Will JBS Survive a Political Corruption Scandal?

 

This article was published on the Emerge 85 blog on Aug. 28, 2017:

By Rasheed Abou-Alsamh

If you live in the Americas or Europe, you’ve probably eaten beef or chicken processed by Brazilian meat giant JBS. At its peak, just a few years ago, JBS was slaughtering 90,000 head of cattle a day. Now, battered by a recession and its role in a corruption scandal, its future is set to be smaller.

However, as the world’s largest producer of animal protein, JBS is expected to survive its involvement in one of Brazil’s biggest political scandals not just because of its size, but also because it draws 80% of its income from abroad. In 2016, the company pulled in revenue of $53.5bn. In comparison, its closest rival, Arkansas-based Tyson Foods, made $41.3bn in 2015.

The majority owners of JBS, brothers Joesley and Wesley Batista, are accused of bribing politicians in exchange for rulings and favours that would benefit the business. They are also accused of paying members of congress R$30m ($9.5m) to ensure Eduardo Cunha – who has since been jailed – was elected speaker of the House of Representatives in 2015. The Batistas called the payments “campaign contributions”, claims denied by Cunha who says the money was given directly to each congressman.

Secret contributions to political parties started small, in 2002, amounting to about R$200,000 ($63,514). By 2014, they had ballooned to about R$366m ($116.2m), divided among 24 parties.

The brothers have been under investigation since 2016, with at least five separate cases opened against them during that time. On May 18, 2017, they agreed to tell investigators everything about the scheme – in return for total immunity from prosecution and a R$225m ($71.4m) fine to be paid back over ten years.

Rapid growth and expansion overseas

JBS began life in 1953 as Casa de Carnes Mineira, a small butcher’s shop in Anápolis run by José Batista Sobrinho, father to Joesley and Wesley. That same decade, the planning and building of Brazil’s new federal capital Brasilia gave Sobrinho the chance to expand his business. Envisioned by President Juscelino Kubitschek, Brasilia was born to develop the country’s interior and disperse some of the Brazilian population concentrated along the coastline. But such development takes time, and for several years Brasilia was nothing more than a collection of construction sites – construction sites that, in 1957, Sobrinho began supplying beef to. But it was not until 1970 that the butcher decided to buy his first slaughterhouse and change the company name to Friboi.

By 1980, Friboi had bought another meat processing plant in the Federal District, tripling the number of cattle slaughtered daily to 300. In 1985, Friboi decided to expand out of the meat business, building a plant to produce soaps. But it didn’t take Sobrinho long to once again hear the call of the cattle, and a small meat-processing plant was purchased in Luziânia in 1988. Eight years later, a fourth plant was purchased in Goiânia that would allow Friboi to meet stringent European meat standards and export its goods further afield.

But it wasn’t until 2005, with the purchase of Argentine meat processor Swift Armour, that Friboi’s international expansion began. Two years later it launched an initial public offering and was listed on the São Paulo Stock Exchange. It also changed its name to JBS, in honour of its founder, and bought Swift units in the US and Australia. This also marked the addition of pork and chicken to its range of products.

In 2009, JBS bought major US poultry-processing company Pilgrim’s Pride, significantly boosting its US payroll to 70,000. In 2015, Primo Smallgoods in Australia and Moy Park in Ireland came under its remit. The Moy Park acquisition helped JBS grow its manufacturing and distribution of prepared foods in Europe, and in 2016 the company’s income rose to R$170bn ($5.4bn), up from R$4bn ($1.3bn) in 2006.

To read the rest of my article please visit the Emerge85 website: http://emerge85.io/articles/will-jbs-survive-political-corruption-scandal/

Brasilia’s political circus/scandal continues


A view of the windows in the room where Jose Roberto Arruda is being held in at the Federal Police compound in Brasilia. Below, a view of his bunk beds and office desk.



THE political crisis in Brasilia continues with the Federal District Governor Jose Roberto Arruda still being held at the headquarters of the Federal Police, a month after he was accused of trying to obstruct an investigation into massive corruption in his administration.

The threat of federal intervention in the governing of the Federal District has eased for the time being, with the federal Supreme Court loath to intervene in a district that was given political emancipation only in 1988.

 

Last week the Federal District Assembly voted to begin impeachment proceedings against Arruda. If he does not resign before the process is over, which takes several months, he could see his political rights suspended for up to eight years. Last Saturday, two district representatives tried to serve Arruda with the notice of the impeachment proceedings, but he refused to receive it, later saying in a handwritten letter to the Federal District Assembly that he wanted access to the full report on his impeachment before accepting the notification. The representatives returned last Monday with two witnesses to corroborate that they had informed Arruda of the proceedings against him, and served him with the notice.

Arruda’s lawyers have been trying to get him moved to house arrest, something the Supreme Court justices have not been inclined to allow since this would facilitate his communication with supporters, and thus possibly make it easier for him to interfere in the Federal Police’s ongoing investigation into corruption in his administration.

The governor is currently allowed visits only from his immediate family and his lawyers. His wife Flavia brings him lunch everyday, although she is not allowed to be alone with him in his room. He is being held in a room of approximately 16.8 square meters in the Federal Police headquarters compound in Brasilia. He had previously been held in a room of 40 square meters. He has access to newspapers and magazines, but is not allowed access to television or telephones. His lawyers claimed that he was being held in a “masmorra”, or a subterranean jail, which forced the Attorney General’s office to release pictures last week of his quarters which showed the room had clean white walls, a bunk bed, an office desk, a small refrigerator, a little sofa and a window.

Arruda’s lawyers have also been claiming that the governor is suffering from pains in one of his ankles, which they claim is swollen and is linked to his diabetes. Two visits to a private hospital this week found Arruda in good health, taking away yet another reason his lawyers were trying to use to push for house arrest.

The three-time former governor of the Federal District, Joaquim Roriz, who is now 75 years old, has been running political ads on television showing himself talking casually about the “shame of corruption” that is currently rocking Brasilia. Roriz is expected to run in the October elections for governor again. He has been embroiled in several corruption scandals in the past, which make his criticisms of Arruda extra ironic. Will voters here remember that when they go to the polls in October? One can only hope so.

Brasilia in crisis as governor remains jailed

Jose Roberto Arruda, left, and Paulo Octavio in happier times.

THE capital of Brazil, Brasilia, remained in a deep political crisis this week with the Distrito Federal Governor Jose Roberto Arruda still being held by the federal police for obstruction of an investigation of massive corruption involving the governor and at least 11 district representatives.

Arrested on Feb. 11, at the beginning of Carnival, Arruda is being held at the headquarters of the Federal Police in Brasilia after he allegedly tried to bribe a local journalist to testify in his favor in the ongoing corruption investigation called “Pandora’s Box”.

The vice governor of the Federal District, the enormously wealthy and successful real estate tycoon Paulo Octavio, took over as acting governor when Arruda was arrested. But he too has been linked to the corruption scheme, and impeachment proceedings have been filed against him, as well as Arruda, by several district representatives.

Octavio found that he had little support in the DF legislature and after only 11 days in office decided to resign last week. After a hurried meeting with Brazilian President Luis Inacio “Lula” da Silva last week, he announced that he was holding off on resigning until this week, claiming that President Lula had asked him to wait a few more days. This was promptly denied by the presidential palace, which did not want the public to think that the president was supporting a politician under suspicion of corruption.

Arruda was arrested upon request of the Attorney General Roberto Gurgel, who has repeatedly warned that there could be federal intervention in the governance of the Federal District if the local government does not get its act together. If the federal government stepped in, they would need to appoint someone to manage the capital at least until October when national elections are scheduled to take place and a new slate of politicians can be voted into office. The problem here is that the leading candidate expected to win the governor’s race is Joaquim Roriz, a former three-time governor of the DF and federal senator, who had to resign from the Senate in 2007 in a corruption scandal in order to not have his political rights suspended for several years if he had been found guilty.

The Pandora’s Box investigation by the federal police came to public knowledge last year when hours of secretly filmed videotape was released by the police showing Arruda and several district representatives in different instances accepting large cash bribes and stuffing the money into their socks, underwear and handbags. The police claim these were regular kickbacks made over several years by businesses that had been given lucrative contracts with the Federal District government. These scenes caused a national outcry against such blatant greed and corruption when they were televised, although Arruda still maintains the payoffs were to fund the electoral campaigns of the politicians.

Durval Barbosa, a former official in the DF government, who was involved in all of the payoffs, secretly filmed them in a deal he made with the Federal Police to help them in their investigation. In return he has been promised a reduced sentence.

The Supreme Federal Court was originally scheduled to rule today on a habeus corpus motion by Arruda’s lawyers, but has postponed any decision until next week after Arruda’s lawyers asked for more time to study the original voting of the court which decided in favor of holding the governor. According to today’s Correio Braziliense newspaper, 13 of the 15 justices, who heard the original petition to have Arruda arrested, voted in favor of his arrest.

A district representative, Wilson Lima, is now the new acting governor of the Federal District. He was described by Octavio in an interview with the Estado de Sao Paulo newspaper yesterday as “a simple man”.

What remains to be seen is if Lima can stave off a federal intervention until the elections in October, and if Arruda, Octavio and the 11 district representatives will be tried in court for corruption. For too long disgraced politicians in Brazil have been able to cry on TV begging for forgiveness and then make a political comeback several years later as if nothing had happened. One can only hope that the memory of voters in the Federal District is not so short that they re-elect politicians that have proven in the past how rotten they really are.

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