What’s at Stake With Brazil’s Pension Bill
Brazil’s Congress may vote in coming weeks on President Michel Temer’s flagship proposal to cap pension spending. Since it was first presented to Congress a year ago, the proposal has been watered down several times in an attempt to secure support the three-fifths majority needed in both houses.
The Temer administration now expects to guarantee at least 50 percent of the 750-800 billion reais ($230-246 billion) in savings envisaged over a decade in the original proposal. The following charts show what impact the proposal may have on Latin America’s largest economy.
The watered-down proposal won’t generate half the savings in a decade that the original proposal would have. But without it, investor expectations on stabilizing public accounts would deflate sharply as growing pension costs would drive government spending through the newly-adopted constitutional limit. “The government needs to make the budget fit under the ceiling,” said Braulio Borges, a researcher at the Getulio Vargas Foundation’s economics institute Ibre.
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