The Strategist

Brazilian pension reform is facing problems

05/04/2017 - 15:41

Proposal of Brazilian President Michel Temer to reform the expensive social security system was voted on by the committee. However, the measure, considered extremely unpopular among voters, is expected to meet resistance in Congress, Reuters reports.

Michel Temer, photo by Diego DEAA
Michel Temer, photo by Diego DEAA
23 members of the committee voted in favor of amendments to the country's constitution, which will force the Brazilians to work more and will reduce pension benefits. In the authorities' opinion, this should stop the increase in the budget deficit, which underlies the country's worst economic recession for its history.

A spokesman for President Alexandre Parola told reporters that number of votes indicates that "Brazilian society recognizes the urgent need to reform the social security system". 

However, the presidential aides said that the government was not sure that it provided support for the changes in the two-thirds majority that is necessary for passing the lower house of parliament. In the opinion of Temer himself, the adoption of changes will restore the confidence of investors. This, in turn, will bring the flow of investment back in the country.

The pension reform is a controversial issue in Brazil, which has one of the most generous social care systems in the world. Now the pension system in the country can be described by the formula 85/95. For men, it is necessary that the amount of age and work experience, during which contributions to the pension fund was made, was not less than 95 years, and this amount reach 85 for women.

According to the presidential bill, the country is required to set a minimum age for retirement at the age of 65 for men and 62 for women (in this case, a citizen will be able to count on a so-called full pension, which is equal to their average monthly earnings for all years of seniority).

Dozens of prison guards protesting against the new rules of retirement broke into the committee's meeting room after voting on Wednesday evening, and were detained by the congressional police using pepper spray. The legislators had to finish the meeting.

Changes in labor legislation and the country's pension system caused fierce clashes between demonstrators and police in the main cities of Brazil on Friday during the first national strike against President’s austerity measures.

On August 31, 2016, the Brazilian senators supported the initiative on impeachment of Dilma Rousseff, previously suspended from the post of the republic’s President, in the majority of voices. A few hours later, Temer, who was vice-president of Brazil in the previous administration, officially took office as Head of State. The new leader of the South American country told that his priorities were combating unemployment and eliminating the budget deficit.