Brazil sees pension bill as ‘starting point’ in renewed talks

By Silvio Cascione and Marcela Ayres

BRASILIA (Reuters) – Brazil’s government is sticking with its current pension reform proposal but reckons that a final decision on what could be approved and when will be up to Congress, the country’s pensions secretary told Reuters on Friday.

Secretary Marcelo Caetano said the already watered-down bill is a “starting point” of revived talks with congressmen. Many legislators seeking re-election in October 2018 are reluctant to back the unpopular changes that would make Brazilians work for more years ahead of retirement.

The pension overhaul, seen by investors as crucial to plugging Brazil’s budget deficit, came close to a lower house vote in late May after months of discussions, but remained stalled for six months due to a corruption scandal involving President Michel Temer. Talks resumed this week after the lower house voted to reject a criminal charge against Temer.

“Time will tell what is going to happen, it will depend on the negotiations. The ideal reform, from a political perspective, is to approve the bill approved as it passed the congressional committee,” Caetano said.

The government’s proposal cleared the committee on May 3 by 23 votes to 14 after the government agreed to reduce planned savings from the measure by 25 percent, to about 600 billion reais over 10 years.

Many key legislators, including lower house speaker Rodrigo Maia, have called for an even weaker overhaul as Temer’s support base seems too small to approve constitutional reforms. The bar for the current pension reform is 308 of 513 votes, whereas Temer received 251 votes in his favor against the charges this week.

Pessimism over Temer’s chances to pass sweeping reforms has started to creep into Brazilian markets after months of strong gains. The spread between yields on the government’s 2018 and 2023 local-currency debt, a gauge of medium-term uncertainty, hit a record high last week.

Caetano, however, warned against proposals being floated by legislators seeking alternatives to pass parts of the reform as ordinary law, which would require a smaller number of votes, as many changes that need to be made in the pension regime for public workers would still require constitutional amendments.

The secretary said the government prefers to put the pension reform to a vote only if it is confident it has secured a comfortable majority, but again repeated a decision will be up to Congress. “Ideally, we would like to see this approved by the end of the year.”

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