Bribery and corruption mar Brazil’s meat packing and processing industry
March 21, 2017
JBS suspended production at 33 of its 36 Brazilian plants as other countries — though not the U.S. — ban Brazilian beef due to a corruption scandal, Reuters reported.
Egypt, China, Mexico, Canada, the European Union, Saudi Arabia, Japan, Switzerland, Hong Kong and Chile have all instituted partial or full bans on Brazilian meat imports, Reuters said.
The U.S. Food Safety and Inspection Service has instituted pathogen testing and increased the examination of all shipments of raw beef and ready-to-eat products from Brazil, but has issued no ban. FSIS is also testing all lots of raw beef trimmings and ready-to-eat product from Brazil for pathogens and increased examination of all of those products.
Sonny Perdue, President Donald Trump’s nominee for agr secretary, said at his confirmation hearing on March 23 that he would oppose a U.S. ban because it could lead other countries to retaliate with bans on imports of U.S. ag products.
Senate Agriculture Committee ranking member Debbie Stabenow, D-Mich., sent Ag Acting Deputy Secretary Michael Young a letter seeking information about how USDA is handling the issue.
Sen. Jon Tester, D-Mont., announced he would introduce a bill to to ban the importation of Brazilian beef for 120 days.
Tester has been a critic of USDA’s decision to allow the importation of Brazilian beef.
There have been reports that Australia and other countries are trying to replace Brazil as a supplier, but in Montana there are concerns that the Brazilian scandal could hurt the beef industry, reported the Billings Gazette, with calls to reinstitute country-of-origin labeling (COOL) for beef.
The U.S. repealed COOL when the World Trade Organization ruled that it resulted in discrimination against Mexican and Canadian producers.
-The Hagstrom Report
A recent Brazilian meat packing and processing scandal continues, wreaking havoc from within the country, but also on a number of other countries that have banned imports from Brazil, a country that is still recovering from a recession and government corruption.
According to Brazilian police reports, three factories belonging to BRF (the world's top poultry producer) and JBS (the world's top beef exporter), have been raided and closed, because the companies have, for years, been bribing officials and politicians to ignore quality meat standard policies, and allowing the sales of rotten beef and poultry. Authorities in Brazil have also reportedly suspended at least 33 government officials, arrested up to 38 individuals, and are reviewing up to 21 other processing plants.
"Brazilian authorities are investigating some of the world's biggest meatpacking companies for allegedly bribing food-sanitation inspectors to approve sales to domestic and foreign buyers of meats that might otherwise have failed to pass muster," the Wall Street Journal reported on March 17.
It has been dubbed operation Carne Fraca — "The Flesh is Weak" — a Biblical reference aimed at the health officials who allegedly succumbed to temptation by accepting bribes; the two-year investigation came out on March 17, when officials said they had evidence of at least 40 incidents. The BBC reported that federal police carried out raids in 194 locations, deploying more than 1,000 officers. Investigators allege that managers bribed health inspectors and politicians for product certification, overlooking expired meats.
“We feel it’s too soon to speculate about any impact on Brazil’s exports or on global meat trade. A few trading partners have announced temporary suspensions or enhanced inspections for Brazilian meat, but we don’t know if this will have a lasting impact on trade.”
"They used acid and other chemicals to mask the aspect of the product. In some cases, the products used were carcinogenic," the police said. In other cases, potato, water and even cardboard paper was mixed with chicken meat to increase profits, according to reports.
CME's daily livestock report on March 21 pointed out the big concerns behind the scandal. "The reason this is such a major issue is because it brings into question the integrity of the food safety inspection [of] a key global producer. The most recent revelations are part of a widening corruption scandal in Brazil; a scandal that has involved some of the most powerful people and companies in Brazil."
Much of the meat produced by the companies accused in the scandal is exported to Europe and other parts of the world. In recent years, Brazil has become the largest global supplier of red meat and poultry products, surpassing the U.S. USDA data shows exports of Brazilian chicken accounting for almost 40 percent of the exports from the major supplying countries. China and Hong Kong accounted for 18 percent of Brazilian chicken exports in 2016, according to USDA numbers, and Saudi Arabia and the UAE, combined, imported about a quarter.
Brazil also ships to a number of smaller markets and Brazil's beef exports were up 9 percent in 2016 from previous years, according to USDA.
The audit of the plants has been launched and is expected to take up to three weeks, leaving a large window for trade implications.
"We feel it's too soon to speculate about any impact on Brazil's exports or on global meat trade. A few trading partners have announced temporary suspensions or enhanced inspections for Brazilian meat, but we don't know if this will have a lasting impact on trade," said Joe Schuele, Vice President, Communications, U.S. Meat Export Federation.
On March 20, the Brazilian government said it was shutting down exports of meats from the 21 plants under investigation, but internal sales would not be affected.
Hong Kong's ban followed China and Chile's decision to block all imports of meat from the South American nation. China is the largest consumer of Brazilian meat, followed by Hong Kong. The European Union also has imposed a ban on meat coming from the targeted plants.
Brazil got a small reprieve, when South Korea lifted a ban imposed on all poultry imports.
"The challenge for smaller markets is that Brazil represents a critical supply source. According to reports, about 80 percent of South Korean chicken imports come from Brazil. For countries in the Middle East, Brazilian beef and chicken also represent a critical supply, which may be difficult to replace in the very near term," CME reported.
USDA and FSIS plan to increase inspection of Brazilian imports.
"Brazil ships relatively little meat to the U.S. It is our understanding that at this point FSIS has moved to inspect 100 percent of all Brazilian product at the port of entry. Also, Brazilian beef trimmings will be subjected to increased testing for E.coli O157:H7," CME reports.
With Brazilian meat products typically less expensive than U.S., and some countries with no established trading relationships for imports, analysts believe the products from Brazil may not be easily replaced.
"In the case of beef, Brazil is the top global supplier, having surpassed both the U.S. and Australia to grab the top spot. Brazil beef exports in 2016 were 1.850 million MT (metric tons) on a carcass weight basis," CME reported.
Agriculture Minister Blairo Maggi met with foreign ambassadors on March 20, to try to prevent sanctions being issued against the country and assure consumers that the country's meat products are safe.
"The agro business for us in Brazil is very important and it should not be marred by a small nucleus (of bad actors), a small thing," Maggi told the American Chamber of Commerce in Sao Paulo.
JBS confirmed the raids, but said in a statement that it had followed rigorous quality standards and sanitary regulations. In the statement, JBS said it had been "inappropriately connected to this story."
JBS is one of the largest meat processers in the world, producing beef, chicken and pork. It has about 150 plants worldwide and it is based in Sao Paulo.
"There are no allegations in the judge's order that JBS or its executive management violated food safety or product quality standards or engaged in any wrongdoing," the JBS statement said. "The investigation is focused on the actions of Brazilian Federal Meat Inspectors."
BRF also denied the allegations, and said it was cooperating with the investigation. BRF said it "assures the quality and the safety of its products and guarantees that there is no risk for consumers." BRF was formed by the merger of two of the best known Brazilian meat processers, Sadia and Perdigao, both from Santa Catarina in southern Brazil. They also produce margarine, pizza and other processed foods.
According to prosecutors, a percentage of the bribe money was paid to two parties from the governing coalition: Temer's centrist Brazilian Democratic Movement Party and the right-leaning Progressive Party, which is part of the president's governing coalition.
While the scandal gains traction, despite some Brazilian officials trying to downplay it, some countries are using it as another reason to buy local.
"The fact that the world's largest red meat exporter is home to this scandal is a reminder that the best way for consumers to ensure they are buying fresh, quality, and tasty food is to buy food from Scotland which is clearly labelled as Scottish," said NFU Scotland President Andrew McCornick. ❖