Brazil’s never- ending scandal | TSLN.com

Brazil’s never- ending scandal

Against opposition from all of the major cattle organizations in the country, USDA is expected to approve the importation of fresh meat from Brazil this year. Many worry this will give foot and mouth disease entrance into the United States. iStock photo

The founder and chairman of Brazil-based meat processor Marfrig Foods signed an agreement with federal prosecutors to pay $28.73 million to cover potential damages related to a bribery investigation, according to the Federal Prosecutors' Office.

Marcos Antônio Molina is under investigation for allegedly paying $2.87 million in bribes to obtain a loan from state-owned bank Caixa Economica Federal in 2012.

Marfrig Global Foods, one of the world's largest animal protein producers, released a statement saying that the agreement signed by Molina is not an admission of guilt, but exempts the company from any potential payments and future financial impact arising from the investigation.

However, the agreement does not exempt Molina from responding to the allegations of illegal activities being investigated in the corruption probe dubbed "Operation Cui Bono," and is in "anticipation of compensation" to victims, according to prosecutors.

According to reports, the payment will be paid in installments starting in May, to be adjusted by Brazil's Selic interest rate. The payment will be divided among Caixa Economica Federal, the federal government and social projects involved in research and treatment of childhood cancer.

While the company works to settle the scandal discussion, it's all business as usual.

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On April 9, Marfrig announced the company had reached an agreement for the acquisition of 51 percent of the membership interests in National Beef Packing Company, LLC, the fourth-largest beef processor in the United States. Marfrig will pay $969 million for the equity interest and, once the transaction is concluded, will become the world's second-largest beef processor, with consolidated sales of $13 billion.

Founded in 1992, National Beef reported sales of $7.3 billion in 2017 and, since 2011, has been controlled by Leucadia National Corporation, which currently holds a 79 percent interest. National Beef has a slaughtering capacity of 12,000 heads of cattle per day and is headquartered in Kansas City. It has 2 slaughterhouses located in Dodge City and Liberal, Kansas and accounts for approximately 13 percent of total U.S. cattle slaughtering capacity. National Beef is one of the most profitable beef companies in the United States. Once the transaction closes, Leucadia will transfer control to Marfrig and remain a minority shareholder in National Beef, with a 31 percent interest. The US Premium Beef, an association of American producers, will hold 15 percent and other shareholders with the remaining 3 percent.

Leucadia and the other investors have agreed not to sell their shares in National Beef for at least five years, but some in the industry are crying foul play on the merger.

In a letter to U.S. Attorney General Jeff Sessions and U.S. Treasury Secretary Steve Mnuchin, R-CALF USA asked the Trump Administration to block the sale.

According to R-CALF USA, Marfrig has followed JBS to the United States so Brazil can gain additional control over U.S. fed cattle marketing outlets and the U.S. live cattle supply chain.

The group contends that both JBS and Marfrig are state-controlled enterprises controlled in whole or in part by the Brazilian government, which is providing resources to the companies so Brazil can become a global, beef packing powerhouse. It asserts JBS and Marfrig are cartels with histories of being bad actors, working in parallel if not together to exploit cattle producers on one end of the supply chain and consumers on the other.

With the purchase, comes plans for a sale. Brazil's Marfrig announce plans to sell its subsidiary Keystone Food, to reduce financial leverage following the National Beef acquisition.

In a securities filing last week, Marfrig said five companies qualified for the second phase of bidding. According to a Reuters report, Tyson, Cargill and Fosun International were among the interested parties. Marfrig said the bidders will be allowed to access a data room and visit Keystone plants in the U.S. and Asia. The company also said it expects binding proposals in June.

Keystone Food, which is one of the largest international suppliers of industrialized foods to large restaurant and retail chains, operates 19 production units in the U.S., China, Malaysia, Thailand, South Korea and Australia. Together, these units have the capacity to process up to 250 million birds and manufacture 580,000 tons of food annually — enough to serve a customer base that includes restaurant and fast-food chains such as McDonald's, Subway, Wendy's, Iceland Foods and Campbell's.

While the buying, selling, and investigating continues, more Brazil news was added with a national truck strike.

More than 100 meat production facilities in Brazil have partially or completely suspended activities as of March 23, according to Brazilian meat industry associations. The truckers' strike started on Monday as a protest against the fuel price policy of state-owned oil company Petrobras, and taxes on diesel fuel.

The national poultry and pork processors association, ABPA, and the entity representing the beef industry, ABIEC, said 129 plants have stopped production, and more than 90 percent of the total production of animal protein in Brazil could be suspended if the strike proceeds.