By Fabio Teixeira

RIO DE JANEIRO

The 163 Chinese workers found by Brazil's labor ministry in "slavery-like conditions" at a factory construction site owned by Chinese electric vehicle producer BYD (SZ:002594) have been removed and taken to hotels. Officials are negotiating with BYD and the Jinjiang Group about further measures to protect them.

The growing controversy in the automaker's biggest overseas market has highlighted immigrant worker conditions in Brazil's northeastern state of Bahia. A deal with labor prosecutors involving BYD and Jinjiang Group could be finalized as soon as January 7, when they are scheduled to meet.

Earlier this week, the labor prosecutor's office described the workers, hired by Jinjiang Group, as victims of human trafficking. Investigators reported the firm had withheld the passports of 107 workers.

Investigations into slavery in Brazil can lead to significant consequences for employers, including restrictions on bank loans. Jinjiang has denied any wrongdoing, while BYD announced it had severed ties with Jinjiang. Both companies are collaborating with authorities on the investigation.

Jinjiang stated that labeling the workers' conditions as "slavery-like" was incorrect. A BYD executive accused media groups of "deliberately smearing Chinese brands and the relationship between China and Brazil."

If found guilty of subjecting workers to slavery-like conditions, both companies could end up on Brazil's "dirty list," a public registry of employers liable for such conditions. Inclusion on this list carries a significant reputational risk and prohibits obtaining certain loans. Companies may avoid the list by signing agreements with the government to rectify practices and compensate affected workers.

Executives and companies could also face legal action. Labor prosecutors can sue for abuse of workers' rights unless companies agree to compensate affected workers and the government. Additionally, criminal charges can be pursued against executives, with penalties of up to eight years in prison for human trafficking.

Federal prosecutors have requested labor authorities share evidence against BYD and Jinjiang Group.

NEGOTIATIONS BEGIN

Labor inspectors are currently negotiating compensation for workers whose rights were violated. This may include payment for back wages and severance, alongside unemployment benefits.

Mauricio Krepsky, a former head of Brazil's Division of Inspection for the Eradication of Slave Labor (DETRAE), stated, "The efforts of government bodies at this time are focused on the victims and guaranteeing their rights." Victims of human trafficking can decide whether to remain in Brazil or return to their home countries.

BYD has already agreed to purchase travel tickets and cover expenses for seven employees returning to China, as per Brazil's labor prosecutor's office statement.

Negotiations can take months, depending on case complexity and cooperation from the firms. If charges are pressed, it could take years for companies to be added to the dirty list due to potential appeals. (This story has been adjusted to position the phrase 'labor prosecutor's office' correctly).