Brazil meat giants surge on trade deal, but worries persist

RIO DE JANEIRO (AFP) – Shares in Brazilian meat processing giants BRF and JBS rose sharply yesterday after the signing of a historic trade deal that will open the European Union (EU) to South American agricultural products.

The EU and Mercosur trade bloc countries Argentina, Brazil, Paraguay and Uruguay sealed a pact on Friday, ending 20 years of talks over one of the world’s biggest regional commercial agreements.

Shares in BRF, one of the world’s largest food companies, soared nearly nine per cent on Brazil’s Bovespa, while its rival JBS gained 5.5 per cent, outstripping gains on the benchmark index.

While investors welcomed the accord, Brazilian farming experts expressed concern over the potential for excessive use of the deal’s “precautionary principle” for food safety that enables European authorities to suspend approval for products if they perceive a risk to human, animal or plant health, even in the absence of conclusive scientific evidence.

“Historically Brazil has always been opposed to the inclusion of the precautionary principle, an EU demand, both in the World Trade Organization (WTO) negotiation rounds and in bilateral talks,” said Pedro Camargo Neto, a former president of the Brazilian Rural Society.  “In our view the rules already in place under the WTO multilateral agreement have been and still are sufficient to guarantee the health and safety of the people of the European Union,” added the ex-agriculture ministry official.

Shares in food giant BRF soared nearly nine per cent on Brazil’s Bovespa stock exchange following news of the Mercosur trade deal with the European Union. – AFP

A spokesman for the Brazilian Association of Meat Exporting Industries said a meeting between industry representatives and the government was held yesterday in the capital Brasilia to “assess the possible impacts” of the precautionary principle.

“Everything has been negotiated to shield Brazil against the inappropriate use of this instrument,” Pedro Miguel Costa e Silva, in charge of regional negotiations in the Foreign Ministry, was quoted by the economic daily Valor as saying yesterday.

Under the trade deal, 91 per cent of customs duties on European imports into the Mercosur countries will eventually be scrapped.

In return, the EU will abolish 92 per cent of duties currently imposed on South American imports.

In its biggest concession, the EU will open its markets to South America agricultural products via quotas: 99 tonnes of beef per year at a preferential rate of 7.5 per cent, a supplementary quota on 180,000 tonnes of sugar and another one on 100,000 tonnes of poultry.