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Brazil smells something rotten in world's biggest meat producer

Brazil smells something rotten in world's biggest meat producer
The world’s largest meat processing and sales company JBS faces a crisis with Brazilian authorities investigating the firm for bribery of government officials willing to approve the sale and export of tainted meat.

Along with JBS, the investigation called Operation Weak Flesh is targeting at least 20 other companies, including Brazil's second biggest meat producer BRF. Several raids on the firms’ slaughterhouses revealed that some of the meat, including sausages and cold cuts, was stuffed with ingredients such as pig heads and cardboard, while suspect smells were masked by applying acid.

The probe is also looking into the role of 33 federal food safety inspectors, and over 30 arrest warrants have been issued.

JBS is not accused of selling tainted or rotten meat with no action being taken against its managers or executives, according to a company’s statement.

The accusations involved a minor part of JBS’s operations in Brazil, they follow a series of allegations made over the past 14 months. Brazilian federal police raided the company’s headquarters in Sao Paulo twice last year in connection with other corruption probes. The Federal Budget Court is checking capital injections into JBS by a state development bank.

Experts say the number of allegations could be a severe blow to JBS with years of hard-won expansion going to waste as longtime investors have stood firmly behind the company.

“The latest crisis could actually be quite serious because it not only raises doubts about the safety of the company’s key product but involves claims of bribery,” said David Tawil, a co-founder of Maglan Capital in New York, as quoted by Bloomberg.

At the same time, the scandal might further delay JBS’s plans for an initial public offering in New York. The company was expected to hold share sale by midyear.

“If there’s any truth to these allegations, then the IPO won’t even be a possibility,” Tawil added.

In the wake of the investigation, several foreign buyers, including China, Hong Kong, Singapore and Saudi Arabia have suspended meat imports from Brazil and increased inspections. On Tuesday exports plunged to just $74,000 compared to the daily average of $63 million, a drop of 99.9 percent, according to Brazil’s Trade Ministry.