Brazil risks Mid­dle East trade with Is­rael em­bassy move

The world’s largest meat ex­porter Brazil has pro­posed to move its em­bassy from Tel Aviv to Jerusalem, which could stir trou­ble with the main trade part­ners in the Mus­lim world

Daily Sabah (Turkey) - - Money -

A PRO­POSAL by Brazil’s next pres­i­dent to re­lo­cate its em­bassy in Is­rael, fol­low­ing U.S. 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, which com­plies with Mus­lim di­etary rules. 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 told Reuters on con­di­tion of anonymity. “We are ex­pect­ing Brazil to act with rea­son and not con­front the Mus­lim world.”

Brazil ex­ports $16 bil­lion an­nu­ally to the Mid­dle East and Turkey, with just 3 per­cent 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 $5 bil­lion 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.

Is­raeli Prime Min­is­ter Ben­jamin Ne­tanyahu praised Bol­sonaro for the plan to move Brazil’s em­bassy, call­ing him a “friend.”

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

Bol­sonaro has shown al­ready he is not afraid to give an im­por­tant trade part­ner a poke in the eye, fol­low­ing the ex­am­ple of the U.S. pres­i­dent, whom he openly ad­mires and em­u­lates in both po­lit­i­cal style and for­eign pol­icy.

Like Trump, Bol­sonaro railed against China on the cam­paign trail. He 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.

CAN­CELLED TRIP

The pres­sure from the Mid­dle East may be more blunt.

Egypt on Mon­day called off the visit by Brazil’s top diplo­mat and ex­ec­u­tives just days be­fore they were set to ar­rive, which two diplo­matic sources said was a di­rect response to Bol­sonaro’s pro­posal to move the em­bassy.

The Egyp­tian em­bassy blamed a sched­ul­ing con­flict. That has sounded alarm bells in Brazil’s meat in­dus­try.

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 $7.1 bil­lion last year, ac­cord­ing to Brazil meat­pack­ing group ABPA.

“There is a $2-bil­lion trade be­tween Egypt and Brazil, mainly in the food agri­cul­tural sec­tor, and within that sec­tor mainly in beef and poul­try,” Egypt’s Am­bas­sador to Brazil Alaa Roushdy told Reuters.

He de­clined to com­ment on a hy­po­theti- cal move of the em­bassy or if it could have any im­pact on trade.

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.

JBS sent more than an eighth of its ex­ports to the Mid­dle East and Africa in 2017, sec­ond only to the Greater China re­gion.

Rep­re­sen­ta­tives for JBS de­clined to com­ment on fall­out from a po­ten­tial em­bassy move. The Arab-Brazil Cham­ber of Com­merce ex­pects Brazil’s to­tal ex­ports to a group­ing of 22 Arab coun­tries, which ex­cludes non-Arab Mus­lim na­tions such as Iran, to swell to $20 bil­lion by 2022, up from $13.5 bil­lion in 2017. Rubens Han­nun, the cham­ber’s pres­i­dent, added that Brazil also stands to ben­e­fit from in­fra­struc­ture in­vest­ment from Arab sov­er­eign funds. UAE’s Mubadala De­vel­op­ment Co, for ex­am­ple, poured some $2 bil­lion into Brazil­ian com­modi­ties em­pire EBX ear­lier this decade.

“We do not want any noise in this re­la­tion­ship,” Han­nun said. “We are afraid that would open a door for the com­pe­ti­tion.”

A butcher un­loads beef from a truck out­side a butcher’s shop in Sao Paulo, Brazil, July 27, 2017.

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