Brazilian meat exports and the consequences of “Weak Flesh” corruption probe

29/03/2017 - 7:00 | Author: Proinde

Despite a significant decrease in volume and income due to a two-year economic recession, the agribusiness firmly stands as an important aspect of Brazil´s economic development and remains fundamental to keep a positive trade balance. Last year, agribusiness exports represented nearly 46% of all Brazilian exports yielding a revenue of USD 84.9 billion with animal protein exports contributing with 17% of this result.

Brazil is the world´s leading exporter of beef and poultry. In 2016, poultry exports accounted for US$ 6,7 billion whereas beef exports reached US$ 5,3 billion in revenue. It is also the fourth largest exporter of pork meat having exported around US$ 1,5 billion last year with room to market expansion.

On 17 March 2017, a Brazilian Federal Police investigation code-named Carne Fraca (“Weak Flesh”, in Portuguese), launched in 2015, went public in the most alarmingly fashion and almost instantly put the entire Brazilian meatpacking industry, which employs 6,7 million people, in jeopardy with consumers wondering whether the quality and health of the meat products can be trusted.

Conducted by a team of 1,100 officers, the Weak Flesh operation investigates a corruption scheme rooted in at least three States that targeted public servants are accused of issuing quality certificates overlooking mandatory sanitation and health requirements and practices in exchange of bribes paid out by meatpackers such as JBS and BRF, the biggest exporters of Brazilian beef and poultry, respectively, and a dozen of other smaller competitors.

The chief of police in charge of the Weak Meat told reporters there is evidence of at least 40 cases where acid and other potentially carcinogenic chemicals were used to mask the aspect of decayed meat. He also mentioned incidents where water, potato and even cardboard were added to the chicken to increase its weight and enhance profits. JBS and BRF have both issued notices to the market reassuring adherence to the highest quality standards and denying any corporate wrongdoing.

In a joint press release, the Federal Police and MAPA affirmed that although the police investigation aims at irregularities within the S.I.F. system, the misconducts under investigation were perpetrated by a few public servants and do not signify a widespread malfunction of the food safety system.

In all 194 search and seizure warrants were issued; 77 individuals coercively taken for police questioning and 38 arrested, including MAPA public servants and employees of JBS and BRF and other smaller meat producers. 33 officials were ousted from their posts at MAPA pending conclusion of the probe. As at today, 25 individuals remain under police custody and the others were released. It is expected that as the Weak Flesh progresses and widens its scope, other companies and individuals could also be probed.

Despite the prompt response by governmental authorities and the meatpacking industry to conduct a transparent investigation and reassure the excellency of the Brazilian export animal protein, the sector has inevitably been hit and it will take some time until the confidence of the importing markets is reconquered. A decline in the exports is likely to occur with competing exporters trying to clinch a deal to fill the supply gap left by the ban in some countries.

At the exporting ports, delays are expected to happen due to uncertainties surrounding the acceptance of laden containers at the destination. The Union of Shipping Agencies in the State of Sao Paulo (SINDAMAR), where the Port of Santos is located, has expressed concerns that depending on the amount of cargo grounded in the port terminals, there may be a shortage of power outlets in some location. Delays could also limit the offer of reefer containers for carriage of other types of perishable cargoes exported by Brazil, such as fruit cargoes that are shipped in the Northeastern ports.

Delays or even abandonment of Brazilian meat exports may also be experienced at discharging ports due to the heightening of sanitary surveillance for cargo clearance by importing authorities.

The carriers must cooperate fully with their customers to handle requests for cargo return and change of destination with the utmost priority to prevent containers from being stuck at ports where restrictions are in place – MAPA website (in Portuguese) provides a list of the countries imposing restrictions. It also provides a list of the status of the meatpacking plants under investigation.

Considering the current uncertainties, the carriers must keep a good track over containers with Brazilian meat imports for early detection of uncollected (or non-eligible) cargo, so as to allow prompt action aiming at cargo disposal, container return and collection of demurrage and other charges due to the carriers.

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