Brazil Takes Knife to Pension Plan to Ensure Its Survival

  • Government willing to concede up to 20% of projected savings
  • Survey showed significant opposition in Congress to proposal

The Brazilian government is prepared to give up as much as one-fifth of the potential savings from its pension reform bill to ensure its approval by Congress, according to a person with direct knowledge of the negotiations who was not authorized to speak publicly.

A new proposal will be unveiled on April 18, including changes to protect the most vulnerable, the bill’s rapporteur in the lower house, Arthur Maia, told reporters on Thursday. Although he said the modifications would maintain the fiscal impact of the reform, the government is aware that, without concessions, the bill won’t move forward in Congress.

Concern about President Michel Temer’s ability to approve the deeply-unpopular reform increased this week after a survey showed very low congressional support for pension changes just 18 months before general elections. Since taking office last year, Temer managed to approve an initial austerity push that encouraged investors to buy stocks and the nation’s currency. But the government and market analysts say that failure to reform the costly pension system would undermine these fragile gains. In a video released on social networks on Thursday Temer sought once again to justify the proposal to the public.

Other changes to its original proposal that the government is currently mulling include a reduction in the minimum retirement age for rural workers and allowing retirees to receive multiple benefits worth up to two minimum wages, the official said.

The approval of a "reasonably robust" pension reform remains on track, Eurasia Group political consulting firm said in a report published Thursday night. It estimates that there is a 45 percent chance that around three-quarters of the proposal will be approved and a 25 percent chance that more than half will be passed.

The original proposal was projected to save 678 billion reais ($216 billion) over the next ten years. The finance ministry declined to comment for this article and the press office of the presidential palace said negotiations over the pension plan were ongoing.

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