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Full responses from the meatpacking companies and banks

Statements and answers sent to the report ‘BNDES finances slaughterhouses that buy from deforested ranches and use slave labor’

Mercúrio

In a telephone interview, Mercúrio’s chairman of the board Lincoln Silveira Bueno stated that their contracts with BNDES focused on acquisition of machinery rather than on expanding the company, which would exempt them from complying with Regulation 1854/2009. He adds that the issues detected in Ibama and Repórter Brasil investigations are exceptions and mentions the company’s results in the Federal Prosecution’s audits, with environmental compliance exceeding 99%, to demonstrate their social and environmental commitment.

Ribeiro Soares

Ribeiro Soares also provided clarifications by telephone, through IT technician Aparecido de Souza Vieira Júnior, responsible for monitoring the Conduct Adjustment Agreement. According to him, the high percentages of noncompliance in MPF’s audits in 2018 and 2019 were due to the company’s misunderstanding about what was or was not allowed. According to Vieira, they understood that tolerance for illegal deforestation was 6.25% of the total area of ​​the property, when in fact it was 6.25 hectares per farm. “We misunderstood it, we thought it was a percentage and not the real value. Since people thought it was 6.25%, in an area of ​​300 hectares it would be 18 hectares [of legal deforestation]”, he says, adding that they are now adjusted to the norm.

Boi Branco

CARNES BOI BRANCO LTDA. has been a signatory of the Conduct Adjustment Agreement for the Beef industry since April 2013 and does not source cattle from areas interdicted by Ibama, illegally deforested, within Indigenous Lands, in Conservation Units with restricted use for livestock, as well as from producers that are on the list of slave-like labour, or rural areas with no CAR or GTA registrations. We have a Supply Chain Monitoring Program and a contract with a specialized high-tech company that checks all social and environmental issues before each cattle purchase, through official public lists as well as Geospatial monitoring. The company undergoes annual independent audits to verify social and environmental issues and is proud of its history of zero non-compliance. The last audit was carried out in April 2021, referring to 2020, and has already been filed with the Federal Prosecution Service, which monitors all activities related to the TAC.

Banco do Brasil

Responses sent by email:

1) How does the bank inspect whether meat companies with BNDES loans comply with livestock guidelines?

Banco do Brasil’s Credit Policy provides for compliance with social and environmental criteria when granting loans and financing. It has a set of policies, guidelines and other instruments that guide the management of ESG factors in our business and operations. Borrowers are required to present documents that prove the social and environmental regularity of their projects, such as licenses, water permits, deforestation authorization in accordance with the limits expressed in the Brazilian Forest Code, among other documents. We do not finance clients that appear on Ibama’s list of interdicted areas for deforestation or irregular fires.

In addition, for properties located in the Amazon Biome, credit is also conditional upon proof that properties’ environmental and land tenure status is regular. Additionally, in operations intended for agricultural activities in the municipalities that make up the Amazon Biome, specifically in the Beef Cattle Sector, an updated list of all suppliers present in the register of direct suppliers is required.

Regarding credit to rural producers and their agricultural cooperatives, BB has a tool that prevents it from contracting operations in areas with legal restrictions linked to environmental issues. The system stops the operation when the area overlap with indigenous lands, interdicted areas or illegal deforestation throughout the national territory (whatever the percentage of overlap is).

R: We do not finance clients that have caused intentional damage to the environment, and our credit concession systems are prepared to identify such restrictions and prevent contracting with irregular clients. We included contractual clauses for credit operations with the prerogative of suspending fund transfers or early contract termination, with immediate payment of debts and suspension of disbursements in the event of violations.

2) Has the bank refused to sign any financing contract with companies using BNDES credit lines due to applicants’ socio-environmental issues?

R: For banking, commercial and business secrecy reasons, Banco do Brasil does not comment on its credit operations. BB conducts automatic verification on more than 50 public databases with indicators for red flags, impediments and socio-environmental information, calculating the properties’ overlap with the bases. Risk assessment for illegal deforestation is included in that general process. Enterprises that eventually face interdictions resulting from deforestation pointed out by environmental agencies have their loan requirement refused in the analysis.

3) Meatpacking company Ribeiro Soares has two contracts signed in 2014 in the amount of R$ 3.7 million that were still active in early 2020, according to data from Forests and Finance. BB is the intermediary for that loan and should check the company’s social and environmental compliance. However, in audits disclosed in 2018 and 2019 by the Federal Prosecution Service, its irregularity rate in purchases was above 20%. According to livestock guidelines, this should have led to early termination of the contract. Why was this not done?

R: For banking, commercial and business secrecy reasons, Banco do Brasil will not comment on specific transactions.

4) Has BB ever reported any case in which a company from the livestock sector provided false information about its supplier control? If so, what was BNDES’s reaction?

R: For banking, commercial and business secrecy reasons, Banco do Brasil will not comment on specific transactions.

5) Has BB ever been sanctioned for failing to check these documents and maintaining active contracts with companies involved in cases of illegal deforestation, slave labour or other socio-environmental irregularities?

R: BB fully complies with the regulations of the resource allocator, in compliance with the rules of the programs and with our credit and social-environmental responsibility (SER) policies.

Itaú Unibanco

Responses sent by email:

1) How does the bank inspect whether meat companies with loans from BNDES lines of credit comply with livestock guidelines?

R: In 2007, Itaú Unibanco voluntarily adopted a Social and Environmental Responsibility policy for granting credit. In order to approve credit to rural producers – including cattle ranchers – based on that policy, the bank checks the existence of irregular deforestation, slave labour and overlapping with sensitive areas such as conservation units, indigenous lands or quilombola communities. Additionally, large clients operating in sectors considered sensitive such as meatpacking companies undergo individualized social and environmental risk analysis, which includes aspects of supply chain management and adherence to public commitments to supplier traceability. The bank also takes steps when granting loans intended for rural areas, in order to prevent the use of resources in areas that are not regular from a socio-environmental point of view. Finally, Itaú is constantly improving its social and environmental practices and, in the context of the Amazon Plan, has been improving analysis tools for clients in the meatpacking industry in order to encourage adoption of even more comprehensive social and environmental diligence in the meat supply chain.

2) Has the bank refused to sign any financing contract with companies using BNDES credit lines due to the applicant’s socio-environmental issues?

R: Yes, over the years there have been cases involving companies in the sector in which the bank, after conducting individualized socio-environmental risk analysis for granting credit – either with the bank’s own resources or BNDES’s – decided not to proceed with the operation.

3) Masterboi has a R$ 6.3-million contract signed in 2013, which is still active according to BNDES’ Transparency Portal. Itaú is the intermediary for that loan and should check the company’s social and environmental compliance. But a 2018 audit conducted by the Federal Prosecution Service attested that 31% of Masterboi’s purchases were irregular. According to the livestock guidelines, this should have led to early termination of the contract. Why was this not done?

R: For banking, commercial and business secrecy reasons, Itaú will not comment on specific transactions.

4) Has Itaú ever reported any case in which a company from the livestock sector provided false information about its supplier control? If so, what did BNDES do?

R: There has been no such case in the history of Itaú Unibanco.

5) Has Itaú even been sanctioned for failing to check these documents and maintaining active contracts with companies involved in cases of illegal deforestation, slave labour or other socio-environmental irregularities?

R: There has been no such case in the history of Itaú Unibanco.

Read the full article: BNDES finances meatpacking companies that source from deforested farms and use slave labour


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