What's Happening with Pension Reform in Brazil? | Wilson Center

What's Happening with Pension Reform in Brazil?

This page will be regularly updated as the pension reform bill proposed by the Bolsonaro administration develops in Congress. 

The need for pension reform in Brazil is an old refrain, but one that has gained new urgency as demographic shifts and diminished federal revenues threaten the pension system’s fiscal solvency. The current system functions as a pay-as-you-go model: the working population pays a tax which is transferred to recipients as pension payments. Public accounts are balanced when expenditures are equal to or less than revenues from this tax. However, expenditures have exceeded revenues for years, with a combined shortfall of 4.5 percent of GDP according to the OECD. In 2017, the government accumulated a deficit of more than R$200 billion (US$61.3 billion) in order to meet its pension obligations. The current pension system moreover reinforces existing inequalities, with higher-paid civil servants and military officers receiving roughly six times as much as private sector employees.

Read “The Case for Pension Reform in Brazil: An Unequal and Exhausted Retirement System on the Verge of Collapse.”

Yet the road to genuine reform is a complicated one. In Brazil, a constitutional amendment (PEC) is required to modify pension laws because the right to retirement benefits is engraved in the 1988 Constitution. As a result, Congress must hold numerous committee and chamber votes on the measure, and ultimately three-fifths of Congress (308 votes in the House and 49 votes in the Senate) must vote in favor of reform—and pension reform is almost always unpopular. Once approved by the two chambers, however, the proposal does not go to the president for sanction or veto; it is directly enacted by Congress. Past presidents have had to accept watered-down versions of their proposals, amounting to little more than kicking the can down the road. Will this government have more success?

 

2019 PENSION REFORM TRACKER

 

July 10, 2019
  • The lower House of Congress approves the main text of the bill by an overwhelming margin, 379 to 131, after nine hours of debate on Wednesday.
  • Congress takes up consideration of amendments. Following amendments, the full text must be submitted to a final second vote in the lower House, expected to take place in August after a July 18-31 recess.
 
July 4, 2019
  • Pension reform is approved in the House's Special Committee, with 36 votes in favor and 13 votes against. The Special Committee vote was a major challenge for the government and dragged over two days.
  • Amendments were proposed to exclude teachers from the reform and to make rules for public security agents more flexible. Both were defeated.
  • House speaker Rodrigo Maia said he expects the lower Congressional House to begin voting on the pension reform bill on Tuesday, July 9. The pension reform needs at least 308 votes in two voting rounds, equivalent to three-fifths of representatives in the lower House.
 
May 28, 2019
  • The bancada feminina (women’s caucus) has formed a working group to study the impact of the pension reform proposal on women. The group drafted four amendments: to the minimum retirement age (including a separate, lower minimum for rural female workers), benefits calculation, maternity rights for female workers, and pension upon death.
  • There are currently 54 proposed amendments before the special committee, 17 of which are related to public security. The number of amendments is likely to climb, as federal deputies have until May 30th to present their changes. 
 
May 8, 2019
  • Minister of Finance Paulo Guedes participates in a public hearing before the House’s Special Committee, arguing that the current pension system creates privileges and is unsustainable. According to Guedes, approval of his reform will generate R$1,236 trillion (US$309 billion) in savings and will stimulate the economy. He also states that the proposal allows for the creation of a capitalization system, in which each individual has a savings account and is guaranteed future pension payments.
  • The Secretary of Pension and Labor, Rogério Marinho, presented and explained the government’s projections and studies, arguing that the proposal will promote equity, generate positive fiscal impact, and combat fraud.
  • Minority parties expressed concerns regarding the capitalization system and doubts about the positive impact the reform is expected to have on the economy. Moreover, 13 parties expressed the intention to introduce modifications to the proposal regarding rural pensions, benefits to disabled people, and underprivileged elders.
 
May 7, 2019
  • The House's Special Committee begins analyzing the merits of the proposed bill. There will be 11 public hearings with about 60 guests to discuss the topic of social security and the proposed reform. The committee's chairman, Marcelo Ramos, says he will work to approve the bill and deliver its analysis to the House plenary by July. 
  • Polling by the Brazilian National Confederation of Industry (CNI) indicates that the amount of people who believe pension reform to be necessary increased to 72 percent in 2019, from 65 percent in 2015. However, only 39 percent of people favor the current proposal, and only 36 percent of respondents affirmed that they understand the main points of the pension reform bill.
 
April 23, 2019
  • After 62 days, the House's CCJ approves the pension reform proposal by 48 votes to 18. There were no abstentions. The bill was approved with minor changes, after four elements were removed from the text.
  • The proposal will now move to the House's Special Committee for further analysis and discussion.
 
April 17, 2019
  • The House's constitution committee delays the vote on pension reform for another week.
  • Despite the rapporteur's recommendation for the total approval of the project, opposition lawmakers managed to push back the first of several votes needed to approve the bill.
  • Leaders from the political center demand that five points be removed from the proposal: 1. the change in rules regarding salary bonuses; 2. the change regarding the age of compulsory retirement of Supreme Court justices; 3. the change in the forum used in cases of judicial action against the INSS (National Institute of Social Security); 4. the change in the FGTS (Guarantee Fund for Length of Service) and 5. the change that removed retirement rules from the Federal Constitution.
  • The leader of the PSL party at the House, Delgado Waldir, denied that the postponement is a defeat. He stated that it is part of the process so that the bill reaches its best version.
 
April 1, 2019
  • The Minister of Finance, Paulo Guedes, will attend a public hearing at the CCJ on Wednesday, April 3 to explain the proposal to the commission. Francischini estimated that the CCJ should then vote on the proposal by April 17.
  • Despite the political conflict that took place last week, support for pension reform in the Chamber of Deputies grew by 15 percent in the past two weeks, based on monitoring from Atlas Político. 308 votes are required for approval, but 199 deputies remain undecided. 
 
March 20, 2019
  • Upon returning to Brasilia, President Jair Bolsonaro delivers the pension proposal for the military to Congress. The proposal increases the minimum years of service required to retire, changes the age limit for transfer to the reserve, reduces the number of dependents allowed, and foresees the levying of a tax on the gross income of the military in all categories. The government is expected to save R$10.45 billion (US$2.77 billion) over 10 years with the changes. The full proposal (in Portuguese) can be read here.
 
March 13, 2019
  • Lower House sets up its Committee of Constitution and Justice (CCJ) to analyze the government’s proposal to overhaul Brazil’s pension system, and first-term Congressman Felipe Francischini (PSL-PR) is elected as the CCJ’s new president. The Commission is given five sessions to discuss the proposal. 
  • The Ministry of Defense submits a military pension proposal to the Ministry of Finance. The changes in the proposal are considered less aggressive than those stipulated for civilians. Defense Minister General Azevedo e Silva confirmed that the final text will be sent to Congress on March 20.  
 
February 26, 2019
  • Opinion research released by the National Confederation of Transportation (CNT) finds that 45.6 percent of the population reject the pension reform proposal and 43.4 percent approve it. Polling was carried out in 137 municipalities in all 25 states.
  • Bolsonaro holds a meeting with party leaders to discuss the proposal. 
 
February 20, 2019
  • President Jair Bolsonaro delivers long-awaited pension reform bill to Congress. A presentation of the proposal drafted by the economic team is available in Portuguese. 
  • To learn what steps the bill must take in Congress to get approved, check out our infographic below:
 

 

You can follow the trajectory of the proposal in the Chamber of Deputies here

Image by Agência Brasil
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