Brazil risks Mideast trade over Jerusalem embassy move

A proposal by Brazil’s next president to relocate its embassy in Israel, following US President Donald Trump’s lead, may set off a diplomatic storm in the Muslim world, threatening a key market for the world’s largest meat companies.

Brazil is by far the world’s largest exporter of halal meat. President-elect Jair Bolsonaro’s plans to move Brazil’s embassy from Tel Aviv to Jerusalem, strengthening relations with Israel, has already upset Egypt and could soon stir trouble with other Islamic nations.

“The reaction will be given not only as an individual country but on behalf of the whole Muslim world,” a Turkish diplomatic source said. “We are expecting Brazil to act with reason and not confront the Muslim world.”

Brazil exports $16bn annually to the Middle East and Turkey, with just 3% going to Israel, according to government statistics. More than a quarter of Brazil’s exports to the region are meat.

Both Brazil’s JBS SA, the world’s top beef producer, and BRF SA, the No. 1 poultry exporter, have bet big on the growing demand for halal meat.

Brazil exports over $5bn of halal meat per year, more than twice its nearest rivals, Australia and India, according to Salaam Gateway, a partnership between the Dubai Islamic Economy Development Centre and Thomson Reuters.

Bolsonaro’s proposal for the Israel embassy is part of his overhaul of Brazilian foreign policy, cozying up to major powers such as the United States and undoing what he calls leftist predecessors’ alliances based on “ideological bias.”

Trump’s decision to open an embassy in Jerusalem in May stirred a hornets’ nest in the Middle East, and the United States had few allies follow suit.

Guatemala did so in the days afterward while Paraguay has since reversed a similar decision.

After Egypt abruptly cancelled a visit from Brazilian diplomats and business leaders this week, Bolsonaro said his decision on the embassy in Israel was not final.

Bolsonaro has softened his stance since the election last month, however, amid lobbying from diplomats and executives keen to protect relations with Brazil’s largest trading partner.

BRF Chairman Pedro Parente said on Thursday earnings call that the Israel embassy issue was “cause for concern.”

“We have a very important trade with Arab and halal markets,” he told journalists. “We are confident that when a discussion of the matter involves the relevant areas — the farm, trade and foreign ministries — they will certainly reach the best solution.”

BRF’s halal business segment contributed a quarter of its operating revenue and nearly half of its operating profit in the third quarter.

Halal chicken represented nearly half of Brazil’s overall chicken exports of $7.1bn last year, according to Brazil meatpacking group ABPA.

BRF has processing plants in Turkey and the United Arab Emirates to meet growing demand for halal meat.

The company aims to double its output of processed products in the Gulf by 2023, its head of halal operations said at an October event.

The Arab-Brazil Chamber of Commerce expects Brazil’s total exports to a grouping of 22 Arab countries, which excludes nonArab Muslim nations such as Iran, to swell to $20bn by 2022, up from $13.5bn in 2017.

Since Arab and halal markets have a whopping trade with Brazil, Bolsonaro would be wise enough to rethink his decision.

“We are expecting Brazil to act with reason and not confront the Muslim world”