Final vote on Brazil pension reform now expected after June

Reuters News
Posted: May 03, 2017 11:10 AM

By Maria Carolina Marcello

BRASILIA (Reuters) - President Michel Temer's proposal to reform Brazil's costly social security system easily cleared a congressional committee vote on Wednesday, setting up for what are expected to be two tough floor votes in the lower house this month.

The committee voted 23-14 to approve the unpopular constitutional amendment, which would make Brazilians work longer and reduce some pension benefits to plug a widening budget deficit at the root of the country's worst recession ever.

The government, however, is not sure it has secured the two-thirds vote needed in the full chamber to approve a bill that is seen as crucial to Temer's efforts to recover investor confidence and restore investment and growth.

Committee chairman Carlos Marun, of Temer's PMDB party, told reporters that pension reform would be taken up by the full house in the second half of May. Presidential aides said final passage of the bill in the Senate was unlikely before the second half of the year.

Pension reform is a contentious issue in Brazil, which has one of the world's most generous social security systems, allowing retirement on average at the age of 54 with almost full benefits, compared with 72 years in Mexico.

The bill sets a minimum retirement age for the first time in Brazil, at 65 for men and 62 for women.

Changes to the country's labor laws and pension system triggered violent clashes between demonstrators and police in Brazil's main cities last Friday during the first national strike called by unions against Temer's austerity agenda.

Economist warn that the social security system is one of the main threats to Brazil's government finances with pension expenditures accounting for nearly half of its spending before debt payments.

Temer made concessions to ease passage of the proposal at the center of his austerity plan, raising doubts among investors about the watered-down bill's ability to help narrow a bulging budget deficit that cost Brazil its investment grade credit rating two years ago.

Temer agreed to set a lower retirement age for women, police, teachers and rural workers and grant more generous transition rules for workers after allies balked at backing it.

Finance Minister Henrique Meirelles has said the changes will reduce the impact of the reform by 25 percent in the next 10 years, lowering fiscal savings to 600 billion reais from about 800 billion reais.

(Additional reporting by Lisandra Paraguassu; Writing by Silvio Cascione; Editing by Daniel Flynn and Leslie Adler)