Brazil’s pension reform moves forward

. Jun 13, 2019
The latest version of Brazil's pension reform

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Save the date: Brazil’s pension reform

The pension reform’s rapporteur in the House, Congressman Samuel Moreira, will present his report today before a special committee analyzing the reform. The document is the result of political negotiations, and is more palatable to party leaders than the original bill. However, it shouldn’t provide the same amount in savings for the next decade.

On one hand, Mr. Moreira has kept the minimum retirement age at 65 for men and 62 for women. Three important points were left out:</span></p> <ul> <li><span style="font-weight: 400;">No changes to pensions of rural workers, nor cuts to benefits given to poorer elderly citizens;</span></li> <li><span style="font-weight: 400;">A lower length of service for women to become eligible for pensions, from 20 to 15 years. (For female teachers, the minimum age of retirement could go from 60 to 57.)</span></li> <li><span style="font-weight: 400;">The idea of &#8220;removing&#8221; pension rules from the Constitution has been scrapped. The provision made sure that Congress would only need to pass new ordinary laws (and not constitutional amendments) to make future changes to the pension system. That move takes leverage from Congress.</span></li> </ul> <p><span style="font-weight: 400;">Two other big important decisions were made:</span></p> <ul> <li><span style="font-weight: 400;">The report keeps the current pay-as-you-go system (current generations pay for the pensions of older ones), instead of changing it into a capitalization system (each worker is responsible for their own savings);</span></li> <li><span style="font-weight: 400;">State- and municipal-level civil servants will no longer be included in the new rules. Lawmakers believe governors and state lawmakers were non-committal about the reform, and would benefit from its savings without bearing the political costs—which would fall entirely on Congress.</span></li> </ul> <p><span style="font-weight: 400;">We will only know for sure how much the reform will save over the next decade after the report is presented—a session is scheduled for 9:30 am today. Speaker Rodrigo Maia has floated savings around BRL 800bn (against the government&#8217;s proposed BRL 1.2 trillion)—but his numbers could be inflated. Mr. Maia also says the House Special Committee will vote on the report on June 25.</span></p> <ul> <li><b>Go deeper: </b><a href=""><span style="font-weight: 400;">The ins and outs of the pension reform</span></a></li> </ul> <hr /> <h2>The Car Wash leaks continue</h2> <p><span style="font-weight: 400;">At least 8 federal investigations have been opened to discover who is behind recent alleged hacking attacks against prosecutors and judges. It will be a long ordeal—and the police is not optimistic about finding concrete results. That&#8217;s because, according to the initial findings, prosecutors didn&#8217;t use all the safety tools offered by messaging apps, making an attack easier—and less traceable.</span></p> <p><span style="font-weight: 400;">Meanwhile, </span><i><span style="font-weight: 400;">The Intercept</span></i><span style="font-weight: 400;"> has published new conversations between Operation Car Wash investigators and former Judge Sergio Moro. The website also published longer exchanges, giving more context to the previously published information. In at least one of them, the comprehension of the dialogues change.</span></p> <p><span style="font-weight: 400;">In a December 2016 chat, Mr. Moro tells lead prosecutor Deltan Dallagnol to only go after 30% of possible defendants that had been flagged by collaborators of justice. Initially, it seemed as if Mr. Moro was cherry picking who to prosecute—but longer, more contextualized chats show that he was narrowing his scope to clear-cut cases of bribery. Which doesn&#8217;t necessarily vindicate Mr. Moro. Coaching the prosecution on how to frame its case remains illegal.</span></p> <h4>Moro on trial</h4> <p><span style="font-weight: 400;">The Supreme Court has set June 25 to analyze a case in which former President Lula asks for release from prison, claiming he didn&#8217;t get a fair trial. The case was stalled, but after Sunday&#8217;s revelations that former Judge Sergio Moro coached prosecutors on how to build their case (which is illegal), it was brought back to life. The current Justice minister will speak before the Senate next Wednesday.</span></p> <p><span style="font-weight: 400;">In a gesture of support for his minister, President Jair Bolsonaro attended a football match alongside Mr. Moro, watching Flamengo (Brazil&#8217;s most popular club) taking on CSA in Brasilia.</span></p> <p><script src="" type="text/javascript" charset="utf-8"></script></p> <hr /> <h2>Labor courts allow police to use force against strike</h2> <p><span style="font-weight: 400;">Multiple courts have issued decisions to fustigate tomorrow&#8217;s general strike, called by unions and the Workers&#8217; Party. The movement is a reaction to the pension reform—but judges fear it could turn into a political act in favor of former President Lula, especially after the Car Wash leaks scandal.</span></p> <p><span style="font-weight: 400;">A state judge has forbidden employees of São Paulo&#8217;s metropolitan train network to join tomorrow&#8217;s walkout. The judge cited the strike&#8217;s &#8220;notoriously political motivations&#8221; in the ruling, and said employees would be fined BRL 1m if they stop working. Unions can still appeal. </span></p> <p><span style="font-weight: 400;">Meanwhile, the Superior Labor Court has given banks the right to request police forces (or use private security) to prevent workers on strike from blocking strikebreakers from crossing picket lines. As bank services are considered &#8220;essential&#8221; by Brazil&#8217;s strike legislation, the decision opens a precedent for other companies—such as public transport—to pull similar moves. It would take a major toll on Brazil&#8217;s already ailing union movements.</span></p> <hr /> <h2>Also noteworthy</h2> <p><b>Hacking.</b><span style="font-weight: 400;"> After the Car Wash leaks, government officials were instructed to abandon messaging apps such as WhatsApp or Telegram. They should, from now on, only exchange messages through encrypted telephones provided by Brazil&#8217;s Intelligence Agency (Abin).</span></p> <p><b>Petrobras. </b><span style="font-weight: 400;">Brazil&#8217;s state-owned oil and gas company Petrobras announced a change in its pricing policy yesterday evening. From now on, fuel price changes will happen without an established periodicity, and &#8220;according to market conditions and analysis of the external environment.&#8221; Despite the change, the company committed itself to keeping prices pegged to international fares. In the same announcement, Petrobras reported a 4.6% reduction in diesel prices. </span></p> <p><b>Triple defeat. </b><span style="font-weight: 400;">President Jair Bolsonaro saw three of his main policies being threatened yesterday. Besides the exclusion of state- and municipal-level servants from the pension reform, he saw the Senate&#8217;s Constitution and Justice Committee vote to nullify his decree for looser gun laws (the floor is still to vote on it), while the Supreme Court suspended part of his decree extinguishing collegial bodies, such as boards and committees, from the federal administration. </span></p> <p><b>Gold.</b><span style="font-weight: 400;"> After soybeans, gold is the biggest exporting product in Roraima, Brazil&#8217;s northernmost state—194kg were exported to India, worth BRL 30m. There&#8217;s only one caveat: the state hasn&#8217;t got a single operating mine. A </span><i><span style="font-weight: 400;">BBC Brazil</span></i> <a href=""><span style="font-weight: 400;">report</span></a><span style="font-weight: 400;"> shows that authorities know the gold comes from illegal extraction in Yanomami land, an indigenous reserve partially in Roraima. Community leaders say about 10,000 illegal miners are operating in the land.

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