Brazil forecasts $273 mn in savings from pension reform

O ministro da Economia, Paulo Guedes, discursa na solenidade de transmissão de cargo.

 Brazil’s government predicts it can save up to one billion reais ($273 million) over a decade by overhauling its costly pension system, Economy Minister Paulo Guedes said Tuesday.

The amount exceeds the 800,000 reais previously forecast under the preceding center-right government that had to limit its reform ambitions in the face of lawmakers’ resistance.
Shaking up Brazil’s over-generous and unsustainable pension system was a key election promise of far-right President Jair Bolsonaro, who has handed its execution to Guedes, a free-market advocate. “The idea is that (savings) will come in at at least one billion reais,”
Guedes told reporters after meeting the newly sworn-in speaker of the lower
house of Congress, Rodrigo Maia. “We have done 15-, 20- and 10-year simulations. The one billion reais
amount is for over 10 years, but there are also simulations of one billion over 15 years. That is what we are calibrating,” he said. In order to change Brazil’s pension system, Bolsonaro’s government will need to effect constitutional reform, which will require the support of at least 308 lawmakers in the 513-seat lower chamber. Maia has said he expected to be able to round up between 320 and 330 votes
for a reform that could be passed in June or July. According to an initial negotiating position reported in the media, Guedes is aiming to raise the minimum retirement age to 65 for both men and women, with 40 years of contributions needed for full pension rights.

Bolsonaro, who is currently in hospital recovering from abdominal surgery, is understood to favor lower minimum ages. Currently in Brazil, partial pensions can be paid to women at age 60 and to men at age 65 if they make at least 15 years of contributions. Full
pension rights kick in after 30 years of contributions. Early retirement is possible for women who have contributed for 30 years
and for men with 35 years of payments into the system. Pensions vary according to age and the number of years with contributions. Brazil’s welfare system ended 2018 deeply in the red, owing 195 billion reais ($53 billion at current exchange rates), accounting for 2.8 percent of GDP of Latin America’s biggest economy.