Meat Scandal May Derail Brazil’s Economic Recovery

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Authorities in Brazil continued on Monday their attempt to contain a backlash of reactions about the investigation by the country’s federal police into tainted meat being sold in markets in Brazil and abroad.

With several countries already halting meat imports from Brazil, analysts say that the scandal would derail Brazil’s economic recovery.

As feared, major importers of Brazilian meats, such as China, the European Union, Chile and Korea announced on Monday morning a total or partial ban of meat imports from the South American country. Analysts say that this latest scandal is likely to be a major headache for the Temer Administration in the months to come.

“This has the potential to deliver a sizable hit to (Brazil’s) GDP,” said Neil Shearing Chief Emerging Markets Economist at Capital Economics. “As things stand, should the bans that have already been announced continue over a full year, Brazil is facing a potential loss of export revenues of about $3.5 billion. That’s the equivalent of about 0.2 percent of [its] GDP.” added the economist.

According to Shearing if other countries follow suit and also ban Brazilian meat imports, the total hit to the country’s GDP could be as high as 0.5 percent.

After a two-year investigation, federal authorities arrested on Friday, March 17th, thirty people involved with the tainted meat scandal, raided more than a dozen processing businesses and shut down a poultry-processing unit and two meat-processing plants.

Authorities set up a crisis management team with Brazil’s Agriculture Minister, Blairo Maggi and his team holding video conferences with foreign animal sanitary agencies to explain the situation.

On Sunday President Michel Temer convened an emergency meeting with foreign representatives and even took a group of ambassadors out to dinner to a churrascaria, typical Brazilian steakhouse.

According to Shearing the size of the scandal and the duration of the import ban now depends on Brazil’s capacity to handle the crisis and if “Brazil’s government and major food companies can provide adequate assurance as to the quality of the country’s meat exports”.

The longer it lasts, the more the country’s GDP will suffer and the longer it will be for the country to finally come out of one of the worst economic recession in its history.