarsky said parliament was holding back on approving draft law 2488a, which would strip Ukraine’s inefficient and outdated state-owned stevedoring companies of their designation as strategic assets.
Blocked privatization
“We could sign deals for these kind of projects at least once a month,” Pyvovarsky said. “The only thing holding us back is the decision of the Rada not to vote for draft law 2488a.”
If the stevedoring companies were no longer strategic assets, that would open the way to their privatization, investment, and the creation of new jobs, Pyvovarsky said.
“All that needs to be done is to vote for legislation that has already been in the Rada for many months,” he said.
Frustration high
Pyvovarsky has long voiced frustration with the slow pace of Ukraine’s reforms. The minister submitted his resignation back in December 2015, complaining he was not allowed to fully execute his authority in replacing the old CEOs of state-owned companies, raise salaries for his staff, and because of delays in the privatization process. However, on Feb. 4, he canceled his resignation on the condition that reforms would start right away.
Pyatt said that U.S. agricultural companies are looking for “a Ukrainian government that demonstrates a clear and unambiguous commitment to the path of reform.” They also want to see Ukraine’s parliament fully support the upholding of Ukraine’s commitments to the International Monetary Fund, and a government and “a presidency that demonstrates a clear commitment to continue progress on the rule of law, to include the critical issue of anti-corruption reform.”
The ambassador said that Cargill should be seen as only the first of many more investors to come, particularly into Ukraine’s agriculture sector, which in 2015 brought in $14.5 billion worth of export revenues, or 40 percent of the country’s total.
“But those numbers could easily be doubled,” Pyatt said, noting that Ukraine has more than a quarter of the world’s richest soils – Ukraine’s famous black earth, or chernozem.
“Ukraine is already one of the world’s great agricultural producers. But it should be an agricultural superpower,” Pyatt said.
