Brazil Meat Scandal

HOW BRAZIL’S MEAT SCANDAL COULD IMPACT EXPORTS

The meat industry is one of the cornerstones of the Brazilian economy

By
Brazil's Meat Scandal BRF JBS Brazil meat producers agribusiness exports poultry rotten beef

It took Brazil’s meat industry decades to convince the world that their products were quality. In fact, even Oscar-winning actor Robert de Niro appeared on commercials vouching for Brazil’s processed meat. The country is now the world’s second-largest meat exporter, shipping beef, pork, and poultry to over 150 countries. Every year, exports brought $14.5 billion to Brazil. However, chances are those numbers will go down very soon. Way down.

Brazil’s Federal Police unveiled a scheme through which companies bribed federal auditors in exchange for sanitary permits to rotten beef and poultry. That episode is capable of destroying the image of the entire sector. While JBS and BRF, the industry’s leaders, lost almost $2 billion in one day, other players who are not in the scandal suffered multi-million losses as well.

“In other countries, consumers don’t know the multitude of Brazil’s meat brands. For them, it’s all Brazilian meat,” says Blenda Lara, a lawyer specialized in foreign trade.

She continues: “Things get even bleaker when we analyze that JBS and BRF, which are at the center of the scandal, are present in other sectors of the food industry, like dairy products. Consumers could boycott not only their meat but their entire production.”

Less than one year ago, Brazil had pulled an amazing deal to allow its beef into the U.S. market after 17 years of negotiations. American safety standards for foreign products are among the world’s strictest, and many countries could follow the U.S. in opening their markets to Brazilian beef.

Following the scandal, it would be a surprise if the U.S. didn’t back down from the deal.

Other countries might force prices down or even forbid imports from Brazil altogether, as the European Union has threatened. The bloc’s ambassador to Brazil, João Gomes Cravinho, told O Globo that the EU will suspend imports unless Brazil offers sufficient explanations to the problem. Today, Brazil is the EU’s biggest poultry supplier.

News couldn’t be worse for a country highly dependent on the agribusiness.

Understand Brazil’s meat scandal

Companies paid hefty bribes to auditors in exchange for fraudulent sanitary licenses. A Federal Court has issued arrest warrants against 38 people, as well as blocked more than $350m in assets. After two years of investigations, authorities found that the Ministry of Agriculture used regional bureaus to coordinate the corruption schemes.

The police identified corrupt deals in the states of Minas Gerais, Goiás, São Paulo, Rio Grande do Sul, Santa Catarina, and Paraná. Authorities have also identified corrupt actions in the nation’s capital, Distrito Federal. According to police statements, these ministry employees “acted directly in protecting business groups to the detriment of public interest”.

Of the 309 court mandates procured by the police, 38 are for the immediate arrest of authorities and agribusiness executives. Furthermore, 194 of the court mandates are for search and seizure in places of residence or work.