How committed is Jair Bolsonaro to a pension reform?

. Dec 05, 2018
How committed is Jair Bolsonaro to a pension reform? Jair Bolsonaro promised to be a reform. Will he keep that promise?

Financial markets jumped on the Jair Bolsonaro bandwagon for one reason: Paulo Guedes, the ultra-libertarian economist the President-elect chose as his future economic tsar. As reporter Maria Martha Bruno pointed out on August 10, Brazilian big business had its eye on Mr. Guedes’ plan to cut public spending and push for deep structural reforms—particularly a reorganization of the country’s pension system. During the campaign, Mr. Bolsonaro also defended the reforms, however, just weeks before taking office, his stance seems to be veering from Mr. Guedes’ pro-market beliefs. In the space of a week, members of the future administration have given multiple signs that the pension reform —deemed as arguably Brazil’s most urgent problem—will take a backseat in the future administration’s agenda.

Last week, Eduardo Bolsonaro (one of the president-elect’s sons and close confidants) told investors in Washington that “it will be a fight, maybe [the government] can’t do that.” (listen to the audio clip below, in English).

Then, the future Chief of Staff, Onyz Lorenzoni, said that “there will be four years to pass a pension reform.” Finally, on Tuesday, the President-elect himself said that, instead of a single, comprehensive reform bill, it would be better to split it up into several proposals. Coupled with his previous statements that “the reform couldn’t be one that would kill old folks,” and you have plenty of red flags being raised for financial markets.

</span></p> <p><span style="font-weight: 400;">In Mr. Bolsonaro&#8217;s mind, the best start would be to establish a minimum retirement age for workers—who currently can retire after 30 years of work, in the case of women, or 35, for men.</span></p> <p><span style="font-weight: 400;">That would be a mistake.</span></p> <p><span style="font-weight: 400;">Such an approach would demand enormous political capital, seeing as each change to the system would entail new negotiations. Given how unpopular the reform is, Congress could be satisfied with simply passing the minimum age bill before moving on to less controversial topics.</span></p> <p><span style="font-weight: 400;">As it is, the Brazilian pension system deepens the country&#8217;s inequality. Data from the Department of the Treasury shows that 41 percent of the money paid in pensions goes to the richest 20 percent of Brazilians. Only 3 percent goes to the poorest 20 percent of society. </span></p> <h2>How urgent is the pension reform?</h2> <p><span style="font-weight: 400;">This may be one of the main challenges the president-elect will have to address at the very beginning of his administration. If no reform is passed, pensions will take up an increasingly large proportion of public expenditure (as indicated by the growth of the light blue bars above) and squeeze other expenses while exceeding the budget limit.</span><span style="font-weight: 400;"><br /> </span><span style="font-weight: 400;"><br /> </span><span style="font-weight: 400;">Consultancy firm Tendências estimates that if a minor pension reform is passed, the next president will have to cut around BRL 20 to 30 million in costs each year to comply with the new fiscal legislation.</span></p> <p><span style="font-weight: 400;">Future economic tsar Paulo Guedes tried to get Congress to approve the pension reform proposed by </span><a href=""><span style="font-weight: 400;">incumbent Michel Temer</span></a><span style="font-weight: 400;">, but his efforts fell flat. </span></p> <p><span style="font-weight: 400;">Mr. Guedes&#8217; </span><a href=""><span style="font-weight: 400;">reformist impetus</span></a><span style="font-weight: 400;"> (he said he wants a “Pinochet-style” solution for Brazil) might be frustrated more often than not. If the Dilma Rousseff administration has taught us anything, is that it doesn&#8217;t help to have a pro-market finance minister if the administration is not fully on board with his agenda.</span></p> <p><span style="font-weight: 400;">After winning her 2014 re-election campaign, Ms. Rousseff named Joaquim Levy (who will be Jair Bolsonaro&#8217;s president of the Brazilian Development Bank) to lead the Ministry of Finance, after promising during the campaign that austerity measures were not required. Veering off from Ms. Rousseff&#8217;s campaign agenda, Mr. Levy wanted to implement budget cuts and balance the federal budget. The president&#8217;s Workers&#8217; Party didn&#8217;t support Mr. Levy&#8217;s plans and the opposition moved to boycott the administration.</span></p> <p><span style="font-weight: 400;">The Joaquim Levy experiment ended less than one year in. Just months later, Congress ousted Ms. Rousseff and brought in current president Michel Temer.

Gustavo Ribeiro

An award-winning journalist, Gustavo has extensive experience covering Brazilian politics and international affairs. He has been featured across Brazilian and French media outlets and founded The Brazilian Report in 2017. He holds a master’s degree in Political Science and Latin American studies from Panthéon-Sorbonne University in Paris.

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