Threats Remain to Brazil’s Pension Bill Despite Investor Cheer

(Bloomberg) -- While investors cheered the progress of Brazil’s key pension reform bill last week, there’s no certainty that its passage through the rest of the legislative process will prove smooth.

A day after the lower house special committee approved the text, President Jair Bolsonaro said there are some errors in the bill that need correcting. Members of his party, the PSL, are grumbling about the lack of special treatment for police. Meanwhile time is fast running out for a vote on the bill in the plenary before the July 18 recess.

The proposal to overhaul Brazil’s social security system is the centerpiece of Bolsonaro’s plans to cut debt and put Latin America’s largest economy back on track. First unveiled in February, the constitutional amendment seeks to save around one trillion reais ($261 million) over the next decade by establishing a minimum retirement age and toughening access to benefits. But it faces fierce resistance from opposition lawmakers who argue it entrenches yet further the country’s economic inequalities and even from members of the ruling party who want to make last-minute changes to the bill.

While Brazilian assets strengthened on news of the bill’s progress, some of its champions in Congress adopted a cautious tone on the next steps.

“No one can guarantee anything, we don’t know what tomorrow is going to look like,” Jose Nelto, leader of the centrist Podemos party, said. “But there is an agreement between leaders that we need to move on quickly with the pension reform.”

Possible Exceptions

The main risk comes from within Bolsonaro’s own law and order camp. The president’s PSL party leader Waldir Soares de Oliveira, known as Delegado Waldir, said in an interview he will push for an amendment that eases retirement rules for members of the police force.

“Policemen are an exceptional group in our society, just like teachers or disabled people. We need to take this into account in order to improve the bill,” Waldir said, after a failed attempt to change the pension bill in last week’s committee. Bolsonaro himself has asked Congress to consider police pension requests.

But the move may encourage other public servants to demand special treatment, putting at risk the expected savings. Rodrigo Maia, the house speaker, spoke out against such a change, as he argued it may create a “domino effect.” After meeting party leaders on Saturday, Maia said he hoped to put the bill to a vote in the plenary this week.

Against the Clock

Still, timing may yet prove an issue. As a constitutional amendment, the pension reform needs to be approved by a three-fifths majority in a double round vote in both houses of Congress. Each vote will almost certainly be slowed down by amendments and complicated regimental procedures. The opposition can, for example, apply for a certain type of amendment that would require the government to gather a three-fifths majority to block it.

“Are there enough votes to approve the bill? Yes. Will there be amendments that may delay the discussion? Maybe,” said Julio Delgado, a lawmaker from the Socialist Party who says he backs most of the proposal. “I doubt we will have the two lower house votes done by recess.”

Jeronimo Goergen, a lawmaker from the conservative PP party, says he remains confident the schedule will be maintained. He said the absence of a major public backlash or negative reaction to the bill’s approval in this week’s committee proves the society has understood the need of a reform.

“This clears the way for the bill to advance quickly,” he said.

To contact the reporter on this story: Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Bruce Douglas

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