SAO PAULO/BEIJING, March 20 (Reuters) - Fallout over a Brazilian meat corruption scandal spread on Monday, with China and South Korea suspending some imports, the European Union mulling action and shares of meatpacking companies BRF SA and JBS SA dropping.
China, Brazil’s top trade partner, decided to suspend the import of meat products from Brazil as a “precautionary measure,” said a source who requested anonymity because of the sensitivity of the information.
South Korea’s agriculture ministry said in a statement that it would tighten inspections of imported Brazilian chicken meat and temporarily bar sales of BRF chicken products.
The South Korean ministry said suppliers of Brazilian chicken would have to submit a health certificate issued by the Brazilian government.
The actions came after Brazilian police investigation on Friday named BRF, JBS and dozens of smaller rivals in a major investigation of alleged bribery of health inspectors to hide unsanitary conditions in plants.
Police conducted raids on Friday in six states to seek more evidence, tarnishing one of few vibrant sectors in Latin America’s biggest nation, which is suffering its worst recession on record.
The two-year probe, known as “Operation Weak Flesh,” found evidence that meatpackers paid off inspectors and politicians to overlook practices including processing rotten meat and shipping exports with traces of salmonella, police said.
Shares of BRF SA fell 8 percent and JBS SA dropped 5 percent on Monday. The companies have strongly denied any wrongdoing.
Shares of Minerva SA and Marfrig Global Foods SA , which are not involved in the investigations, also fell sharply as traders fretted over the possibility of further import bans.
Credit Suisse Securities analyst Victor Saragiotto wrote in a Monday note to clients that the scandal “could be enough to compromise temporarily Brazilian protein’s acceptance worldwide.”
Brazil exported $6.9 billion of poultry and $5.5 billion of beef worldwide last year, according to industry groups.
More than 80 percent of the 107,400 tonnes of chicken imported by South Korea last year came from Brazil, and almost half of that was supplied by BRF.
The European Commission said it would monitor meat imports from Brazil, and any companies found to be involved in a meat scandal there will be denied access to the European Union market, a spokesman said.
“The Commission will ensure that any of the establishments implicated in the fraud are suspended from exporting to the EU,” a spokesman for the European Commission told a media briefing.
The Commission said the scandal would have no impact on negotiations between the European Union and South American bloc Mercosur about agreements on free trade. (Reporting by Bruno Federowski and Brad Brooks in Sao Paulo, Dominique Patton in Beijing, Robert-Jan Bartunek in Brussels and Jane Chung in Seoul; Editing by Daniel Flynn and Lisa Von Ahn)