More legal beef for Brazilian meat producer

. Jun 04, 2020
More legal beef for Brazilian meat producer JBS A gazebo outside the Pilgrim's Pride plant in Mt Pleasant, Texas. Photo: Shutterstock

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We’re covering the latest scandal involving meat giants JBS. Brazil’s industrial woes. And the new Covid-19 death record — as well as promising research on the pandemic.

Meat giants JBS face governance issues. Again.

Top executives at Pilgrim’s Pride were

charged by a Colorado grand jury for allegedly taking part in a price-fixing scheme between 2012 and 2017. The U.S.&#8217; second-largest poultry producer is owned by Brazilian meat processing giant JBS, and accounted for 24 percent of the parent company&#8217;s BRL 56 million Q1 2020 revenue. The scandal forced Pilgrim&#8217;s stock to crash 12 percent on Wednesday.</p> <ul><li>CEO Jayson Penn and Vice President Roger Austin, among others, face ten years in prison and up to USD 1 million in fines.</li><li>Competitors Tyson Foods and Sanderson Farms have also received grand jury subpoenas as part of the investigation, according to regulatory filings.</li></ul> <p><strong>Why it matters. </strong>The investigation could cost the company hundreds of millions, perhaps billions, in fines. That will come as an additional shock to an industry that has been <a href="https://brazilian.report/business/2020/05/30/role-meat-plants-coronavirus-spread-brazil-countryside/">severely affected by Covid-19</a>, as slaughterhouses have been identified as coronavirus breeding grounds — forcing companies to shut down part of their production. </p> <p><strong>Multiple strikes.</strong> JBS has had a laundry list of misdeeds, including corruption allegations and insider trading probes which sent owners Joesley and Wesley Batista to jail for many months. They were given permission to <a href="https://brazilian.report/newsletters/brazil-daily/2020/05/27/coronavirus-doesnt-stop-brazilian-agribusiness-from-growing/">resume their roles</a> in their Brazilian companies just last week.</p> <p><strong>Meanwhile in Brazil … </strong>Labor prosecutors in the southern state of Santa Catarina accuse JBS of <a href="https://revistagloborural.globo.com/Noticias/Criacao/noticia/2020/06/mpt-entra-com-acao-na-justica-apos-jbs-demitir-40-indigenas-de-frigorifico-em-sc.html">firing 40 indigenous workers</a> after authorities determined they should be put on paid-leave for being a Covid-19 high-risk group. JBS told <strong>The Brazilian Report </strong>that the workers were dismissed after a bus line that took them to work was closed, but they received compensation. Also, the 200 indigenous workers who remain employed at the unit are on paid-leave.</p> <p><strong>Market reaction.</strong> The immediate slump of JBS stocks should not last for long. “China is resuming meat purchases from Brazil and is set to buy even more. Exports are increasing at a moment when the U.S. Dollar is high in Brazil. And if meatpackers stop (due to Covid-19 cases), prices will increase even more, because there isn’t enough supply,” says stock analyst Pedro Galdi.</p> <p><em>— with Natália Scalzaretto</em></p> <hr class="wp-block-separator"/> <h2>Brazilian industry crashes and burns —&nbsp;but not as much as expected</h2> <p>The Brazilian Institute of Geography and Statistics published its latest figures for industrial production in April, showing an 18.8-percent drop in output. While it is the worst result on record, the sector actually outperformed expectations, thanks to positive results from food processing firms (+3.3 percent) and pharmaceutical companies (+6.6 percent).</p> <p><strong>Lowlights.</strong> The auto industry had its worst stretch on record, falling 88 percent. Machinery and equipment producers were down 31 percent.</p> <p><strong>Why it matters.</strong> Covid-19 did not create <a href="https://brazilian.report/business/2019/04/15/brazilian-industry-shrinking/">Brazil&#8217;s industrial woes</a>, but it has certainly aggravated them. If April results were bad, May figures are expected to be brutal. However, some experts believe a turnaround could start as early as July, if the pandemic is tamed — which is a big if.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2705731" data-url="https://flo.uri.sh/visualisation/2705731/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Lack of leadership, transparency at Health Ministry</h2> <p>With a three-hour delay, the Health Ministry published Brazil&#8217;s new Covid-19 numbers on Wednesday night, registering a new record for daily deaths: 1,349, amounting to one death per minute and taking the total tally to over 32,500. Total infections have exceeded 584,000 people. Meanwhile, most states are beginning to <a href="https://brazilian.report/power/2020/05/29/before-flattening-the-curve-brazilians-governors-push-to-reopen/">reopen their economies</a>.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2641192" data-url="https://flo.uri.sh/visualisation/2641192/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> Brazil&#8217;s infection and death curves continue to rise, but the Health Ministry seems to be more of a concerned bystander than an institution with a leading role in fighting the pandemic. Between May 15 and June 3, the ministry had no official boss&nbsp;— Army General Eduardo Pazuello, who was the acting chief, has only now been formally confirmed as &#8220;Interim Health Minister.&#8221;</p> <ul><li>Meanwhile, the department has become less transparent during the pandemic. Until March 11, the Health Ministry refused, on average, 4.8 percent of requests based on the Access to Information Act. That rate has almost doubled since.</li></ul> <p><strong>Research.</strong> About 2,000 Brazilian volunteers will participate in a Covid-19 vaccine trial led by Oxford University. Taking part in the study could mean Brazil will be one of the first countries to get the vaccine if it proves to be effective.</p> <ul><li>Meanwhile, São Paulo scientists will move on to human trials with antiviral drug tenofovir — used on HIV patients. In vitro tests reportedly showed promising results, and the medicine will now be administered to patients of low and medium severity.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Protests.</strong> President Jair Bolsonaro labeled the <a href="https://brazilian.report/podcast/2020/06/03/opposition-brazil-jair-bolsonaro-protests/">anti-fascist groups that protested</a> in a handful of cities over the past weekend as &#8220;criminals&#8221; and &#8220;terrorists.&#8221; Vice President Hamilton Mourão called them &#8220;troublemakers.&#8221; Government officials have privately admitted that they fear an escalation of protests, something similar to the 2015-2016 wave that precipitated the downfall of former President Dilma Rousseff.</li><li><strong>24 hours.</strong> Alexandre Cabral was dismissed as chairman of the Northeast Bank after only a day in the job. The press revealed he is suspected of overseeing fraudulent bidding processes during his 2018 stint as head of the Brazilian Mint. Mr. Cabral was handpicked by former Congressman Valdemar Costa Neto —&nbsp;a notoriously corrupt politician who controls the Liberal Party (39 seats in the House). Mr. Costa Neto is one of the president&#8217;s newfound allies and exchanged his support for the possibility of <a href="https://brazilian.report/power/2020/06/02/jair-bolsonaro-bedfellows-congress-deliver-results-how-long/">appointing officials to key positions in the administration</a>.</li><li><strong>Gig economy.</strong> Delivery and personal shopper app Rappi has doubled its base of couriers to 1,200 professionals in Brazil in only two months, a direct result of quarantines. Long before the pandemic, however, <a href="https://brazilian.report/business/2019/07/10/pizza-boom-delivery-apps-brazil-market/">most new jobs</a> in Brazil were already going to the gig economy. Logistics and transport apps are the main job creation drivers in Brazil, employing over 4 million people — who have a no-strings-attached relationship with tech companies. Recently, labor courts considered these workers as &#8220;<a href="https://brazilian.report/newsletters/brazil-daily/2020/01/29/ifood-delivery-app-workers-slave-labor-natural-disaster-floods/">entrepreneurs</a>.&#8221;</li><li><strong>Water.</strong> For the third year in a row, water waste in Brazil went up and reached 38.5 percent. Of every 100 liters of water collected, almost 40 liters are lost due to leaks, fraud, illegal water connections, or problems with hydrometers — causing losses of BRL 12 billion. To this day, <a href="https://brazilian.report/society/2017/11/26/brazils-sanitation-water-supply-problem/">access to potable water remains a challenge in Brazil</a>, with 10 percent of households still not receiving a supply of drinking water on a daily basis. Moreover, the National Water Agency says that distribution networks must make massive investments in 84 percent of municipalities&nbsp;—&nbsp;without which millions could face shortages in the near future.</li><li><strong>Military.</strong> After a 20-year legal battle, former Air Force Cadet Maria Luiza da Silva, 59, was recognized by the Superior Court of Justice as Brazil&#8217;s first trans member of the Armed Forces. She was considered &#8220;unable to perform her duties&#8221; after undergoing gender reassignment surgery and retired. The case&#8217;s justice decided to grant Ms. Silva a lieutenant&#8217;s pension, in line with the highest grade for a cadet. Her lawyer called the decision &#8220;a historical landmark for LGBTQ rights.&#8221;

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