Brazil Unveils Details of Bold $312 Billion Pension Plan
(Bloomberg) -- Brazil President Jair Bolsonaro paid a visit to Congress on Wednesday morning to submit his proposal to overhaul the pension system, in hopes that the effort to bolster fiscal accounts helps revive an economy that’s struggling to emerge from a massive recession.
Bolsonaro is still working on building a strong coalition in Congress to pass the unpopular initiative -- an effort that may be hindered by the president’s dismissal of a key aide this week, the first ouster of his cabinet. For now, markets have given the administration a vote of confidence.
- The pension reform, as proposed by the government, would allow for savings of 1.16 trillion reais ($312 billion) over 10 years, according to the official estimate
- Retirement age would be set at 65 for men and 62 for women
- Initiative also sets limits to social security programs in states and municipalities, which are facing fiscal woes as severe or worse than the federal government
- Plan removes automatic link between social security benefits and the minimum wage; increases social security tax paid by workers in some instances
- With details now known, attention will now shift to negotiations with Congress, which will likely water down the bill considerably. Timing for approval also on investors’ radar
- Reform needs to be approved by both houses of Congress, garnishing support from three-fifths of each chamber in two separate votes
- Investors initially cheered the details, especially the proposed savings which came in at a higher initial point than expected
- About an hour later though, the gains had mostly faded -- the Ibovespa equity benchmark fell 0.2% as of 11:55am local time, while the currency was little changed
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