Add trigger-happy Brazilian prosecutors to the list of probable drivers of commodity markets in the coming months.

As the pandemic strains supplies, judges in Brazil have granted prosecutors’ requests to shut major mining and meat operations in recent weeks. That contrasts with the US where officials have taken steps for industries to continue operations while implementing measures to contain the virus.

The aggressive legal moves are for technical as well as cultural reasons. Brazil’s system of civil law restricts judges’ interpretations to matters in which the law offers no guidance, giving them less leeway to throw out actions from prosecutors.

Unlike district attorneys in the US, Brazilian prosecutors are unelected officials with tenure, and have a history of framing cases in extreme terms that are later winnowed down through the judicial process. In a famous case in 2011, prosecutors sought nearly $20 billion from Chevron for a small oil spill. Chevron wound up paying a fraction of the initial amount.

Brazil is unique in that it has a specific branch among public prosecutors to watchdog labor issues, according to Priscila Schvarcz, a labor prosecutor who has filed four suits against meat giant JBS for failing to prevent the spread of Covid-19 at meat plants in southern Brazil. It’s closer oversight than in some other countries that’s led to closures, she said.

“In the US, meat plants were shut due to a lack of workers to keep them running when the number of infections reached hundreds,” Schvarcz said. “It may sound weird abroad when Brazil halts operations with 25 coronavirus cases. It happens because we have an investigation going on and continuous monitoring of labor conditions to avoid major outbreaks.”

CULTURAL DIFFERENCES
Labor prosecutors usually receive complaints and reports from workers and local unions on safety and environmental breaches, and then can start a formal investigation that could include inspections. Based on the findings, they can request stricter measures from a labor judge -- including a plant shutdown or a reduction in output. That’s what has happened in Brazil over the past months.

In the US, the Occupational Safety and Health Administration is the federal agency responsible for inspecting working conditions. The main difference between Brazil and the US is more about cultural behavior, according to Cassio Casagrande, a law professor in Rio de Janeiro.

“In the US, companies avoid litigation because it’s very expensive -- they try to find solutions for some issues in administrative spheres,” Casagrande said. “In Brazil, companies don’t have so much economic sanctions for non-compliance or in a legal battle. That’s why judicialisation is more frequent.”

Iron ore futures surged above $100/t this week after a Brazilian labor court ordered top producer Vale SA to suspend operations that account for about a 10th of its output after workers contracted Covid-19.

“What we have been experiencing in Brazil, even more so in this pandemic, is the growth of judicial activism, both by the courts and the prosecutors,” said Leonardo Theon de Moraes, a Brazilian corporate lawyer who focuses on cross-border litigation.

In April Brazil’s Supreme Court added another layer of uncertainty when it gave cities authority over social isolation measures.

There have been cases of towns in the state of Sao Paulo blocking state measures to reopen businesses, and local officials in mining towns are more likely to press for their constituents to get back to work.

The competing priorities from state, federal and local officials clouds any outlook for when companies like Vale will be free from virus-related shutdowns.