Brasil Foods (BOV:BRFS3)
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6 Months : From Jan 2017 to Jul 2017
By Paul Kiernan
RIO DE JANEIRO -- Brazilian authorities scrambled to contain the fallout from a police sting that has raised questions about the safety of the nation's meat industry, as more countries said they planned to suspend imports due to sanitary concerns.
China, the biggest buyer of Brazilian meat, along with South Korea, the European Union, Egypt and Chile took steps to ban imports from either Brazil or those companies accused by Brazilian federal police Friday of bribing sanitary officials for health certificates. Among the dozens of companies targeted are some of the world's biggest producers and exporters of chicken and beef, including JBS SA and BRF SA.
Both companies have denied selling bad meat or bribing officials.
Brazilian officials fear police allegations that meatpackers peddled rotten, salmonella-infested products could hurt one of the country's most vibrant industries at a time when the economy is fighting to recover from its deepest recession on record. Brazil is the world's second-largest producer of chicken and beef, trailing only the U.S., and meat products are among its top exports.
Both here and abroad, consumers expressed concern about the allegations. "We've been cheated if all of this is true," said Patricio Buccioni, a 68-year-old taxi driver in Santiago who often buys Brazilian beef at the supermarket. Asked whether he will continue doing so in the future, Mr. Buccioni said, "I'm going to be more careful."
GPA, Brazil's largest retail group, said in a note that it is watching the scandal closely and "repudiates any practice that puts at risk the health of its customers." The firm added that its supermarkets conduct internal monitoring to guarantee the quality of their meats.
The investigation, dubbed "Weak Flesh," took Brazil's leaders by surprise and left them walking a fine line as they sought to calm consumers and trade partners without appearing dismissive of the findings.
"Agribusiness for us in Brazil is an extremely important thing, and it must not be devalued by a small nucleus," President Michel Temer said Monday in a speech at the American Chamber of Commerce in São Paulo.
Mr. Temer has been huddling with regulators, meat producers and foreign officials to discuss the probe and reassure them that Brazilian meat is safe. After a day of back-to-back meetings Sunday, the president treated 19 ambassadors and eight foreign trade officials to dinner at Steak Bull, a plush, all-you-can-eat grill near the presidential palace.
Mr. Temer's office said Sunday night that all the meat served at the dinner was of Brazilian origin, after local media outlets reported that the restaurant specializes in imported cuts.
In a Twitter video featuring uplifting music and scenes of green pastures, Mr. Temer said Brazil's meat producers have "won over consumers and obtained approval from the most demanding markets in terms of enforcement." Agriculture Minister Blairo Maggi, himself the owner of huge tracts of farmland in Brazil's interior, said that "the vast majority" of government workers are trustworthy and that only 21 of the country's 4,837 meat plants are under investigation.
Talking to reporters on Sunday, Mr. Maggi said the government supported the investigation but he criticized the federal police for not clarifying some information with the ministry. For instance, police highlighted the use of meat from pigs' heads in sausages, a practice Mr. Maggi said is in fact legal in Brazil.
And some meat-loving Brazilians shrugged off the concerns.
"Yesterday, I had a barbecue with my family and friends," said José Molina, a 57-year-old advertising worker, while preparing for a meat-heavy lunch at a São Paulo steakhouse. "I think there's exaggeration and that the situation will go back to normal soon."
But several governments around the world expressed worry about the allegations, and industry officials were bracing for further restrictions from export markets.
China informed the Brazilian Agriculture Ministry on Monday that it will ban meat imports from the South American country until Brazil's government explains the situation. Mr. Maggi was scheduled to hold a videoconference with Chinese authorities on Monday night to "provide clarification," the Brazilian ministry said.
China imported nearly $2 billion of meat products from Brazil last year.
Enrico Brivio, spokesman for public health and food safety at the European Commission, said Monday during a news briefing that the bloc is moving to suspend imports from "any of the establishments implicated in the fraud."
"We've asked our member states to remain vigilant and increase...controls on meats coming from Brazil," Mr. Brivio said, referring to "documentary and physical checks."
The Agriculture Ministry of Chile, one of Brazil's top-10 export markets, said on Twitter that it had suspended imports of Brazilian beef until it received further details.
South Korea's Ministry of Food and Drug Safety said it wouldn't allow chicken already imported by BRF to be sold or circulate in the country. And in Finland, the food safety authority said it had launched its own investigation.
Egypt temporarily suspended imports of poultry and other meat from Brazil pending a response from the Brazilian Embassy in Cairo to questions sent by the local authorities, Agriculture Ministry spokesperson Hamed Abduldayem said.
BRF said Monday that it hasn't been officially notified by foreign or domestic authorities of any suspension by countries where it does business.
Industry officials sought to play down the scandal by calling the police's conclusions into question. Antonio Jorge Camardelli, head of beef exporters' group ABIEC, said in a news conference Monday the police based some of their allegations on technical mistakes, saying an "unnecessary crisis" had resulted.
The biggest questions going forward are how many more countries will move to restrict Brazil's meat exports, and for how long.
Neil Shearing, chief emerging markets economist at Capital Economics, said that while it is too soon to know the full impact, the scandal could "plausibly derail the country's economic recovery" if it continues to grow.
"It goes without saying that this is the last thing that Brazil's economy needed," Mr. Shearing said.
--Emre Peker, Paulo Trevisani,
Jeffrey T. Lewis
, Luciana Magalhães,
, Lucy Craymer and Ryan Dube contributed to this article.
Write to Paul Kiernan at email@example.com
(END) Dow Jones Newswires
March 20, 2017 16:32 ET (20:32 GMT)
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