In Brazil's Pension Poker, Temer Bets on his Finance Minister

  • Meirelles has leading role in talks on Brazil pension reform
  • Former central bank president widely respected in Congress

With Michel Temer’s closest aides sidelined by corruption scandals, Brazil’s president has increasingly relied on his finance minister, a former Wall Street executive, to steer an unpopular pension reform bill through the treacherous waters of Congress.

Henrique Meirelles, a 71 year-old trained engineer, business administrator, and former executive at FleetBoston Financial Corporation, met with hundreds of legislators in recent weeks. In session after session he has plowed through presentations and fielded questions from anxious legislators to drum up support for a pension overhaul that could prove crucial to Brazil’s economic recovery and its return to investment grade.

Henrique Meirelles

Photographer: Krisztian Bocsi/Bloomberg

Meirelles is stepping up to the plate just as some of Temer’s top aides have been engulfed by corruption scandals. His congressional liaison Geddel Vieira Lima was forced to step down and his chief of staff Eliseu Padilha allegedly requested illegal campaign donations. Both have denied wrongdoing.

"When you’re in a poker game, you have to play with the cards you’ve been dealt," David Fleischer, professor emeritus of political science at the University of Brasilia, said by phone. "Temer has lost several cards from his inner circle. Meirelles is the best card he has left."

The proposed pension overhaul aims to control social security costs by setting a minimum retirement age and increasing contribution time. The plan has come under fire from opposition lawmakers and labor unions that argue the measure violates Brazilians’ constitutional rights.

While much of the cabinet is working to get the bill approved, Temer gave his nod for Meirelles to become the standard-bearer of the proposal because he’s respected among legislators and well-versed on the issue at hand, according to one of the president’s aides who asked not to be named.

If successful, Meirelles would emerge as the man who pulled the country from its deepest recession ever, possibly making him a presidential hopeful. But the risk of delving into a congressional bee hive with nearly 30 political parties is big. A former finance minister, Joaquim Levy, tried and was ultimately forced to resign, albeit because he lacked support from the governing coalition.

Mixed Results

So far Meirelles has had mixed results, partly due to the fact he and his audience are playing for different stakes. The finance minister’s focus on the long-term viability of the country’s public accounts contrasts with lawmakers’ concerns over how to sell their voters a plan that obliges them to work for longer. Elections are just 18 months away.

"Meirelles isn’t worried about the re-election of lawmakers who vote against workers," said Alberto Fraga, deputy-leader of the Democratas Party, one of Temer’s main coalition partners. "He only thinks about numbers and statistics."

Those voting in favor of reforms will be able to say they helped put Brazil back on track, Meirelles said in e-mailed comments. "Some legislators’ concerns that they could be hurt in the eye of the electorate by approving apparently unpopular reforms are misguided," Meirelles said. "These reforms will allow Brazil to grow again, create jobs, and generate more income for the population with lower inflation and interest rates."

Though elected as a federal deputy in 2002, Meirelles never took office. Instead, he ran the central bank at the invitation of former President Luiz Inacio Lula da Silva. Since leaving that position in 2010 he has held numerous private sector jobs, including senior adviser at Kohlberg Kravis Roberts & Co. Ltd and the chairman at J&F Investimentos SA, the holding company that controls the world’s largest meat producer, JBS SA.

Appointed as finance minister in May last year, Meirelles has helped to restore credibility to Brazil’s economic policy making. But even those congressmen who admire his efforts as both a technocrat and a politician point out that they have an extra responsibility when it comes to securing pension reform.

"We in the chamber of deputies represent the Brazilian people," said Ricardo Tripoli, lower house leader of the government-allied Brazilian Social Democratic Party, the PSDB. "So you have to have not only a technical and scientific understanding, but also a political understanding."

Yet Meirelles warned of obstructionism. "It won’t benefit anybody taking demagogic attitudes, avoiding a vote in favor of the reforms Brazil needs," he said in his e-mailed comments. Legislators understand they will ultimately benefit as well if Brazil’s economy as a whole improves, he wrote.

Supporters say that Meirelles’s experience and understanding have been invaluable in clarifying the complex piece of legislation, and dispute the notion that he fails to appreciate their concerns.

"Meirelles listens," said Danilo Forte, a legislator from the Brazilian Socialist Party, or PSB.


Indeed, some investors fear the government may be listening too much. On Tuesday, Temer announced that states and cities’ civil servants would be left out of the pension bill. The concession briefly spooked the markets on fears the legislation may become badly disfigured. The government insists, however, that the change makes passage of the bill more likely and that it will have little fiscal impact.

Pushing the legislation across the finishing line without further compromise will require considerable skill. Given Meirelles has spent most of his life in banks - private or central --
some wonder whether he has the charm or agility needed to schmooze with politicians. While Temer invited lawmakers to a barbecue in the presidential palace on the eve of last year’s crucial spending cap bill, Meirelles has stuck mostly to Powerpoint presentations in chilled conference rooms.

Talks with lawmakers require delicate negotiation, persuasion and bartering know-how that Meirelles may not possess, according to Carlos Melo, a political scientist and professor at the Insper business school.

"He’s more of a natural fit for economic operations, policy elaboration and ideas, not political negotiation," Melo said. "It’s not his natural habitat."

— With assistance by Rachel Gamarski

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