Brazil undertakes sweeping pension sector reforms

As it currently stands, the bill would set a minimum retirement age of 65 for men and 62 for women, with a transition period of 12 to 14 years. If enacted as approved by the lower house, the legislation would save the state over 900 billion reais ($236 billion) over a decade.


Brasilia:
Amid the gloom surrounding Brazil’s economy -- shrinking growth forecasts, double-digit unemployment and rising public debt -- Wednesday’s lower house vote to reform the pension system marks a significant step forward.

 

In a 379 to 131 vote, lawmakers approved the base text of a reform that will result in significant savings for the government and finally establish a minimum retirement age for Brazilians. While the bill still faces a number of legislative hurdles before becoming law, including amendments that could sap its strength, the draft legislation has now overcome its most challenging obstacle.
 

Brazil spends much more on its pensions than most peer countries, and offers more generous terms, particularly to its well-paid civil servants, many of whom retire in their 50s. The vast, multi-billion dollar deficits in its pension funds are driving up Brazil’s public debt to unsustainable levels and risk consuming the entirety of the federal budget.

 

Already Brazil spends ten times more on payments to retirees than on education. With a rapidly aging population, and a constitutional limit on public spending, the current system is a ticking time bomb that threatens to devastate the country’s fragile economy and condemn Brazil to many more years of sub-par growth.

 

Retiring Later
As it currently stands, the bill would set a minimum retirement age of 65 for men and 62 for women, with a transition period of 12 to 14 years. If enacted as approved by the lower house, the legislation would save the state over 900 billion reais ($236 billion) over a decade.

 

Yet lawmakers still have to debate a handful of proposed amendments that could reduce those projected savings. A second vote in the lower house is likely by the end of the week; as with the first, it will require a three-fifths’ majority to pass. After that it heads to the Senate where it needs to pass twice with the same margin.

 

Rogerio Marinho, the special secretary for pensions and jobs at the economy ministry, said that the government would work to minimize the impact of any amendments, adding that the first-round vote tally had been a “positive surprise.”


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