March 23, 2020 / 5:25 PM / 14 days ago

UPDATE 2-Brazil farm town's coronavirus lockdown could affect Bunge, Cofco

(Adds industry group statements, agriculture ministry comment, context)

By Ana Mano and Jake Spring

SAO PAULO, March 23 (Reuters) - A town in the heart of Brazil's farm country has halted all non-essential services and ordered industrial sites, including agricultural processing facilities, to suspend operations in response to the coronavirus crisis.

The municipal decree ordering the closures was issued on Saturday by the mayor of Rondonópolis in Mato Grosso state, Brazil's largest producer of grains and meat. The order could face legal challenges as the federal government pushes to keep certain businesses open through the outbreak.

Chinese food conglomerate Cofco and U.S.-based grain trader Bunge are among companies that have plants in the city. Bunge and Cofco directed questions to oilseed industry association Abiove.

Abiove said all of its members in the area continue to operate normally and export logistics are not affected.

Several parties are negotiating with the Rondonópolis city government to attempt to resolve the issue, a person in the oilseeds industry said on condition of anonymity.

Aprosoja, a group representing Brazilian grain growers, warned that states and municipalities are enacting measures to curb the circulation of people that could "threaten the supply of food products, goods and diesel oil and automotive parts."

In a statement, Aprosoja called on regional governments to observe a federal decree issued by President Jair Bolsonaro last week as to what constitutes essential services.

Bolsonaro's decree states that production, distribution, commercialization, and delivery of food and beverages is essential, along with the transportation of cargos more generally.

The press office for Brazil's Agriculture Ministry told Reuters that companies should present the relevant federal law to their local governments in Rondonópolis and other cities that have enacted similar measures to halt spread of the virus.

If the matter cannot be resolved, companies should sue in their local jurisdictions in order to prevent "essential activities" from being shut down, the ministry said.

Frederico Favacho, a partner at law firm Mattos Engelberg Advogados, told Reuters on Monday that the Rondonópolis mayor lacks jurisdiction to enforce such restrictions.

The attorney said at least two other towns, one in Bahia state and another other in Minas Gerais state, are enforcing similar decrees that his law firm is legally challenging on behalf of clients he declined to name.

Rondonópolis city hall could not be reached for comment.

Favacho, who has clients in the agribusiness sector but does not represent Abiove in this matter, said the measure would be detrimental to soy crushers that produce oil and soymeal in the region, and could affect commercial contracts. (Reporting by Ana Mano and Jake Spring Editing by Chizu Nomiyama and Bill Berkrot)

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