Meat Scandal Will Cost Brazil Over R$1.5 Billion Per Year

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The effects of last week’s Operação Carne Fraca (Weak Flesh Operation) continue to resonate both in the domestic and international meat markets. While two of the investigated meatpacking plants closed, laying off hundreds of workers, Brazil’s government calculates years until the country is able to regain international market shares.

“In export, if there is embargo, it will take three to five years to regain these markets. We are working hard to make the problem confined to these 21 companies in a clear, direct, transparent, fast and efficient confrontation,” said Agriculture Minister, Blairo Maggi, at a joint public hearing of the Senate Economic and Agricultural Affairs Committees on Wednesday.

According to Maggi the government is forecasting a loss of up to US$1.5 billion in revenues per year from the disclosure of the scandal, and losing at least ten percent of its market share. The latest official data on meat exports shows that the daily average exports fell from US$63 million to US$74,000 on Tuesday, March 21st, after more countries announced a ban on Brazilian meat imports.

From Friday, March 17th, when the operation was announced to early Monday (March 20th) afternoon, shares of JBS, BRF, Marfrig and Minerva registered losses of up to R$7.72 billion in the São Paulo Bovespa Market, according to a Reuters survey.

On Wednesday South Africa and Egypt announced they were suspending imports of meat from the meatpackers involved in the operation. They join at least six other countries which earlier announced restrictions on Brazilian meat including, Japan, Chile, China and Hong Kong.

While the government tries to convince foreign buyers that the operation only denounced specific plants and not the entire Brazilian meat industry, two of the meatpacking units investigated by federal police closed their doors and fired dozens of employees. According to analysts more layoffs and plant closings are expected in the coming days as both foreign and domestic meat sales continue to decline.

The investigation by Brazil’s federal police revealed a scheme in which companies ‘baptized’ meats with ascorbic acid and repackaged them to sell them. Monitoring agents from the Agriculture Ministry received bribes to authorize the marketing of products that were already unfit for consumption.