Brazil sees backlash over meat scandal
March 21, 2017
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 are involved in the scandal: two belonging to BRF (the world's top poultry producer) and one belonging to JBS (the world's top beef exporter). According to reports, the factories have been raided and closed, because the companies have been bribing officials and politicians to ignore quality meat standard policies, and allowing the sales of rotten beef and poultry, for a number of years. 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" — for a Biblical reference aimed at the health officials who allegedly succumbed to temptation by accepting bribes; the two-year long investigation came out Friday, 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.
“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
"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.
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JBS confirmed the raids, but said in a statement that it had followed rigorous quality standards and sanitary regulations, and had not been accused of selling tainted or rotten meat. 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 investigation is focused on the actions of Brazilian Federal Meat Inspectors. Accusations regarding product quality issues have been inappropriately linked to JBS," said Cameron Bruett, JBS spokesperson.
According to Bruett, there have been no actions taken against JBS executives or managers.
"While one JBS employee who works at one of our processing plants has been included in the investigation, allegedly due to his relationship with federal inspectors, he is not an executive and does not play a strategic role in our Company. Any proof of wrongdoing would lead to immediate action by the Company," Bruett said.
BRF also denied the allegations, and said it was co-operating 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.
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.
Reports have the tainted meat landing in retail chains, including Wal-Mart stores, though none in the U.S. According to police and Brazil's Federal Revenue agency, up to three BRF cargoes of tainted meat were allegedly exported. Wal-Mart said in a statement that it has requested explanations from the suppliers cited by the police, and that its internal procedures on food safety are reliable.
Brazil also ships to a number of smaller markets and Brazil beef exports were up 9 percent in 2016, according to USDA. But 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.
According to a press release from USDA, that agency and FSIS began a 100 percent point-of-entry re-inspection on March 18 of beef from Brazil, but have said that none of the slaughter or processing facilities implicated in the Brazilian scandal have shipped meat products to the United States. FSIS has also increased its examination of all these products at ports-of-entry across the country. The agency said it will indefinitely maintain its 100 percent re-inspection and pathogen testing of all lots of FSIS-regulated products imported from Brazil.
"Keeping food safe for American families is our top priority," said Mike Young, Acting Deputy Secretary of the U.S. Department of Agriculture. "FSIS has strengthened the existing safeguards that protect the American food supply as a precaution and is monitoring the Brazilian government's investigation closely."
"USDA already possesses the necessary authority to prevent products which do not meet the high standards of American consumers from reaching our markets, and we expect USDA to rigorously enforce their existing authority to ensure the safety of the beef supply," Craig Uden, president of the National Cattlemen's Beef Association said in a statement.
Senator Jon Tester (D-MT) introduced legislation this week that would place a 120-day ban on the importation of Brazilian beef to the U.S. in order to allow the USDA to thoroughly investigate the matter while keeping the domestic supply safe.
"We must take decisive action to ensure no family in Montana or anywhere else in this country is exposed to the danger of deceptive Brazilian beef processors," Tester said in a press release.
In August of last year, Tester criticized the USDA's decision to allow Brazilian beef in the U.S. In 2015, Tester successfully blocked the importation of Brazilian beef from regions where foot-and-mouth disease was prevalent.
Senator Heidi Heitkamp (D-ND) and Senate Ag Committee Ranking Member Debbie Stabenow (D-MI) issued their own letters to the Administration calling for a halt on Brazil shipments and increased scrutiny. The letters ask the USDA-FSIS to report any shipments that have arrived in the U.S. and protocol taken to ensure the U.S. meat supply is safe moving forward.
United States Cattlemen's Association president Kenny Graner said, "USCA has remained opposed to the importation of Brazilian beef products to the U.S. for this very reason. The corruption and uncertainty within the Brazil government leaves the U.S. domestic industry at risk for FMD (foot and mouth disease) and suspect product," said
Trade implications, while still unknown, are likely.
An audit of the plants has been launched and is expected to take up to three weeks, leaving a large window for trade implications.
"In the case of beef, Brazil is the top global supplier, having surpassed both the U.S. and Australia to grab the top stop. Brazil beef exports in 2016 were 1.850 million MT on a carcass weight basis (they are less on a product weight basis as the chart shows)," CME reported.
Hong Kong's ban followed China and Chili'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 early Tuesday, when South Korea lifted a ban imposed the day earlier 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.
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.
The U.S. bought $297.8 million of red meat from Brazil in 2016, according to government data. That's a fraction of the roughly $200 billion of meat Americans consume annually, the bulk of it from domestic sources, according to the North American Meat Institute.
"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.
Agriculture Minister Blairo Maggi met with foreign ambassadors Monday, March 20, to try and prevent sanctions being issued against the country and assure consumers that the countries meat products are safe.
"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.
"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.
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.