GENETICALLY-MODFIED CORN AND SOY GET ALL MIXED UP IN BRAZIL, THREATEN EXPORTS

Brazil has rules for the deployment of genetically-modified organisms (GMOs), including corn and soybeans. But Folha de Sao Paulo, one of the country's main dailies, reported on Sunday, May 10, that the country’s soy and corn crops are hopelessly mixed up, a situation that came about because Brazil does not have the necessary harvesting, transportation, and storage equipment and facilities to separate crops that have been genetically modified from those that have not.

This state of affairs creates a number of problems:

• By law, consumers have a right to know if the food they are consuming has been genetically manipulated or not. But, given the extent of the problem, they must now presume that at least a portion of what they eat comes from seeds developed by Monsanto, Syngenta, Bayer, and other corporations.
• Folha reports that, while the problem is just beginning with corn, the vast soybean fields of Brazil’s Center-West, in the states of Mato Grosso, Mato Grosso do Sul, and Goias, have been totally contaminated by GMOs, according to producers it interviewed. This fact has already led to the cancellation of a number of export contracts.
• Sadia and Perdigao, two of the country’s largest producers of poultry, pork, beef, turkey and chicken, have said that they will maintain their policy of not using GMOs. But Folha says that, in light of the generalized mix-up, they have been unable to explain how the separation will be accomplished.

The realization that GMOs may make their way into the meat Sadia and Perdigao produce and sell comes at a particularly bad time. The two companies are contemplating a possible joint venture in some operating areas, seeking to boost margins eroded by the current downturn. A joint venture would also allow Sadia to recover from heavy losses associated with the downfall of Lehman last September and with wrong-way bets on forex derivatives.

Following the Law, the Brazilian Way

Folha reports that CTNBio, the Brazilian government agency in charge of approving and overseeing the deployment of GMOs in the country, has said that the rules governing GMOs “are being followed, but not to the extent required by law”.

In other words, the rules are being fudged and, the government hopes, will eventually fade away into distant memory as the use of GMOs becomes a fait accompli. One has to wonder how the country’s trading partners will react once they realize that they can have any kind of corn or soybeans they want – as long as it’s transgenic.

As is usual in Brazil, the legal framework governing an industry looks far better on paper than on the ground. Pre-salt investors: take note.