Brazil breathes sigh of relief as meat scandal subsides

The scandal over Brazil’s meat sector, which at one point appeared to threaten the country’s economic recovery, seems to have faded just as quickly as it escalated. The crisis exploded following the revelation earlier this month that the authorities had begun an investigation into allegations that up to 40 food processing companies had bribed government officials to approve the sale and export of soiled meat. In response, countries from China to Chile imposed bans on imports of Brazilian meat with the result that shipments fell by about a fifth last week. At one point, meat exports worth about $8bn annually (0.5% of GDP) were subject to various bans and restrictions. The good news is that most of these bans have now been lifted, helped in part by an intense lobbying effort by the government. The bad news is that the fact that a single scandal posed such a threat to the economy underlines just how fragile Brazil’s economic recovery will be. Meanwhile, with the meat scandal subsiding, investors have quickly turned their focus to the progress of pension reforms through Congress. Signs that the bill is struggling to get out of committee have taken some steam out of the rally in the real over the past week.