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Will Brazil implement pension reforms?
April 11, 2019, 7:47 pm

Michel Temer entered the presidency vowing to slash spending but he ended his presidency having failed to push pension reforms through Brazil’s Congress [PPIO]

Despite severe criticism in Brazil against the controversial pension reform plan, the government says it is confident the measure will pass in Congress and save the country one trillion reais, or $262 billion dollars over the next 10 years.

The government says that the reform plan, which was a core policy of the former cabinet led by Michel Temer, is necessary to boost growth.

On Thursday, speaker of the lower house of the National Congress Rodrigo Maia says he expects the reforms will pass by the end of June. The lower house is also known as the Chamber of Deputies and it is where Temer faced defeat, and the new government is hoping for a reversal of fortune.

The Brazilian economy has been in a quicksand of sorts for five years, sinking into recession and then struggling to reach one per cent GDP growth in 2017. The forecasts are repeatedly slashed; for 2019 an initial GDP growth of 2.2 per cent has been revised down to 1.8 per cent because the already slow recovery is itself slowing down.

Economists are pointing to the fourth quarter of 2018 as a worrying sign that Brazil hasn’t entirel shed its ability to fall back into recession. In the fourth quarter, GDP growth was just 0.1 per cent.

That helps to explain why the government is hoping that the pension reforms will give the economy a boost. It says that overhauling the pension system is necessary to cap government spending, which some economists say was overblown and a factor in the recession since 2014.

The reforms call for the government to lift the retirement age, for example, well into the 60s, easing the burden on the national coffers. Temer’s proposal would have men retiring at 65 and women at 62, but under the Bolsonaro government, the retirment age is now 65 for all – men and women.

Most Brazilians in the public sector retire in their mid to late 50s.

In the rural industries, women will retire at 55 and men at 60, according to the initial proposal. But this, too, has been revised to 65 nationwide. Furthermore, in order to qualify for pension, those in the public and private sector should have served for at least 40 years.

According to the constitution, the proposal requires 308 of 513 votes in congress to pass. It was shot down during Temer’s tenure and it looks increasingly an uphill battle for Bolsonaro’s government to pass it this year.

The government says the reforms will help fill a funding gap and cut the national deficit.

The BRICS Post with inputs from Agencies