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Shares in Brazil meat processor JBS plunge 31%

Shares in JBS, the meat processor at the heart of Brazil’s latest political scandal, fell 31 per cent on Monday following a credit rating downgrade and investigation on possible insider trading.

The record drop came as Brazil is still absorbing the revelation that Michel Temer, the country’s president, was secretly taped in a conversation with JBS chairman Joesley Batista, in which the former allegedly endorsed bribe paying. 

Investors were reacting in part to comments from Brazil’s securities regulator, which said on Friday it had launched fresh probes into suspicious trades, including “signs of possible insider trading”, made by JBS, and other businesses controlled by J&F Investments. JBS said it had “a policy and a practice of using financial protection instruments aimed exclusively at minimising the currency and commodity risks associated with its debt and receivables denominated in US dollars, given the nature of its operations”. 

Sentiment was further dented by Moody’s, the credit rating agency, which downgraded JBS and its US subsidiary to Ba3 from Ba2 and placed the ratings of both companies “under review for further downgrade”. 

Moody’s cited “increased risks related to potential future litigation cases, governance of the company, and liquidity, on which there is currently limited visibility”. 

The fall in JBS stock dragged the Ibovespa benchmark index down 1.54 per cent on Monday, less than a week after it suffered a sell-off on news of the Temer tape. “This fall of JBS shows there is a lot of pressure, a lot of tension in the Brazilian market right now,” said André Perfeito, chief economist at the São Paulo broker Gradual Investimentos. 

Mr Temer has denied wrongdoing and defied calls to resign. In a televised speech on Saturday, the president accused Mr Batista of committing the “perfect crime” by front-running last week’s sell-off and making “millions and millions of dollars in less than 24 hours” in currency trades. 

The company has been reeling from the “Weak Flesh” probe into alleged bribery of Brazilian health officials by Brazilian meatpackers. In March, police accused JBS and some of its peers of paying inspectors to look the other way on meat safety procedures. The company has denied any wrongdoing. 

The scandal caused several countries to halt imports of Brazilian meat, the country’s third-biggest export industry, for a few days. Analysts believe the furore may prompt JBS to freeze a planned $1bn initial public offering of its food processing unit, JBS Foods International, in New York.