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on May 22, 2017

JBS boss' tape implicated Brazilian president in bribery

The tapes seemed to implicate the president and his two predecessors in a bribery scandal.

Over the weekend, protestors called for the resignation of Brazil’s President Michel Temer, after a recording from Joesley Batista, chairman of meat company JBS, seemed to implicate Temer and his two predecessors in a bribery scandal, reported Reuters. The recording was revealed last week. Temer rejected the validity of the tapes and alleged that Batista had manipulated the recording.

A related Brazilian scandal became public on March 17 when Brazilian Federal Police announced an operation to investigate allegations that meat companies, including BRFJBS and Seara (JBS poultry subsidiary), bribed Brazilian Ministry of Agriculture, Livestock and Farming inspectors to allow spoiled or adulterated meat to be sold and exported, reported Spanish newspaper El País.

JBS’ controlling shareholder will continue negotiating with Brazilian prosecutors about the fine the meat company may pay as part of a settlement for Batista’s involvement in the scandal, reported Reuters. A deadline passed on May 19 for JBS to agree to pay 11.2 billion real (US$3.44 billion) as part of a leniency deal.

The police operation was called Weak Flesh (Carne Fraca in Portuguese), referring to the quality of food under investigation and the weakness of federal inspectors tasked with inspecting such foods, reported the Brazilian newspaper Gazeta do Povo.

Through bribery of public officials, JBS and BRF producers allegedly sold products that failed to meet quality standards on international and domestic markets. Investigations suggested that public officials received bribes to facilitate the production of adulterated food, for which health certificates were issued without carrying out the inspection.

Consequences of the food safety allegations

According to the Gazeta do Povo, some executives of JBS are already in prison and the superintendent of the Ministry of Agriculture in Parana is under investigation.

Brazil’s Minister of Agriculture Blairo Maggi declared that establishments under investigation by federal police would now have agricultural tax auditors present.

“Nothing will come out of these slaughterhouses without the express authorization of our auditors, who will work on a rotating basis,” Maggi said in a press release.

Brazilian pork exports show signs of recovery

One of Brazil’s top export markets, Russia, has continued to show confidence in Brazilian pork production systems, but sales to China and Hong Kong have been slow to recover following “misleading disclosures” over the Operation Weak Flesh earlier this year, according to the Brazilian Association of Animal Proteins (ABPA).

For the month of April, the country’s total volume of pork exports – including fresh meat and processed products - was down 17 percent from the same month in 2016 at 51,000 metric tons (mt). The value of those sales, however, was almost 19 percent higher at US$131.2 million.

Brazilian pork exports to other nations

Argentina has also increased its imports of pig meat from Brazil to 12,600 mt for the first four months of this year.

Although embargoes imposed by China and Hong Kong – among other countries – have been lifted following the Operation, exports to those destinations have been slow to recover. For the January-April period, sales to Hong Kong were down by 19 percent at 48,400mt, and those to China fell 4 percent down to 19,200mt.

JBS: IPO for US subsidiary still planned, but delayed

As of May 17, JBS still intended to list and seek an initial public offering (IPO) for a U.S. subsidiary, although it will take longer to do so than previously planned.

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