24/03/2017
Meat crisis causes wider stink in Brazil’s corporate sector
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Americas Business
Meat crisis causes wider stink in Brazil’s corporate sector
Allegations of bribes over tainted exports add to a line of corruption scandals
© FT montage / Getty
YESTERDAY by: Joe Leahy in Brasília
When Flavio Evers Cassou, an employee of the world’s biggest meatpacker, JBS (https://
markets.ft.com/data/equities/tearsheet/summary?s=JBSS3%3ASAO), dropped off a
large cooler of meat at a friend’s home last year in southern Brazil, he could not have
foreseen the crisis of confidence it would cause in the industry and the country’s wider
corporate sector.
The friend in question happened to be Maria do Rocio Nascimento, the chief inspector of
products of animal origin in Paraná. And the meat, delivered together with some cash,
was allegedly a bribe for signing off on health certificates for JBS products, according to
a court order detailing the deal. Unbeknown to the pair, federal police officers were secretly filming the drop­off and
wiretapping conversations between them and scores of other suspects. Last week, police
arrested Mr Cassou, Ms Nascimento and 36 others for allegedly helping lead a scheme (h
https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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ttp://next.ft.com/content/e87e556c­0da9­11e7­b030­768954394623) in which corrupt
health officials blindly issued certificates for exports of meat to Europe and China
without inspecting cargos. The court documents list 21 companies involved in the scheme, including units of JBS’s
processed meat company, Seara, and BRF (https://markets.ft.com/data/equities/tearsh
eet/summary?s=BRFS3:SAO), the world’s biggest poultry exporter. In addition, it is alleged that the officials turned a blind eye while lesser known
producers converted putrefied meat into mortadella or illegally ground pig heads into
sausages. China, Hong Kong, Japan, the EU, Canada, Egypt and Chile have announced
full or partial suspensions of imports of Brazilian meat as a result.
The widening scandal is just the latest in a series of damaging revelations to shake the
Brazilian corporate sector, already struggling with the worst recession to hit Latin
America`s biggest economy.
In 2015, state­owned oil group Petrobras was nearly driven into technical bankruptcy by
an ongoing investigation into a bribery and kickback scheme involving politicians,
former directors and contractors. https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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Then it was the turn of the country’s giant construction sector. Odebrecht, Latin
America’s biggest developer, signed a plea bargain last year in which it admitted to
setting up an international system of bribery payments (http://next.ft.com/content/8edf
5b2c­c868­11e6­9043­7e34c07b46ef) to win public contracts in 12 countries. So the revelation of corruption in the food industry, one of the country’s most successful
export sectors, is yet another sign that the country needs to do more to improve
governance, analysts say. “The cases show very clearly the promiscuous relations between the private sector, public
sector employees and the state,” says Arnaldo Francisco Cardoso, professor of foreign
commerce at Mackenzie Presbyterian University in São Paulo. © AFP
With exports to 160 countries, Brazil’s meat industry accounts for $12.6bn of its exports,
or about 0.7 per cent of gross domestic product. China comprises about one­third of
these exports with other parts of Asia, Chile, the Middle East and Russia also important
markets. The controversy over the meat scandal is expected to hit BRF hardest because most of its
production is in Brazil. Following a decade­long overseas acquisition spree, JBS
generates 73 per cent of its revenue from subsidiaries in the US, Australia, Europe and
Canada, lessening its exposure to the scandal. https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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JBS and BRF, the largest companies allegedly involved, have vehemently denied the
more extravagant allegations, such as that they sold rotten meat or products infected
with salmonella bacteria. JBS has said that none of its executives were arrested and investigators did not raid its
headquarters but targeted three regional plants. Both companies said they were against
corruption and supported the investigation.
Politicians and political lobbyists have complained that the reputation of the sector is
being tarnished by the alleged wrongdoing of a very small group.
“We have about 4,850 meatpacking plants in Brazil,” Michel Temer, the Brazilian
president, told an investor conference this week. “Only three have been suspended, and
another 18 or 19 are being investigated.” The Association of Brazilian Animal Protein, an industry lobby group, argues that the
global meat industry is so competitive that the country’s competitors would have seized
on any problems. Yet out of 853,000 shipments last year, it says, only 184 were found to
have complications and many of these were unrelated to sanitary issues. Even the police have come out defending the industry, saying the probe did not mean
that corruption was systematic in the food industry. The public relations campaign has
helped to stabilise JBS and BRF’s shares, which initially fell almost 8 per cent. “The high sanitary standards and history of animal and product safety of Brazilian
exports should mitigate the risks of further temporary or permanent adverse measures
[from trading partners],” Moody’s Investors Service said. But Moody’s added that it was also difficult to say how long it would take to repair sales.
https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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The reputational damage to the industry will linger. Brazilian social media was rife with
jokes parodying the scandal, with pictures of toilet rolls being prepared for a barbecue in
reference to a police comment that cardboard had made its way into processed meat — a
point later disputed by agriculture ministry officials. “This issue needs to be resolved fast,” says Sérgio de Zen, a researcher into the cattle
industry at Brazil’s centre of advanced studies in applied economics, Cepea. “China, for
example, is a huge importer of Brazilian beef. We cannot replace such a market
overnight.” In one conversation secretly taped by police, two owners at a smaller meatpacker
allegedly discuss illegally putting 2,000 kilogrammes of pigs’ heads into sausage mix. “It’s prohibited to use meat from the head in sausage,” acknowledged one. “Yes, but it
would be only 2,000 kilos to complete the cargo,” said the other, according to the court
order. The same company, Peccin, was also alleged to have covered up the smell of rotten meat
by adding excess amounts of acid, the court order alleges. Peccin has denied wrongdoing.
While none of the larger producers are accused of such practices, the wider question of
why Brazil’s national champions are so often being dragged into corruption scandals
https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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remains.
Some analysts believe it is part of a structural change, with the country’s independent
prosecutors and federal police becoming more active. This is seen to be taking its toll on
private sector companies — and particularly the listed groups, according to Eurasia
Group, a political risk consultancy.
But it added: “In the medium term, the Brazilian private sector will emerge stronger
because of it.”
Mr Cassou, the employee of JBS’ Seara, captured the mood in a post on his Facebook
page before his arrest. He noted that “ethics is what you do when the whole world is
watching. What you do when no one is looking is what is called character”. By his own
measure, he and at least part of the industry have a lot of character building to do. Scandal shines light on BRF
Brazil’s meat selling scandal has brought to the fore one of the country’s most
successful but least known exporters, BRF.
Headed by the country’s richest retail entrepreneur, Abilio Diniz, BRF has grown
into the world`s largest poultry exporter with 105,000 employees and factories
in seven countries and R$28.8bn in sales last year.
With American depositary receipts listed in New York, the company’s largest
shareholders also include two government pension funds, Previ and Petros, with
about 22 per cent.
The scandal, however, highlighted the alleged closeness of its employees with
health inspectors in some regional plants, according to court documents.
Roney Nogueira dos Santos, the company’s head of institutional and
governmental relations, was wiretapped allegedly trying to cover up the fact that
BRF sent a senior Brazilian health inspector, Maria do Rocio Nascimento, on an
all expenses­paid trip to Europe to inspect poultry plants.
He was taped debating how to handle an illegal political donation requested by a
local politician, who also asked Mr Santos for help placing a grandson into the
first division São Paulo Football Club, of which Mr Diniz was a director.
https://www.ft.com/content/52837364­0ed8­11e7­b030­768954394623?accessToken=zwAAAVsAtN3okc9Sg3NkDtgR59OwMHaJVDlGIw.MEUCIQDKC4…
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Other officials, such as Seara’s Flavio Evers Cassou, are accused in court
documents of having had regular access to health inspection computer systems
— or to officials with such access — including usernames and passwords. It was
alleged that they used this to approve export certificates for countries, such as
China. BRF and JBS has denied wrongdoing.
Print a single copy of this article for personal use. Contact us if you wish to print more to
distribute to others. © The Financial Times Ltd.
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