MNI EXCLUSIVE: Brazil Pension Reform Changes May Halve Savings

     BRASILIA(MNI) - The Brazilian government is preparing to scale back its

pension reform in order to secure its legislative approval, slashing potential

savings to as little as $150 billion over the next 10 years from $300 billion,

congressional leaders and government officials told MNI, adding that its chances

of becoming law were rising.

     While government coordinators no longer expect the bill to pass by

mid-July, they still hope for it to have been debated in the lower house of

Congress by that date, with approval in the Senate coming by September or

October. While in Congress there is talk that the bill's overall savings may be

halved after modifications to mollify legislators, including removing changes to

payments for the elderly poor and to rural retirement ages, government officials

say that they might still total $200 billion.

     "Let's make reform possible. The government knows that the bill will not be

approved in the form it was initially submitted. It contains many elements

hitting the poorest people that we need to correct", Jose Nelto, leader in the

lower house Chamber of Deputies of the centrist Podemos party, which supports

the government of President Jair Bolsonaro, told MNI.

     The government is making intense efforts to win over legislators. On the

eve of a successful vote on the proposal April 23 in the Constitution and

Justice Commission, which considered whether the bill was constitutional, it

decided to double a budget allotment made to each individual congressman to

direct towards spending on their own favoured public works or services projects

to $6.5 million. Such pork barrelling has been common practice in Brazil, but

Bolsonaro had promised not to do it.

     --RETIREMENT AGE

     Some 13 of the 27 parties represented in the Chamber of Deputies have

signed a document calling for the removal of significant parts of the pension

reform, such as changes to rural retirement payments and to the Continuous

Benefit welfare payment made to elderly or disabled people with a monthly income

of less than $65. These parties group 234 of the 513 federal deputies, with 308

votes needed to secure approval of the reform, which requires a constitutional

amendment. The bill would then need the votes of 49 of 81 senators.

     The pension reform as it now stands would cut the Continuous Payment,

currently set at about $250 a month from the age of 65, to $100 until

beneficiaries reach 70, although the new lower payment would begin earlier, at

60. The bill would also fix the rural retirement age at 60 for both men and

women, and require workers to make pension contributions for at least 20 years.

     "The changes in the Continuous Payment and in rural retirement are very

severe. They will not pass," the congressional leader of Bolsonaro's Progressive

Party, Aguinaldo Ribeiro, told MNI

     The government had hoped for savings of $31.7 billion over ten years from

the changes to the Continuous Payment and rural retirement, or 10.5% of all of

the savings brought by the pension reform.

     In public statements, Social Security and Labour Secretary Rogerio Marinho

has said the government will defend its initial proposal. But in private the

federal government has been preparing for changes, officials admit.

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

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