INTERVIEW-Brazil minister sees reform savings soon
Reuters, Thursday, November 05, 1998 at 21:52
By William Schomberg
BRASILIA, Nov 5 (Reuters) - The long-awaited approval of
Brazil's pension reform bill goes to the heart of the country's
fundamental budget deficit problem and savings will be seen
immediately, the country's Social Security Minister said.
"We have taken a very important step," Waldeck Ornelas told
Reuters in an interview Thursday.
"Brazil has a profoundly unbalanced system that has taken
its toll on all of society," he said. "The problem is
principally in the public sector. Starting now, we will begin
heading for a system where all workers will contribute to their
pensions."
The lower house of Congress finished voting on amendments
to the reform bill in a late-night session Wednesday, closing a
nearly four-year battle to overhaul the country's pension
system, which is heading for a massive $35 billion deficit.
Ornelas said the bill, which introduces minimum retirement
ages of 53 for men and 48 for women already working, would save
around $3.4 billion in 1999 and more in the following years.
Higher retirement ages of 60 for men and 55 for women
entering the job market were lost in the lower house earlier
this year but should be approved separately in the Senate next
year, the minister said.
Pension savings in 1999 could total $8.2 billion if the
government managed to approve an effective cut in civil service
pensions, a controversial measure in a new fiscal austerity
plan, and if it cracked down on social security fraud, he said.
That is more than a third of the $23.5 billion the
government plans to save next year in a bid to cut its budget
deficit of more than 7 percent of gross domestic product and to
recover the confidence of worried foreign investors.
"Until now the government has been stuck with the bill for
pensions," Ornelas said. "People in general didn't realize
their taxes were being spent on that instead of education,
health...and the things the government should be doing."
He said the two key points of the reform -- the
introduction of minimum retirement ages and the tying of
pensions to contributions -- would be put into effect in the
next few days via a ministerial decree.
Much of the rest of the reform's small print will be
spelled out in a batch of regulatory legislation to be sent to
Congress.
Ornelas said those bills would only require simple
majorities -- unlike the reform, which needed tough,
three-fifths approval -- and should be passed quickly.
The main thrust of the regulatory bills would be to create
individual social security accounts for all Brazilian workers,
as opposed to the current system where contributions go into
general funds. The individual accounts would make it easier to
manage the pension system and avoid deficits, the minister
said.
The often-generous pensions of civil servants have been
restricted to just over $1,000 a month under the terms of the
reform bill, effectively bringing them in line with workers in
the private sector.
The regulatory legislation would set the terms for workers
seeking to boost their pensions through private funds.
The new bills would also limit government payments into
pension funds of civil servants to double contributions from
public sector workers. Up to now, the federal government has
paid up to seven times the amount contributed by its employees.
More new legislation seeks to close social security
loopholes for agricultural firms and companies posing as
non-profit-making organizations.
Ornelas said he expected the new system would boost
Brazil's already powerful pension funds, which are currently
worth about 14 percent of GDP. That, however, is a long way
behind Chile, where pension fund holdings are equivalent to
about a third of GDP.
But unlike Chile's entirely privately managed system,
Brazil plans to keep the system under government control,
Ornelas said.
william.schomberg@reuters.com))
Copyright 1998, Reuters News Service |
