Brazil court probing state-backed loans to JBS

Sao Paulo | Reuters — Brazil’s federal accounts court, the TCU, said it had identified irregularities on loans to JBS SA, the world’s largest beef producer, and is deepening an investigation into the company’s relationship with state-run lender BNDES.

The TCU is probing loans used to purchase U.S.-companies Swift and Co, for about US$225 million in 2007, followed by Smithfield Beef Group in 2008 and a controlling stake in Pilgrim’s Pride in 2009, according to a preliminary report seen by Reuters Thursday.

“I understand that the three capital contribution transactions include privileged treatment granted to the company JBS,” according to the report, signed by TCU minister Augusto Sherman Cavalcanti.

The originally family-run butcher has grown into a global giant that this year acquired Cargill’s U.S. pork assets and Moy Park, the British unit of rival Marfrig.

The TCU report said that expansion largely stemmed from 10.6 billion reais (C$3.7 billion) in loans from BNDES between 2005 and 2014, an amount the TCU said it was not able to trace to transactions carried out by JBS in that period.

JBS, whose Canadian holdings include major Alberta beef processor Lakeside Packers, said in a statement all of its transactions with BNDES were transparent and are available for review on its website and Brazil’s securities regulator.

A BNDES spokeswoman said the bank was waiting for more information as the TCU report was not final. BNDES loans to the meat sector over the past decade had generated some five billion reais in returns, she said.

The TCU investigation comes days after federal judge Sergio Moro instructed police to collect documents from BNDES headquarters related to loans the bank made to a sugar mill controlled by rancher Jose Carlos Bumlai.

Bumlai, a confidant of former President Luíz Inácio Lula da Silva, was arrested Tuesday for his role as an alleged intermediary in a series of unpaid loans that benefited business associates.

The report said the TCU questioned BNDES’ approval of a loan for the debt-laden Swift in just 22 days, calling it a “complex” and “high-risk” operation. The approval of “an even more complex” purchase of Smithfield Beef, the cattle division of Smithfield Foods, took just 15 days, the report said.

Loans to JBS resulted in steep losses to BNDES and the public treasury, according to the TCU.

Caroline Stauffer is a Reuters reporter in Sao Paulo.

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