April 4, 2017

 

Add'l US$4.8B losses could accrue from Brazil meat scandal-Fitch

While saying that it is still too early to assess the potential impact on meat consumption and exports as the meat scandal investigation is still ongoing, international debt watcher Fitch Ratings predicted that under a worst-case scenario Brazil would suffer additional losses of BRL15 billion (US$4.76 billion) across the whole agribusiness chain this year. The worst-case scenario could occur if the investigation is significantly expanded and has a material financial impact on the protein sector. 

 

The public-sector banks would be more exposed if the meat sector were to experience a wider-risk scenario of losses, according to Fitch.

 

Fitch maintained that the ongoing tainted-meat (also known as "carne fraca", or weak flesh) investigation into the alleged bribery of public health inspectors by 21 meat companies-including Brazil's largest meat producers, BRF and JBS-raises significant short-term uncertainties for the sector.

 

Long-term risks from the corruption investigation will be limited so long as this process remains contained to the existing plants already implicated, it added.

 

Possible delay in JBS subsidiary's IPO

 

Furthermore, the investigation, according to Fitch, will likely delay the initial public offering/private placement of JBS's subsidiary in the US and BRF's halal unit One Foods.

 

Fitch noted that federal government statements indicated that the scope of the investigation might not be significantly expanded, adding that initial import bans on Brazilian meat from key markets, including China, have also been rescinded.

 

The tainted-meat probe was announced on March 17 by the Brazilian Federal Police which divulged that 21 Brazilian meatpackers might have bribed government officials to approve spoiled meat. At least 30 people allegedly involved in the scandal had been arrested.

 

China, Hong Kong, the EU, Japan, Mexico, Canada, Switzerland, South Africa, Chile and Egypt, among others, imposed either a total or partial ban on Brazilian meat. Hong Kong is the biggest market for Brazilian beef, while China is the biggest for beef and poultry overall.

 

China and Egypt have since resumed importing meat from Brazil. Earlier, South Korea lifted a temporary suspension on the distribution of chicken already imported from Brazil, after authorities confirmed that no tainted poultry had entered the country.-Rick Alberto