The crackdown and investigation, called Operation Weak Flesh, is looking into the role of 33 federal food-safety inspectors; more than 30 arrest warrants have been issued. Police have also released transcripts of recorded conversations in which alleged bribes—sometimes in the form of prime cuts of beef—were discussed. In one instance, police videotaped a JBS employee arriving at an inspector’s house with a Styrofoam cooler so heavy it took two people to carry it inside. In a joint statement, the federal police and the agriculture ministry said the alleged actions of the meat inspectors don’t “represent a generalized malfunction of Brazil’s inspection system.”
Since the scandal broke, JBS and BRF SA, Brazil’s biggest chicken producer, also named in the investigation, have been bombarding Brazilian consumers with full-page ads and prime-time TV spots extolling the safety of their products. Brazilian President Michel Temer tried to calm international anxieties by taking ambassadors from China and other importing nations to an all-you-can-eat steakhouse on March 19.
Key buyers of Brazilian meat may have little choice but to stay the course. The U.S. Department of Agriculture says Brazil accounted for almost 40 percent of the world’s broiler-meat exports in 2016. The U.S., the world’s second-largest exporter, has been banned from shipping its chicken to China and other countries since 2015, when an outbreak of bird flu in the American Southeast wiped out more than 48 million birds. As bird flu spreads, “the world doesn’t have many supply alternatives left,” says Ricardo Santin, a director at Brazil’s chicken and exporter group, ABPA.
The outlook for JBS’s stock and bonds is less certain. Until the recent raids and allegations, JBS hadn’t been directly accused of any wrongdoing in investigations involving the Batistas’ holding company. Now it can’t escape the spotlight. “Selling proteins that aren’t fit for human consumption generates horrible headlines,” says Ray Zucaro, chief investment officer of Miami-based RVX Asset Management LLC. “I don’t think this scandal is the one that will blow them up, but it’s another scratch in their armor.”
—With Aline Oyamada
Article Appeared @https://www.bloomberg.com/news/articles/2017-03-23/world-s-biggest-meat-producer-struggles-with-bad-beef-allegations