Cargill defends its interests around the world

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: April 21, 2012 - 10:12 PM

Cables detail the agribusiness giant's maneuvering in a series of trouble spots.

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Minnetonka-based Cargill is already one of Canada's largest grain handlers.

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As one of the most global U.S. companies, Cargill knows well the land mines of international commerce.

A Cargill rice mill in Venezuela gets nationalized. Government security forces pay a midnight visit to a sugar mill in Syria. Iraq suspends a key trading permit when a big wheat shipment mysteriously vanishes. Export and tax policies in Argentina bedevil Cargill's beef and grain businesses for years.

A behind-the-scenes look at these and other Cargill trade tussles is contained in U.S. State Department cables that have been leaked to WikiLeaks. The group began publishing the cables in late 2010, and 250,000 are available on the Web.

The cables are testimony to a long-standing diplomatic mission: to promote U.S. economic interests abroad. They also show how a major global company like Cargill works to protect its interests abroad, sometimes with the help of the U.S. government.

The Minnetonka-based company acknowledged the issues in the cables, some of which are classified "confidential" and others unclassified but "sensitive."

Cargill, whose operations span 65 countries from Australia to Zimbabwe, often faces "complexities" in particular countries, it said in an e-mail to the Star Tribune. "Issues can arise at the economic, government and political levels at any time."

It's a matter of working through them -- when possible.

Take Argentina, historically home to some of Cargill's most extensive operations in Latin America -- and some extensive headaches, too. In 2006, then-president Néstor Kirchner suspended beef exports to stem stubborn inflation. The timing couldn't have been worse for Cargill.

Just a year earlier, it had completed purchasing Finexcor, one of Argentina's biggest beef exporters. A Cargill executive told U.S. Embassy officials that Kirchner's export suspension was a "most brutal" move and could "cripple the company's beef business."

The U.S. ambassador took Cargill's and two other U.S. firms' concerns to the head of Argentina's planning ministry. The minister indicated the ban was being eased. Still, it lasted four months and was followed by years of beef export restrictions.

Last year, Cargill sold Finexcor for what Argentine business newspaper El Cronista described as a nominal sum.

Cargill's beef with Argentina went beyond beef. By 2008, Cargill and several other American companies in Argentina were chafing over the government's increasingly restrictive tax and export policies.

Cargill's top Argentina executive told the U.S. ambassador that his company's grain operation had lost "millions," though it would likely "still do very well" in 2008.

The Cargill executive was frustrated "at the lack of access for his company and other major exporters to key policy makers in the government," according to an embassy cable. "He was not, however, ready to have Cargill identified as asking the U.S. to intervene out of concern [the Argentine government] could target them."

So the U.S. ambassador agreed to raise Cargill's concerns about export regulations to "high level" government officials -- without mentioning Cargill.

If any meeting occurred, it didn't appear to do much good. In the summer of 2008, the Argentine government declared that Cargill and 56 other firms together retroactively owed $1.7 billion in grain export taxes, according to a cable.

It's not clear how that matter was resolved. But tax issues have continued to simmer between Cargill and Argentina's government, which is now led by Cristina Kirchner, Néstor Kirchner's widow.

Last year, Argentina launched a tax evasion investigation of several big agribusiness companies, including Cargill. Cargill has denied it made any deceptive or false tax transactions, and says a dispute with Argentina over tax claims is being resolved in court there.

Nationalized mill

Cargill has had woes of a different sort in Venezuela, where it also has extensive investments, including in animal feed and consumer food products. Under President Hugo Chavez, the Venezuelan food sector is heavily regulated, with Cargill the subject of "constant inspections," one 2008 cable said.

Venezuela's regulations are subject to interpretation, so many companies offer "incentives" to officials to ensure they get proper certificates, according to a cable. "One of Cargill's biggest challenges is their corporate policy, in compliance with U.S. law, against bribes," the cable said.

In the spring of 2009, Chavez announced the expropriation of Cargill's lone rice mill, part of a bid to further his socialist vision and exert more control over the food industry.

Cargill, despite being hammered publicly by Chavez, went "out of its way to cooperate" with the Venezuelan government on the nationalization issue, according to cables.

Not making waves made sense: Rice was but a minor part of Cargill's business in Venezuela, and Chavez's economic interventionism posed a growing threat.

So Cargill accepted a government offer for its rice plant that didn't fully reflect its value -- "in order to protect its larger investments in Venezuela," according to one cable.

But by early 2010, Venezuela hadn't forked over $8 million due for the plant, and Cargill suspected the payment was in jeopardy. The issue still has not been resolved, Cargill told the Star Tribune.

In Syria, Cargill faced direct government intervention of a different sort. Cargill played a big role in developing a sugar mill near Homs, one of the largest private western investments in Syria. A Syrian businessman owns 51 percent of the operation, while Cargill is a minority investor.

In August 2009, the Syrian Ministry of Economy seized up to 6,000 tons of sugar from a warehouse, or about $3.5 million worth -- all of the plant's stock, according to cables. The sugar operation was accused of "hoarding" and "monopolistic practices."

Economy ministry officials and "100 or so" uniformed police officers and security forces descended on the plant in a "midnight raid," as one cable put it. "Cargill's experience serves as a poignant reminder of the government's solid control of the Syrian economy," the cable said.

The sugar refinery suddenly shut down in February as Syrian President Bashar Assad's regime laid siege to Homs. The plant's Syrian majority owner reportedly blamed the closure on deteriorating security. But Cargill and other minority investors say the plant closed after they took legal action against the Syrian owner for trying to push them out. The mill remains shuttered.

Vanishing wheat

Not long after the Syrian sugar shakedown, Iraq's government banned Cargill from trading grain in that country in a dispute over missing wheat worth up to $20 million.

Under a contract with the Iraqi government, Cargill was responsible for transporting 180,000 tons of wheat to Iraq, a job Cargill contracted to a Syrian shipping company. Only 80,000 tons of wheat showed up at Iraqi flour mills, the government claimed, according to a January 2010 cable.

Cargill, which got paid for the whole shipment, claimed it did the whole job and had documents proving so, according to a cable. The company asserted the missing grain was stolen, and the Iraqi government or its agents were complicit in the theft.

Due to the dispute, Iraq's government grain board excluded Cargill from tendering bids for wheat and rice contracts. "These contracts feed the [government of Iraq's] $7 billion Public Distribution System, a significant market even for a company as large as Cargill," the cable said.

Cargill asked the U.S. Embassy in Baghdad to intervene in the dispute. But no luck so far. "We've tried to resolve the matter and resume our business with Iraq," Cargill said in an e-mail to the Star Tribune, "but we have to date been unsuccessful."

Mike Hughlett • 612-673-7003

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