The largest meat exporter in the world is feeling the squeeze of recession abroad as well as at home.
"This economic crisis has definitely hit our industry in Brazil," Emerson Kloss, agricultural attaché at the Embassy of Brazil in Washington, D.C., told MEATPOULTRY.com. "There’s been a reduction in meat demand across the board."
While U.S. packers and processors consider Brazil a competitor in foreign markets, Kloss notes that "70 to 80 percent" of Brazil’s meat production is still consumed at home. "The problem is that the industry is buying fewer cattle for slaughter," he said, causing problems in the livestock sector. Earlier this month, Brazilian Finance Minister Guido Mantega announced the federal government would make available a 10-billion-real (US$6 million) line of credit from the Brazilian National Development Bank, to the industry. Kloss says the credit line, which comes with a low, subsidized interest rate, "is for working capital, for the companies to step up production."
Cutbacks in purchases from Russia and a dispute over sanitation issues with the European Union, which reduced Brazilian meat shipments to Europe, combined with general global economic recession have created "some problems for some of our slaughterhouses," said Kloss, although the US$8.9 million fourth-quarter loss announced last month by Pedigao, Brazil’s second-largest food company and one of its largest meatpackers, were the result of foreign-exchange losses, he said, not losses in meat. Perdigao has reportedly been in merger talks with a competitor, Sadia, although no deal has been announced to date.
Still, there’s reason for optimism. After a March 14 meeting with President Barack Obama, Brazilian President Luiz Inácio Lula da Silva told reporters, "I say every day Brazil was the last country to be affected by the crisis. But we also have the possibility to be one of the first countries to resolve and get out of the crisis. We don’t face any problem in our financial system." In a later, controversial comment, he said, "This is a crisis that was caused by white people with blue eyes, and before the crisis they looked as if they knew everything about economics."
However, autoworkers, construction workers, and others in Brazil — about 750,000 in all since November — are without jobs. The stock market has collapsed, losing nearly 50 percent since peaking in August. The Brazilian real has lost about a third of its value against the U.S. dollar, making imports in Brazil expensive for retailers — but also making Brazilian meat an attractive buy in foreign markets compared to U.S. product.
Kloss told MEATPOULTRY.com the corner may have been turned already by the country’s meat industry. "March and April have been much better than the previous months. We anticipate an upward trend," he said.