Brazil Pension Reform: Govt still lacking congressional support
The Brazilian government admitted that it has still not been able to secure enough support in congress for a major pension reform.
"I believe we currently have around 250 votes in favor of the reform. So, we have to attract others 60, 70 votes," vice president Hamilton Mourão told reporters. A total of 150 lawmakers are members of opposition parties and are likely to vote against the government's proposal under any scenario, he added.
Pushing the reform through congress requires changes to the constitution, which means it needs backing from 308 of 513 lawmakers in the lower house. It also needs to be approved by a majority of two thirds in the senate.
President Jair Bolsonaro (pictured) presented a complete version of the government's reform proposal on Wednesday to lawmakers.
The government unveiled the first details of the proposal last week, with a minimum retirement age of 65 years for men and 62 for women. Currently, Brazilians are entitled to a pension after a certain number of years of contributions to the public pension system (35 years for men and 30 years for women).
On Wednesday, the government said it seeks to increase the level of contribution paid by employees in the private and public sectors.
For private sector workers, the contribution will be between 7.5% and 11.7% of monthly salaries, with larger salaries paying a higher level. Currently, the contribution rate is between 8% and 11%.
For public servants, the rate will be 7.5% for those who earn up to one minimum wage per month, and may exceed 16.8% for those who earn more than 39,000 reais (US$10,549) per month.
In addition, the government wants to link the size of pensions with the length of contribution periods. For workers who retire at 65 years with 20 years of contribution, the pension will be 60% of the salary, while 40 years of contributions would generate a pension that is 100% of the salary.
Reaction
"In our assessment, the authorities presented a robust and comprehensive social security reform proposal; very well designed from a conceptual standpoint," said Alberto Ramos, an economist at Goldman Sachs.
"The expected savings of 1.2tn reais (US$324bn) over 10 years are significant, and the proposal reduces some of the current glaring iniquities among different regimes," added Ramos, who expects the first of the two lower house votes to take place between June and July, with the bill being approved in the senate by 4Q19.
Expecting congress to change various aspects of the government proposal before approval, Capital Economics forecasts the savings to be significantly lower than those announced.
"Our best guess is that the overall savings are likely to be 50-60% of those unveiled today, in which case the public debt ratio will rise slowly, reaching around 110% of GDP by 2030," said William Jackson, an economist at Capital Economics.
Local and international analysts view the pension reform as crucial to control government spending and debt, and also to boost investor confidence. Since the reform will make the pension system less generous, it enjoys little support among the general public.
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