Brazil Rising

Brazil is one of the world’s great emerging economic powers. Experts from Brazil and the United States met recently in Sao Paulo to discuss the unique and important role the South American country plays in the global food system and the challenges that come with it. Hosted by the Food and Drug Law Institute (FDLI), the conference covered many topics that could impact the food industry in the United States.

Brazil’s growing economy, with the sixth-largest gross domestic product in the world, is key to both global production and consumption. Brazil is the world’s largest exporter of beef, chicken, sugar and orange juice, and the second-largest exporter of soybeans. It is the home of many world-class food companies. Brazil’s diverse climate, fertile soil and abundant available water and rainfall make it one of the world’s great agricultural producers.

Many of the world’s largest multinational companies have a presence there, and more than 60 percent of all multinational companies are predicted to be operating in Brazil by the end of 2013. For leading companies such as Cargill Inc., General Mills, Nestle and Kraft, and midsize companies seeking to take advantage of the growing market, Brazil is an attractive target. According to sources at the conference, the average income for Brazil’s middle class will grow 5 percent in the next three years. This is in stark contrast to the U.S. and European economies, and even China, where growth has slowed.

Recognizing Brazil’s role in the global food supply chain, discussions at FDLI’s conference focused in part on the U.S. and Brazilian food regulatory systems, challenges regarding food imports and risk management in the global supply chain. These topics are significant for any U.S. food companies that seek to enter the Brazilian market or import food products from the agricultural giant.

Navigating Brazilian Regulations In Brazil, a World Trade Organization member country, two main federal ministries regulate food safety: the Ministry of Agriculture, Livestock and Food Supply (MAPA); and the Ministry of Health (MH), which does most of its regulation through its associated independent agency, the National Agency of Sanitary Surveillance (ANVISA). Fed-eral food regulations need to be published in Brazil’s Diario Official in order to be implemented.

MAPA has jurisdiction over meat, poultry, fish, dairy products, eggs, a variety of beverages, fruits and vegetables, pet food, animal feed and a number of other products. The agency is responsible for making and enforcing all policies related to Brazilian agribusiness development. MAPA’s duties include regulation, classification and inspection of imported agricultural products entering Brazil. MAPA aims to ensure food safety and surplus production for export, thus strengthening Brazil’s place in the international market.

ANVISA has jurisdiction over all consumer-ready or processed products and is an independent regulatory agency with a mission “to protect and promote health, ensuring the hygiene and safety of products and services and taking part in developing access to it.” ANVISA attempts to achieve its mission by assessing food standards, food safety and contaminants. ANVISA is connected to the MH, but it is independently operated and is sometimes referred to as Brazil’s counterpart of the FDA.

In addition, within the Ministry of Environment (MMA) is an agency called The Brazilian Institute for the Environment and Natural Resources (IBAMA). IBAMA is involved with approval of pesticides and herbicides, as are MH and MAPA to a degree. Another key regulatory agency is the Ministry of Development, Industry and Foreign Trade (MDIC). All food products imported or exported by Brazil must be registered at the Secretariat of Foreign Trade (SECEX) of MDIC. This office oversees import and export tariffs and grants import and export licenses.

At the same time, state and local regulation adds an overlay to federal regulation. The food regulatory structure in Brazil is very complex, and in some instances more than one agency has responsibility for a food item. As a result, U.S. companies exploring the expansion of food product lines into Brazil must give special attention to the complex federal, state and local regulatory schemes.

Controlling Supply Chain Risk

Food companies face challenges in controlling supply chain risk. The increasing sophistication of many manufacturing facilities has begun to reduce risk from within, but has done little to control the safety and quality risks of incoming components. It was evident from the conference that global food companies use a combination of audits, testing and product tracking to minimize supply chain risk. One of the key challenges in a resource-constrained environment is how to develop appropriate tools to focus resources in areas of greatest risk.

Importers and exporters, both U.S.- and Brazil-based, strongly desire supply chain risk-ranking tools. One approach discussed was the use of targeted assessments around inherent product risk – e.g., a food that is grown in the soil and has no pathogen-reduction steps versus a food that is thoroughly cooked – and around supplier risk – e.g., suppliers that have a robust food safety and quality culture along with the processes and record-keeping to back that up versus those that do not.

At the conclusion of the conference, it was evident that companies face similar challenges wherever they are located. The need to have a deep understanding of regulatory structure and how to be compliant, while critical, is only part of today’s challenges in an environment of increasing global complexity and supply chain risk.

Officials from both the United States and Brazil emphasized their mutual commitment to provide consumers in both countries with a safe food supply. Generally, this goal is achieved in both countries through a risk-based food safety evaluation system supported by both governmental inspection and obligations of the food industry to evaluate risk areas in the food chain.

New Import Requirements

Significant attention was given to the Food Safety Modernization Act’s (FSMA) new import requirements, which impact food supply entering the United States from foreign locations. A key aspect is the Foreign Supply Verification Program (FSVP), which requires importers of food, including ingredients, to certify that products coming from foreign countries meet FSMA’s standards for food safety. For example, a U.S. importer of a Brazil-produced foodstuff will have to confirm that it was produced in a plant that meets the FSMA hazard control standards. These new requirements might place additional pressures on the foreign supply chain and further consolidate foreign supply sourcing. FDA has not yet issued the draft regulations implementing these requirements, so their impact is yet to be fully understood.

FSMA also mandates dramatic increases in the number of inspections of foreign facilities, which will impact many companies’ operations in Brazil. Although it is yet to be seen how increased inspections will be accomplished, companies must prepare for the heightened likelihood of inspection. Refusal to allow an inspection can result in a block on the importation of food goods produced at that facility.

Brazilian Food Safety

Brazil is paying increased attention to ensuring a safe food supply for its citizens. The Brazilian system, as emphasized by senior officials, includes both pre- and post-market surveillance. The pre-market phase includes registration, with evaluation of safety and efficacy; regulation of labeling, contaminants, food additives, GMP and transportation; and risk assessment. The post-market surveillance includes attention to monitoring programs, certification programs, risk communications to the consumers and investigation of outbreaks.

MAPA and ANVISA are responsible for overseeing and ensuring the safety of imported food and beverages. There are three major phases of import in Brazil: (1) import procedures prior to shipment, (2) import procedures during shipment and (3) import procedures upon product arrival. According to Brazilian law, the Brazilian importer of a product is held liable in case of a consumer health risk from an imported product.

MAPA has additional regulations for imports to Brazil under its jurisdiction. These include an inspection requirement for meat, dairy and seafood product processing plants that export to Brazil; accompaniment of products of plant origin with an Animal and Plant Health Inspection Service/Plant Protection and Quarantine phytosanitary certificate; and set requirements for pest risk.

As all of these trends and developments illustrate, safety in the cross-border global food supply chain is receiving ever-increasing attention by U.S. and Brazilian officials. Companies operating within and between the two countries must continue to invest attention and resources in compliance systems to maximize market success in each.

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