Meat Scandal Shakes Brazil

Brazilian investigators revealed years of corruption in the meat-packing industry on March 17. The European Union, China, and Chile have instituted bans on Brazilian meat in light of the scandal, during which meat sold did not meet basic health and safety standards. Brazil is largest exporter of meat in the world.

Investigators accuse meat-packing companies of participating in several unsavory health practices such as repackaging beef after its sell-by day, making turkey ham out of soybeans instead of real meat, and overusing dangerous additives. In addition to these practices, they bribed health officials to allow them to continue selling the substandard meat. Authorities are quick to note that only 21 plants out of about 5,000 and 33 officials out of about 11,000 were implicated in the scandal known as Operation Weak Meat.

While the EU only banned meat from the implicated plants, China and Chile instituted blanket bans on all Brazilian meat. Exports of Brazilian meat fell from a daily average of $63 million to $74,000 after the results of the investigation were announced. Meat exports amount to nearly $14 billion, and a decrease in trade will have serious repercussions for the struggling economy. The handling of the investigation has been criticized for exaggerating the scope of the scandal and endangering an industry that employs six million Brazilians.

In a relief to the Brazilian economy, China and Chile lifted their bans on March 25 after reassurances from the agriculture industry. With Brazil’s economy still attempting to recover from its longest-ever recession, a significant drop in meat exports would have dampened recent optimism. The EU still refuses to import meat from the plants revealed by the investigation, which represent only a small portion of total meat production.

JBS and BRF, the two meat-packing corporations who are involved in the scandal, both have plans to launch initial public offerings. The combined IPOs were expected to raise over $2.5 billion and encourage international expansion. Despite the meat scandal, both companies are pressing forward with their IPOs, and neither firm has received pushback from potential investors. Despite the projected calm of both corporations, about $2.2 billion worth of market value has been lost by JBS and BRF.