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On 27 August 2019, Tasso Jereissati of the Brazilian Social
Democracy Party (Partido da Social Democracia Brasileira: PSDB),
who sponsored the pension reform in the Senate, presented the Upper
House's own version of the bill. The Senate's bill retains the key
features of the version passed by the Lower House on 7 August,
namely setting the retirement age at 65 and increasing pension
contributions.
A few modifications were made. On the expenditure side, the
Senate proposed keeping current benefits for survivors' pensions
and maintaining the payments of at least one minimum wage for
low-income beneficiaries. On the revenue side, non-profit
organisations and agricultural exporters would no longer be exempt
from social security payments. According to Jereissati, the net
savings to be generated by the reform would be about USD253 billion
over the next 10 years, slightly higher than the USD239 billon
estimated by the Lower House's version. Jereissati also indicated
that the Senate would introduce a parallel bill to reform the
pension system in states and municipalities, which are not included
in the original bill. If approved, it would generate an additional
USD89 billion of savings.
Significance
The bill is likely to be approved in late September or early
October 2019, since obtaining the minimum required 49 votes out of
81 in the Senate (a two-thirds majority) is within the government's
reach. This is because there is strong cross-party support for the
bill and the opposition has a weaker presence in the Senate than in
the Lower House, where the bill was already approved. Also,
opposition lawmakers are not operating as a single group, which
suggests that some would eventually support the government on this
bill.
Implementation of the pension reform would help to tackle
Brazil's unsustainable fiscal deficit (IHS Markit forecasts a
fiscal deficit of 7.6% of GDP in 2019, with the pension systems
deficit amounting to 3% of GDP in 2018), contain growing domestic
public debt, and improve the operational environment. Indicators of
the bill being delayed or derailed would be a falling out between
President Jair Bolsonaro and the centre-right parties that have
otherwise supported his austerity agenda. Similarly, an escalation
of social and labour protests, which up to now have been modest,
gathering millions or involving violence, would be likely to also
delay discussions or implementation of the reform.
Posted 06 September 2019 by Carlos Caicedo, Senior Principal Analyst, Latin America Country Risk