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BRASILIA (Reuters) – An overhaul of Brazil’s social security system will generate savings of 913.4 billion reais ($237 billion) over the next decade with changes to a draft bill proposed in a long-awaited congressional report presented on Thursday.
Brazil’s President Jair Bolsonaro looks on during a ceremony of the Brazilian National Development Bank (BNDES) Line of Credit for Philanthropic Organizations at the Planalto Palace in Brasilia, Brazil June 13, 2019. REUTERS/Adriano Machado
That will be topped up by a further 217 billion reais from the end of transfers from a workers protection fund to state development bank BNDES, bringing the total fiscal impact to 1.13 trillion reais, according to lawmakers.
The government’s original bill, a cornerstone of President Jair Bolsonaro’s economic plan to heal the public finances and resuscitate a flagging economy, proposed savings of 1.237 trillion reais through a range of measures, including raising the minimum retirement age and workers’ contributions.
Brazilian financial markets gave the report a thumbs up.
The benchmark Bovespa stock index rose 0.9% to a three-month high above 99,000 points, the real firmed 0.6% to 3.8400 per dollar, and 2020 interest rate futures contracts fell below 6.0% for the first time.
“Pension reform is going to be approved, and this gives the central bank room to cut interest rates,” forecast a fund manager in Sao Paulo, who was not cleared to speak with press.
Congressman Samuel Moreira’s report will now be debated, voted on and sent to the lower house plenary for a vote at a later date. If passed in the form he presented on Thursday, it will likely be seen as a success for the administration.
Bolsonaro’s Chief of Staff Onyx Lorenzoni said on Thursday savings of around 1 trillion reais would be a “huge victory”, showing that Brazil is on the path to financial solvency. Lower House Speaker Rodrigo Maia said on Wednesday he hoped for a bill packing a punch of between 800 billion and 1 trillion reais.
But the government has not gotten everything it was seeking. Moreira’s report said that a retirement system based on private savings accounts, which Onyx worked hard to include, is not the best system for a country with low average incomes like Brazil. The costs of transitioning to a more market-based system are also high, he added.
Changes to Brazilian states’ and municipalities’ retirement rules were also omitted from the report, as were changes to how older, disabled and rural workers are treated.
Moreira’s report kept the bill’s proposal to set the minimum retirement age for male teachers at 60 years old, but suggested reducing it for female teachers to 57.
Reporting by Lisandra Paraguassu, Maria Carolina Marcello, Jose de Castro; Writing by Jamie McGeever; Editing by Brad Haynes and Susan Thomas