Jamie Gray is a business reporter for the NZ Herald

NZ could benefit from Brazil meat scandal - economist

Meat is New Zealand's second biggest merchandise export after dairy - accounting for $5.9 billion worth in 2016.  / Picture: Alf Harvey/HRPhoto.ie
Meat is New Zealand's second biggest merchandise export after dairy - accounting for $5.9 billion worth in 2016. / Picture: Alf Harvey/HRPhoto.ie

New Zealand's meat export trade could stand to benefit from the scandal enveloping the meat industry in Brazil, ANZ rural economist Con Williams said.

Early this week, China, the European Union, South Korea and Chile announced that they would curtail meat imports from Brazil as a result of the scandal, which centres on allegations that meat inspectors took bribes to approve tainted meat.

Meat is New Zealand's second biggest merchandise export after dairy - accounting for $5.9 billion worth in 2016. Brazil is the world's biggest beef and poultry exporter.

"I think that it's going to be beneficial because you have the likes of China and South Korea suspending beef imports from Brazil," Williams told the Herald. "We all well know China's concern about food safety issues," he said, adding that New Zealand lamb exports, as well as beef, could benefit.

Williams said much would depend how long the suspension lasts and whether it spreads to other markets.

Bloomberg reported that Brazil's government had tried to head off the crisis by summoning ambassadors to reassure them.

Brazil's President Michel Temer and his agriculture minister met with top diplomats of the European Union, Sweden, Canada and other countries to say slaughterhouses were being properly audited and that Brazilian meat is safe to eat.

"This is an urgent issue since it has repercussions for us internally and abroad," Temer told reporters.

Federal authorities said that an investigation unveiled on Friday showed about 40 companies, including JBS and BRF, had been involved in illicit activities such as bribing inspectors to approve the sale and export of spoiled meat and adding chemical substances to mask the poor quality.

While the companies have denied the allegations, including through full-page ads in Brazil's newspapers and spots on TV, their shares have tumbled at a time when both JBS and BRF are trying to access capital markets again, Bloomberg reported.

China temporarily suspended imports from Brazil, according to people who received notice from the country's quarantine authority. Goods currently at sea or at port will not be able to clear customs, according to one of the people.

The China Meat Association is collecting information from individual companies about their purchases from Brazil and any potential losses they may have, Zhao Anli, an official at the group's import and export sub-branch, said on Monday.

Brazil's Agriculture Minister Blairo Maggi said after the meeting on Sunday that the issues unearthed by the investigations are not generalised or widespread in the industry, and that authorities are working to ensure the highest quality hygiene and transparency.

"Brazil's industry is robust and strong but it isn't infallible," he said. "We're making sure that what's being produced now is getting the proper inspection."

The presidency said in a statement that of more than 4,000 plants in the country only 21 are being probed, and that 33 of a total 11,000 employees in the industry are under investigation.

The investigation and any potential repercussions on business come at a bad time for the companies.

JBS is trying to sell shares in the US and expand in what's proving to be its most lucrative market, while BRF is pursuing a sale of shares in its halal unit -- a plan already in doubt after the company posted a record quarterly loss.

JBS slumped 11 per cent and BRF tumbled 7.3 per cent at Friday's close in Sao Paulo, the worst performers on Brazil's benchmark stock index. Bond yields for both companies also surged.

(with Bloomberg)

- NZ Herald

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