Congress and Supreme Court pose obstacles to pension reform

The government’s proposal to overhaul the pension system has been submitted to Congress, but has a long way to go before becoming effective legislation. The bill must make it through two committees and two successive voting sessions in the lower house, before going through the entire process again in the Senate. As what the Jair Bolsonaro administration is proposing involves altering the Constitution, each of the four votes will require two-thirds of support for approval.

While there is a general atmosphere in favor of passing some sort of reform to the pension system, it is expected that the bill will undergo an overhaul of its own at each stage of this legislative process. This means delays and a potentially watered-down final product, both of which could see the financial markets abandon the Bolsonaro government.

Conditioned support

It was unexpected at the time, but investors (both domestic and foreign) put their faith in Jair Bolsonaro during the election campaign because of the soon-to-be Minister of the Economy Paulo Guedes and his plan to launch profound structural reforms. While the fledgling government has been rocked by political scandal, its support from the markets has not been affected.

This goodwill, however, comes with its own terms and conditions. If the government is unable to reform the pension system by the...