Brazil’s long-awaited pension reform proposal, explained

On Wednesday, the Jair Bolsonaro administration submitted its pension reform proposal to Congress. The bill is the single most awaited piece of legislation from this government. We at The Brazilian Report have broken the project down. Mr. Bolsonaro’s economic team, led by the ultra-liberal Economy Minister Paulo Guedes, is hoping to balance the social security deficit and, therefore, give some stability to Brazil’s public accounts.

According to the Ministry of Economy, if approved, the pension reform could save up to BRL 1.16 trillion over ten years—if Congress doesn’t neuter the bill, of course. But even if Mr. Guedes’ projections are right—and that’s a big if—the social security deficit is estimated at BRL 3.1 trillion for the next decade.

After an initial positive reaction from investors to Jair Bolsonaro’s reform, the São Paulo stock exchange dropped by over 1,000 base points. Market operators believe it will be tough to pass the reform in Congress, due to its tougher rules on civil servants and the government’s political ineptitude.

Civil servants and wealthier workers retire earlier—and are entitled to heftier benefits. With them, Mr. Guedes’ pension reform proposal was but harsher than the one presented by former President Michel Temer. And even that version was struck down by organized lobbies.

Minimum retirement age

The transition for male workers in the private sector will affect those aged 61 or more. According to the bill, the minimum age of retirement will go up by six months every year, until reaching 65. For women, the transition period affects those between 56...