Brazil Cries `Trade War,' Says EU to Ban Some of Its Chicken

(Bloomberg) -- Brazil’s agriculture minister said Tuesday his country’s chicken industry, the world’s second-largest, may be partially shut out from the European Union following a food-safety scandal.

The European Commission will discuss restrictions on BRF, Brazil’s biggest packaged-food producer and its leading poultry supplier, at a meeting on Wednesday, Blairo Maggi told journalists in Brasilia. Some other Brazilian producers may face similar curbs.

The bloc will probably cancel export permits for all BRF plants in Brazil, he said. The measure could force it to cut as many as 15,000 workers, Maggi added, citing BRF. The company declined to comment on the matter. An EU spokesman didn’t immediately respond to a request for comment.

"This is a trade war" Maggi said. "We are under increasing pressure. It’s America first, it’s also Europe first."

Brazil’s federal police said last month that BRF and accredited laboratories had falsified results of tests on meat samples for salmonella. A temporary arrest warrant was issued for former Chief Executive Officer Pedro Faria as part of the police’s so-called Operation Trapaca (Trapaca means cheating in Portuguese). The government temporarily suspended BRF from shipping to Europe while providing information to EU authorities.

"It became evident after Trapaca that BRF had problems," Maggi said. But he added that Europe is also raising unjustified sanitary barriers for Brazilian producers to reduce their market access. "Brazil will have no alternative but to make a complaint against the EU via the WTO."

Import Quotas

BRF closed 0.1 percent higher at 21.04 reais in Sao Paulo. The stock is down 43 percent for this year. The company’s biggest shareholders have been locked in a dispute over the composition of its board in recent weeks after it posted a record annual loss. It has about 88,000 employees in Brazil, according to a 2017 report.

Brazil exports two kinds of chicken to Europe: salted and non-salted. Most shipments fall in the first category, for which Brazil has an annual quota of 170,807 metric tons, and which are tested for 2,600 strains of salmonella, according to Brazil’s agriculture ministry.

In contrast, non-salted imports are tested for just the two most dangerous strains. The quota for non-salted is 21,600 tons and additional volumes are subject to a tariff of 1,024 euros ($1,264) a ton. Brazil has argued that Europe is imposing stricter controls on salted chicken on commercial rather than sanitary grounds because that’s the product category it exports the most.

--With assistance from Tatiana Freitas and Fabiana Batista

To contact the reporters on this story: Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net, Gerson Freitas Jr. in São Paulo at gfreitasjr@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan

©2018 Bloomberg L.P.