MNI EXCLUSIVE: Brazil Pension Deal Foregoes $100B In Savings

     BRASILIA (MNI) - A deal agreed earlier this month to speed approval of

Brazil's pension and social security overhaul will mean postponing government

hopes of an additional $100 billion in savings from extending the reform's reach

to state and municipal government employees, senators told MNI.

     In an agreement involving at least half of the members of the upper house

earlier in August, employees of Brazil's 27 states and 5,570 municipalities will

remain exempted from the changes in the reform, which will raise the retirement

age for many Brazilians and reduce payments, the senators said, raising the

chances that the legislation should pass by the end of the year. The government

had hoped to boost the reform's savings of $280 billion over 10 years by $100

billion during the passage of the legislation through the Senate.

     The Senate should vote in a plenary session on the reform by mid-October.

This is later than the date in September previously hoped for by supporters of

President Jair Bolsonaro, but debates and public hearings have pushed it back in

the agenda. Further delays are possible if the government sends other business

to the Senate, such as the nomination of the president's son, Eduardo Bolsonaro,

as ambassador to the U.S.

     "The focus has to be on Social Security, as important as the embassy agenda

is, we cannot divert our energies from this," said Senator Olimpio Gomes, a

member of Bolsonaro's Social Liberal Party.

     Any changes to the reform in the Senate should be made via a proposal for a

constitutional amendment, 21 senators told MNI. This will avoid the need for any

direct modifications to the bill approved in early August by the House of

Representatives, which would have meant it would have had to return for fresh

consideration by the lower house, causing further delays.

     The constitutional amendment proposal will be tabled shortly after the vote

on the reform bill, in a strategy supported by the presidents of the two houses

of Congress, Senator Davi Alcolumbre and Deputy Rodrigo Maia, both from the

right-wing Democrats, in addition to the draft rapporteur, Senator Tasso

Jereissati, from the centre-right PSDB party. Amendments to the Federal

Constitution require the votes of 49 of the 81 senators.

     Senator Alvaro Dias from centrist party Podemos said that including the

modifications in a constitutional amendment will hold out the possibility that

states and municipalities may be included in the pension reform in the future.

     "We don't want to make the municipalities shake up social security in the

middle of an election year," he said, noting that elections for mayors and

councillors will take place by 2020. "Issues that alter workers' rights and

duties generate intense campaign debates and may influence the outcome."

     But the move has angered some of opposition and social movements. "I am in

favour of a well-done reform, with a rigorous, legally stable text. Let's stop

dragging out the legislative process,"complained the director of the Brazilian

Institute of Social Security Law, Diego Cherulli.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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