(Adds comment from United States food safety body)
By Brad Haynes and Sergio Spagnuolo
SAO PAULO/CURITIBA, Brazil, March 17 Brazilian
police raided the premises of global meatpacking companies JBS
SA and BRF SA on Friday, as well as dozens
of smaller rivals, in a crackdown on alleged bribery of health
officials that could threaten $12 billion in annual exports.
The probe, known as "Operation Weak Flesh," found evidence
of meatpackers bribing inspectors and politicians to overlook
unsanitary practices such as processing rotten meat and shipping
exports with traces of salmonella, police said.
Police investigator Mauricio Moscardi Grillo said there was
evidence of some companies manipulating certificates for meat
exports to European markets, raising the risk of foreign
restrictions on Brazil's powerhouse protein industry.
"We've never seen a scandal like this in the sector ... It's
horrifying," said Alex Silva, a livestock analyst with Scot
Consultoria. "This stains the entire system that Brazil has
spent years building."
Brazil exported $6.9 billion of poultry and $5.5 billion of
beef last year, according to industry groups, as producers
ramped up shipments to China and started sending fresh beef to
the United States.
Shares of JBS and BRF plunged 11.0 percent and 7.0 percent,
respectively, in Sao Paulo. JBS, the world's biggest meat
producer, booked net revenue of 170 billion reais ($55 billion)
last year from sales in 150 countries. BRF, the largest poultry
exporter, booked net revenue of 39 billion reais in 2016.
Police said they arrested three BRF employees and two from
JBS in Friday's raids, as well as 20 public officials.
JBS said in a securities filing that three of its plants and
one of its employees were targeted in the probe, but its senior
executives and headquarters were not targeted. The company said
it followed rigorous quality standards and sanitary regulations.
BRF also said it followed industry regulations and was
cooperating with authorities in the investigation.
Court documents cited recordings of BRF director Andre Luiz
Baldissera allegedly discussing on March 13 how health officials
could help defend the company after inspectors in Italy found
traces of salmonella in four containers shipped from a plant in
Goiás state in central Brazil.
The ruling by federal judge Marcos Silva also included
transcripts of BRF government relations executive Roney Nogueira
allegedly discussing bribery of health inspectors, including one
called on to help avoid the closure of the same Goiás plant.
The judge also ordered that BRF Vice President José Roberto
Pernomian Rodrigues be brought in for questioning.
Baldissera, Nogueira and Rodrigues could not be reached for
Brazil's Agriculture Ministry temporarily closed three
plants cited in the investigation, one run by BRF and two run by
smaller rival Grupo Peccin, and began removing their meat
products from supermarkets.
Eumar Novacki, the ministry's executive secretary, said
there was some concern that other countries would begin blocking
shipments of Brazilian meat. Agriculture Minister Blairo Maggi
will meet on Monday with foreign ambassadors to allay concerns.
Sergio De Zen, a livestock expert at the University of Sao
Paulo, said other countries may be eager to block Brazilian
exports in the fiercely competitive protein market.
"But the impact will not be as big as it would be if another
country had discovered this problem," he said. "It is Brazil
itself that is revealing this."
United States food safety body FSIS said it was in contact
with Brazil's government and monitoring the situation. It said
food supply in the U.S. was safe due to a re-inspection system
applied to all imported meats.
The food industry investigation is the latest in a string of
corruption probes in Brazil, as a tougher judiciary takes on
cozy relations between the government and powerful businesses,
backed by public outrage during a deep economic s8lump.
After investigations into political kickbacks on public
works and oil and gas contracts, Friday's probe struck at the
heart of the booming agricultural sector, one of the few bright
spots in Brazil's economy and a major source of exports.
Police said there was evidence that meatpackers falsified
documentation for exports to Europe, China and the Middle East.
Judge Silva wrote in his ruling that employees of some
meatpackers, including BRF, arranged bribes and favors for
inspectors ranging from political donations and favorable bank
loans to small bribes including hams and other meat products.
In some cases, those inspectors would then allow employees
of the meatpackers to enter government offices, access computers
and issue their own export certificates, investigators said.
($1 = 3.098 reais)
(Reporting by Brad Haynes; Additional reporting by Sergio
Spagnuolo in Curitiba, Pedro Fonseca in Rio de Janeiro,
Guillermo Parra-Bernal, Brad Brooks, Marcelo Teixeira and
Alberto Alerigi in Sao Paulo, Mark Weinraub in Washington;
Editing by Daniel Flynn, Marguerita Choy and Bernard Orr)