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Brazil agribusiness company accuses ally Temer in secret bribe taping

  • The world’s largest meat processor, Brazil’s JBS has been rocked by scandal. In March, investigations revealed the company had bribed federal officials to turn a blind eye to tainted meat, and had also illegally raised 59,000 head of cattle on illegally deforested Amazon lands. JBS is a key backer of the bancada ruralista agribusiness lobby.
  • Now, JBS owners the Batista brothers, in a plea bargain with federal investigators, have produced a tape in which Brazil’s president, Michel Temer, in conversation with one of the JBS owners, apparently enthusiastically endorses the use of bribes by the company. Temer claims the recording has been altered.
  • Temer has consistently done the bidding of the agribusiness lobby, which brought him to power a year ago. He has worked to reverse indigenous land rights gained under the 1988 constitution, and to dismember conservation units, with up to 1.2 million hectares of forest to be turned over to land thieves who illegally seized federal lands.
  • There are calls for the president to resign, though Temer has refused to step down. Legislation to dismember Amazon conservation units was recently approved by Brazil’s Assembly and is headed for the Senate, which has until 29 May to approve the bills, a timeline which is looking extremely tight considering current events.
Brazilian President Michel Temer. Photo by Agência Brasil

JBS, the world’s largest meat processing company was at the center of two globally reported scandals in March, the first, involving federal bribes that allowed the export of rotten meat, and the second in which JBS purchased 59,000 head of cattle raised on 507 square kilometers (196 square miles) of illegally deforested land in the Amazon. Both charges were the result of Federal Police operations.

Now, JBS is at the center of Brazil’s latest political and economic crisis — a corruption scandal that could topple Michel Temer, the nation’s president. This time it is JBS that carried out the operation, apparently entrapping the president.

President Temer, who has been carrying out measures demanded by the bancada ruralista, the nation’s agribusiness lobby, apparently in return for their role in bringing him to power, appears to have been betrayed last week by a powerful member of that lobby. Top JBS executives made plea bargains that are apparently aimed at protecting themselves while sacrificing the president.

Allegations against the President

JBS Company owners, brothers Joesley and Wesley Batista, have signed plea bargain agreements with Brazil’s Federal Public Ministry as part of the Lava Jato (Car Wash) Operation, a countrywide corruption investigation now in its third year. JBS is apparently sacrificing its interests in Brazil — and, along with them, probably Temer — in its anxiety to complete a move of its principal operations to the U.S., already underway

The news of the Batista plea bargain became public last Wednesday, and the following day the Federal Supreme Court approved the pleas, along with those from executives of the J&F Group, the parent company that controls JBS.

Last Friday, the court released the explosive content of the testimonies, which include a secret recording between JBS owner Joesley Batista and the president in which Temer apparently endorses the use of bribes by the company.

Experts analyze president President Michel Temer’s secretly taped conversation with JBS co-owner Joesley Batista. Photo courtesy of EBC Agência Brasil

Since Temer took office last year, he has clearly promoted the interests of the agribusiness lobby. The president selected soy mogul Blairo Maggi as his agriculture minister, and Osmar Serraglio as his justice minister. Serraglio received US $59,000.from JBS in his 2014 campaign — his single largest political donor. The Supreme Court is currently investigating 64 Brazilian lawmakers and 8 members of Temer’s cabinet, including Maggi, for possible corruption.

Temer has vigorously moved the agribusiness lobby agenda forward, attacking indigenous land rights guarantees assured by Brazil’s 1988 constitution, and moving to dismember conservation units and turn up to 1.2 million hectares (2.9 million acres) over to land thieves who want to legitimize their land grabs. He has also sought to gut environmental licensing laws for large infrastructure projects including Amazon dams and waterways beneficial to agribusiness, and has agreed to withdraw the environmental license requirement for large agricultural tracts.

Agribusiness company throws Temer under the bus

The testimony by JBS, the agribusiness giant, could, according to many Brazil watchers, be the undoing of the president.

Statements made say that late on the evening of March 7, Batista went to Jaburu Palace in Brasília to meet Temer. Among other things, they talked about the former president of the Chamber of Deputies Eduardo Cunha, arrested for corruption in the Car Wash Operation and about BNDES, Brazil’s large development bank.

Regarding Cunha, Batista reported that the banned politician continues to receive payments to remain silent. Here are some excerpts from one version of the recording, though other fuller and more compromising versions are now circulating on the Internet:

Batista: How are you in the situation with Eduardo [Cunha]? (…) As much as possible, I did as best as I could; zeroed all past debts. I’m well with Eduardo.

Temer: You have to keep up with this, you understand?

Batista: Every month. I’m hanging in there. I’m in trouble with the cases.

Temer: You’re being investigated?.

Batista: That’s right, I have not been charged yet. I managed to get the judge on one side to slow things down and the substitute judge on the other.

Temer: Are you slowing down both?

Batista: Yes.

Temer: Great, great.

Batista is under federal investigation for other alleged crimes, including a JBS corruption scheme to gain special financial favors from the BNDES, Brazil’s gigantic state-owned development bank. Batista has reportedly been negotiating a plea bargain with Brazilian investigators in exchange for information regarding the BNDES scandal.

BNDES headquarters in Brasilia. The Banco Nacional de Desenvolvimento Econômico e Social is the largest development bank in the Americas. JBS’s Batista is under federal investigation for alleged crimes, including a JBS corruption scheme to gain special financial favors from BNDES, Photo courtesy of BNDES

Batista and Temer seem to agree that the best way forward out of the corruption investigation is not to resolve it, but to create a booming Brazilian economy:

Batista: How will the [presidential] elections be in 2018?

Temer: It’s really bad, the economy is broken, but when it improves…

Batista: Absolutely. There is no better remedy than when things go well financially… Everyone calms down, everyone…

During testimony at the Attorney General’s Office, Batista declared that JBS made illicit donations to more than 1,800 politicians and public servants of approximately US $153 million in the last five years. JBS documents, however, indicate a total of US $584 million in payments.

The list of payments include those made to three Brazilian presidents — Michel Temer, Dilma Rousseff, and Lula da Silva — plus governors, senators and deputies.

JBS moving its operation from Brazil to the U.S.

According to Batista, Temer received about US $1.4 million in bribes when running for vice president in 2014. Temer would also gain US $147 million over the next 20 years if he could end Petrobras’ monopoly of supplying natural gas to a J&F Group thermoelectric plant.

Thanks to the financial support of BNDES — which became a shareholder of JBS with a 21 percent stake in 2007 — the company made numerous acquisitions especially in the United States, including U.S. firm Swift & Company, as well as Smithfield Foods meat business.

In 2006 (pre-BNDES), JBS revenue was just US $1.3 billion; by 2016 it had risen to US $53.5 billion. As of 2017, JBS USA was the second-largest processor of beef and pork in the United States, while JBS-owned, U.S. based Pilgrim’s Pride was the second-largest poultry company.

The New York Stock Exchange (NYSE). Last December, J&F Group approved a plan for a U.S. initial public offering (IPO) of its JBS Foods International unit on the NYSE. As of 2017, JBS USA was the second-largest processor of beef and pork in the United States, while JBS-owned, U.S. based Pilgrim’s Pride was the second-largest poultry company. JBS seems intent on leaving behind its Brazilian corruption problems, as it moves much of its operations to the United States. Photo by Patxi Moraleda on flickr

A possible reason for the rapid closing of the JBS plea agreement in Brazil is that the heart of the JBS operation is already in the U.S. and the company is keen to push ahead with this bright future, leaving behind its messy Brazilian operations, now of only secondary importance.

Last December, J&F Group approved a plan for a U.S. initial public offering (IPO) of its JBS Foods International unit on the New York Stock Exchange (NYSE). Companies that operate in the U.S. are subject to the country’s anti-corruption law, and JBS owns 56 meat processing plants in the country, accounting for almost half of its global sales.

The IPO plan, however, has been postponed and may not happen this year. In a conference call with analysts on May 16, Wesley Batista said that the launch will only take place when the subsidiary’s investors consider that the sale will not be affected by the Brazilian Federal Police operations.

Currently the J&F group is the target of five Federal Police operations. The Batista brothers’ fixed residence is in the U.S., which led President Temer to angrily point a finger at accuser Joesley Batista last Saturday, declaring the JBS owner a confessed criminal, who, instead of doing time in prison for corruption, is “freely walking the streets of New York.

So, while the Batista brothers press ahead with their U.S. ventures, back in Brazil Temer’s popularity continues to fall (It is now in the single digits) and his administration struggles to survive. Even before last week’s allegations, President Temer was already facing testimony that he negotiated a $40 million bribe for his Brazilian Democratic Movement Party in 2010. He denies the claims.

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President Temer has denied the corruption allegations against him. So far the president has refused to resign. Photo by Agência Brasil