French brace for ‘massive’ imports of South American beef

A free trade agreement in the works between the EU and the Mercosur members Argentina, Brazil, Paraguay and Uruguay would pit small French farmers against their much bigger South American counterparts. (AFP)
Updated 17 January 2018
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French brace for ‘massive’ imports of South American beef

SAINTE-CÉCILE, France: Cedric Mandin, who raises some 800 Charolais cows with his brother in France’s Vendee region, is the fourth generation of his family to own their farm, and he fears he will be the last.
The source of his worry is a huge trade deal being negotiated by the EU and the four Mercosur members Argentina, Brazil, Paraguay and Uruguay — an accord whose signature seems closer than ever.
If the treaty goes through, “we would be in an impossible situation, untenable,” said Mandin, 44, who inherited his 270-hectare farm 20 years ago.
“Today we’re paid between €3.60 and €3.70 per kilogram of meat, but our production costs are €4.50 a kilo,” he said while chain-smoking cigars.
“We already have a deficit and face a difficult situation on our farms. If on top of that we add these massive imports of South American beef in Europe, we’re liable to see prices collapse.”
France’s cattle industry, the largest in Europe, has been facing a deep crisis of rising costs and lower prices — against a backdrop of falling meat consumption.
Many ranchers are barely able to make a profit, while debt levels have been rising.
“We’ve been in a crisis for four years, four years that we’ve been trying to streamline everything, clamp down everywhere, cut our costs to the limit,” said Mandin, shrugging his shoulders.
“There comes a point where you can’t cut any more — in terms of competitiveness we’ve tried everything.”
If the EU and the South American countries reach the agreement, at least 70,000 tons of Mercosur beef could enter Europe each year, free of custom charges.
European negotiators consider this an enormous amount, while the South American side says it falls well short of what is necessary.
The new imports would represent just one percent of Europe’s total beef production, and 4.5 percent of France’s output.
But ranchers say the current market structure could not absorb the increase, which would come on top of the 65,000 tons the EU has agreed to allow in from Canada as part of a trade deal.
That assessment is shared by Philippe Chotteau, chief economist at the French Livestock Institute, who said the lower-priced beef will “aggravate the crisis.”
He estimates that retail prices could fall 10 percent, while the national FNB cattle institute says 25,000 to 30,000 jobs could be lost in France.
“French farmers will be the losers in this deal,” Mandin said while walking among his white cows, sheltered in a barn from the harsh winter.
Beyond the economic threats, many French ranchers also say they are worried about insufficient tracing and food security regimens in Mercosur countries, pointing to the scandal over rotting Brazilian meat passed off as safe last year.
Several countries imposed bans on meat imports from Brazil, the world’s largest producer.
“Our animals are tracked since birth. Over there, at best when they leave the ranch,” Mandin said.
“I can tell you the name of the father and mother of my cows. There is genuine traceability throughout the animal’s life. We’re trying to defend this French uniqueness.”
But after two decades of stalled talks, negotiators have made large strides in recent months and appear determined to reach a free-trade deal, taking advantage of a global leadership void in the wake of US President Donald Trump’s election.
The European Commission wants to strike a deal early this year, before a window of opportunity might close with elections expected next year in Brazil.
France, however, has said it does not want to “rush” on the matter, given the potential impact on its hard-hit beef producers.
“The content has to take precedence over the calendar,” Jean-Baptiste Lemoyne, France’s secretary for foreign trade, said in Brussels in November.


UAE regulators ask corporates to declare exposure to Abraaj

Updated 21 June 2018
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UAE regulators ask corporates to declare exposure to Abraaj

  • Air Arabia admits $336 million exposure to Abraaj funds.
  • Abraaj sells its Latam, Sub-Saharan Africa, North Africa and Turkey Funds to Colony Capital.

DUBAI: The United Arab Emirates’ top securities regulator has asked UAE-listed companies to declare their exposure to Dubai-based private equity firm Abraaj, which filed for provisional liquidation last week.
The Securities & Commodities Authority sent a letter earlier this week and companies had until Thursday to submit their responses, Obaid Al-Zaabi, chief executive of the regulator, told Reuters.
Air Arabia, a Dubai-listed low-cost carrier, said this week that it had a $336 million exposure to Abraaj, which is the Middle East’s biggest private equity firm. Shares in the airline plunged because of these links.
Al-Zaabi said some companies in the UAE had exposure to Abraaj, without naming them.
A court in the Cayman Islands, where Abraaj Holdings is registered, ordered this week that PwC be appointed as provisional liquidators of the company and Deloitte as liquidators of Abraaj Investment Management Ltd.
Abraaj said that the latest restructuring agreement has received in-principle regulatory approval and is expected to close upon approval from the Cayman Islands court and other customary consents.
On Thursday, the Dubai Financial Services Authority (DFSA), which is the regulator of the Dubai International Financial Center (DIFC), said it would discuss “various matters” with the liquidators and “will continue to work toward safeguarding the interests of investors.”
The DFSA is involved because Abraaj has an entity regulated in DIFC.
Abraaj Group agreed to sell its Latin America, Sub-Saharan Africa, North Africa and Turkey Funds management business to US investment management firm Colony Capital Inc, the companies said on Thursday.
The sale agreement comes after months of turmoil at Abraaj in the wake of its dispute with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp. (IFC), over the use of their money in a $1 billion health care fund. The group has denied it misused the funds.
The sale is part of a provisional liquidation and restructuring as set out in a court order. Financial terms of the deal were not disclosed.
Colony Capital has also agreed to oversee, on an interim basis, other Abraaj group funds that are not being acquired so that the group and all its stakeholders have a “comprehensive global solution in place,” the companies said.
The other group funds include the $1 billion health care fund, and some legacy funds of the private equity group.
Sources told Reuters earlier that US buyout firm TPG was in talks with investors in Abraaj’s health care fund to take over management of the assets of the $1 billion fund.
The K-Electric asset, which is being sold in Pakistan and is owned by Abraaj Holdings, is also not part of the transaction.
Colony’s deal comes after other investors such as Cerberus Capital Management had also made offers for the Abraaj business before it filed for provisional liquidation in the Cayman Islands.
A unit of Abu Dhabi Financial Group earlier this week made a conditional offer to buy Abraaj’s management interest in all of its limited partnerships for $50 million, according to a document seen by Reuters.
Since Abraaj’s row with some investors became public early this year, it split its investment management business and holding company, while its founder Arif Naqvi stepped aside from the day-to-day running of its private equity fund unit and the firm halted its investment activities.
Tom Barrack, executive chairman of Colony Capital, said that he hoped that the transaction would enable the process of rebuilding on all sides and also bring an end to the speculation that has swirled around Abraaj over the past months.