Brazil’s meat scandal turns stomachs again
BRAZIL’S corruption scandals just won’t go away.
A year-old tainted-meat investigation turned stomachs again on Monday amid accusations that employees at poultry giant BRF altered samples to hide poor sanitary conditions and salmonella contamination.
That comes days after the ever-sprawling Carwash corruption probe ensnared toll-road operator CCR in the investigation’s 48th phase – yes, 48th.
The news sent shares of the affected companies tumbling, and showed how the effort to root out corruption is still claiming victims years after it began roiling the government and state-controlled oil producer Petroleo Brasileiro.
And for some, the effects have been long-lasting. Odebrecht, the conglomerate that has admitted to its role in a kickback scheme, has seen bonds drop to new lows as the construction giant struggles to overcome the damage.
The revived probes come as Brazil’s once-tottering economy improves and its stock market posts one of the world’s best rallies.
So far investors have been mostly unfazed, but the scandals could augur more volatility ahead of October’s presidential election, in which many of the potential candidates have been accused of corruption.
“In Brazil, the rule is to not take huge positions,” said James Gulbrandsen, a Rio de Janeiro-based money manager at NHC Capital, which oversees $3.5 billion (R42bn) “Conviction kills”.
For BRF, the resurfacing of the Weak Flesh probe couldn’t have come at a worse time.
After going through four chief executives in just five years, shareholders are at odds over how to revive the company and are looking to replace the board.
The stock lost 20 percent of its value on Monday, the most since 1998.
BRF said that issues being investigated by police pose no health threat and that the company follows all domestic and international regulations regarding food safety.
The new operation came almost a year after the original probe into meat safety in Brazil, the world’s largest exporter, sent the sector into disarray as countries temporarily banned imports of its beef and poultry.
Accusations included sales of spoiled food and meat tainted with materials like cardboard and acid.
While they weren’t named in Monday’s probe, shares of competitors Marfrig Global Foods and Minerva also dropped as much as 4.1 percent. JBS – no stranger to scandal itself, with its former chief executive’s plea deal with Brazil prosecutors recently revoked – lost 5.9 percent.
Triunfo, a smaller rival to CCR, has lost more than a third of its value since February 22, after it was cited in the Carwash probe due to irregularities found in the execution of a road concession agreement of its toll-road unit Econorte.
CCR, which was cited in the same probe for allegedly facilitating kickbacks through its sponsorship of sports venues and events, may have to give further clarifications to investors to restore the good-governance premium at which it’s always traded, analysts at J Safra Corretora said.
The firm denied wrongdoing and said that it terminated a deal with a contractor after finding possible non-compliance with its code of conduct.
As new companies get caught up in the scandal, Odebrecht – one of Carwash’s first targets – is still battling to overcome the fallout of the probe. And despite the jitters seen in specific sectors, the Ibovespa is up 14 percent in dollar terms this year, the most among major stock gauges, as investors bet on improved results now the economy is emerging from a two-year recession.
Patrik Kauffmann, a portfolio manager at Solitaire Aquila, said: “Maybe investors are starting to get used to the surrounding noise. At least (they are) less afraid.” – Bloomberg/African News Agency (ANA)