Pension reform and fiscal consolidation
If the pension reform proposal sent to Congress by the Bolsonaro administration is approved in full, it will generate savings of a bit over R$ 1 trillion in 10 years, a larger figure than that of the original proposal from the Temer government. Any dilution of this proposal by Congress will have to be accompanied by additional fiscal measures to assure compliance with the spending cap, and the alternatives are scant. But even if the spending cap is satisfied, the achievement of primary surpluses sufficient to reduce the debt/GDP ratio will take several years. To guarantee faster convergence to those primary surpluses, the government will need to make changes that lead to a reduction of tax expenditures, allowing convergence of recurring revenues to 18% of GDP. Temporary revenues generated by concessions and privatizations can help the adjustment process, but cannot replace the necessary adjustment of flows, which will start with approval of the social security reform.
The main point of the reform – with the strongest fiscal impact and impact on the injustices of retirement by time of contribution – is the imposition of a minimum retirement age of 65 years for men and 62 for women. The minimum contribution time will be increased from 15 to 20 years, with the amount of the benefit gradually rising from 60% of the average of the “contribution salaries” for those who contributed for only 20 years to 100% (or more) for those who contributed for 40 (or more) years, limited by the minimum monthly wage (minimum salary) and the ceiling set by the National Social Security Institute (INSS).
Now read on...
Register to sample a report