Brazil Moves to Calm Beef Scandal As Temer Heads To Steakhouse

Brazil’s government moved to head off a crisis over allegations that meat exporters had bribed inspectors to approve tainted beef for sale and export by summoning ambassadors to reassure them they have nothing to worry about.

President Michel Temer and his agriculture minister met with top diplomats of the European Union, Sweden, Canada and other countries to say slaughterhouses were being properly audited and that Brazilian meat is safe to eat. Temer said he was headed out for a steak afterward and encouraged others to do the same.

“This is an urgent issue since it has repercussions for us internally and abroad,” Temer told reporters. “We spoke with embassies so that they could pass the word onto their governments in regards to any concern from the previous days. I invite everyone to go out to a Brazilian steakhouse now.”

Temer then dined with 19 ambassadors at a 119 reais ($39) per person all-you-can-eat steakhouse, sitting between the Chinese and Angolan diplomats.

Federal authorities said that an investigation unveiled Friday showed about 40 companies, including JBS SA and BRF SA, had been involved in illicit activities such as bribing inspectors to approve the sale and export of spoiled meat and adding chemical substances to mask the poor quality. While the companies have denied the allegations, including through full-page ads in Brazil’s newspapers and spots on TV, their shares have tumbled at a time when both JBS and BRF are trying to access capital markets again.

Explanations Sought

The European Committee for Health and Food Safety is aware of the investigation and is seeking additional information, according to an emailed statement Sunday. The committee said it hasn’t found any irregularities with health certificates related to meat from Brazil since 2015. China and the US have also requested explanations, O Estado de S. Paulo newspaper reported, without saying how it obtained the information.

Agriculture Minister Blairo Maggi said after the meeting Sunday that the issues unearthed by the investigations are not generalized or widespread in the industry, and that authorities are working to ensure the highest quality hygiene and transparency.

“Brazil’s industry is robust and strong but it isn’t infallible,” he said. “We’re making sure that what’s being produced now is getting the proper inspection.”

No trade partners have moved to end import contracts, officials said. Only China and the EU have sent requests for explanations and will receive them today, Maggi said.

The presidency said in a statement that of more than 4,000 plants in the country only 21 are being probed, and that 33 of a total 11,000 employees in the industry are under investigation.

Executive Arrested

Federal police served hundreds of court orders related to the investigation on Friday, including more than 30 detention warrants, in what local media said was the largest police operation in the country’s history. Roney Nogueira dos Santos, a BRF executive, was arrested at Sao Paulo’s international airport on Saturday after arriving from South Africa. BRF said in an emailed statement that he surrendered to the authorities and is available to give all clarifications needed.

China and Hong Kong, which together are the biggest export market for Brazilian meat, were the destination for about a third of the $5.5 billion of beef shipped from Latin America’s largest economy last year, according to the meat exporters group Abiec.

The European Union is the second-largest market, with 13% of the exports. China and Hong Kong are also the biggest Brazilian market for chicken, while the European Union ranks third, according to the Brazilian Association of Animal Protein Abpa.

Retail Chains

Some of the tainted meat was sold domestically for school meals or to retail chains including Wal-Mart Stores Inc., according to police and Brazil’s Federal Revenue agency. Some was exported — police allege three BRF cargoes tainted with salmonella are still en route to Europe. Wal-Mart said in a statement that it has requested explanations from the suppliers cited by the police, and that its internal procedures on food safety are reliable.

The US bought $297.8 million of red meat from Brazil in 2016, according to government data. That’s a fraction of the roughly $200 billion of meat Americans consume annually, the bulk of it from domestic sources, according to the North American Meat Institute.

While prosecutors of the so-called “Weak Flesh” probe said the practice was widespread in the industry, there have been no cases of individuals getting sick from consuming the products, and Brazilians over the weekend were mostly buying meat as usual. It was alleged that some of the meat, including sausages and cold cuts, was adulterated with ingredients including pig heads, and that suspect smells were masked by applying acid.

Brazil’s Federal Inspection Service is one of the most efficient and rigorous worldwide, the Brazilian Ministry of Agriculture said Saturday in a statement. On Friday, it said that while the scandal revealed only isolated cases, it may more broadly harm the country’s global trade reputation.

Salmonella Strain

The kind of salmonella found in containers of meat en route to Italy is Salmonella Saint Paul, which is permitted by European standards, BRF also said in a statement on Saturday.

Prosecutors said that BRF and JBS had influence in choosing the inspectors responsible for overseeing their plants and paid bribes to get clearance for their products. Two executives at JBS and three at BRF are among those being investigated, police said.

Expansion Plans

Sao Paulo-based JBS said in a statement that it “vehemently repudiates” claims it sold spoiled food. While the company denied its executives were targeted by court orders, it confirmed three of its plants were included in Friday’s probe.

The investigation and any potential repercussion on business come at a bad time for the companies. JBS is trying to sell shares in the US and expand in what’s proving to be its most lucrative market, while BRF is pursuing a sale of shares in its halal unit — a plan already in doubt after the company posted a record quarterly loss.

JBS slumped 11% and BRF tumbled 7.3% at Friday’s close in Sao Paulo, the worst performers on Brazil’s benchmark stock index. Bond yields for both companies also surged.

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