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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: DMaA who wrote (9432)	11/4/1998 11:22:00 PM
From: Steve Fancy	Respond to of 22640

In Key Vote for Cardoso, Brazil Acts To Reform Bankrupt Pension System By PETER FRITSCH Staff Reporter of THE WALL STREET JOURNAL SAO PAULO, Brazil -- In a key sign of support for President Fernando Henrique Cardoso's efforts to throw a rope around Brazil's runaway budget deficit, the lower house of Congress voted to remove some of the remaining obstacles to a long-delayed reform of the nation's bankrupt pension system. Beyond saving the government $3.6 billion a year in a country where most "retirees" are still in their 40s, the vote was seen as an early test of congressional willingness to bite the bullet on passage of the administration's austerity package, considered a quid pro quo for more than $30 billion in assistance being negotiated with the International Monetary Fund and other international lenders. Investors around the world see the IMF's vote of confidence as crucial if Brazil is to avoid a currency devaluation with disastrous international repercussions. Brazil's austerity plan, announced last week, seeks to save $23.5 billion next year through a combination of tax increases and spending cuts. Much of that package must go through a fickle legislature, whose history of dithering when the chips are down invites comparison with Russia's lower house, the Duma. Pension reform has been stalled for more than three years, a victim of powerful special interests in Brasilia. Congress missed a chance to pass a watered-down version of pension reform by a single vote last May and then couldn't muster a quorum to vote during World Cup soccer action this past summer. Those missed opportunities cost Brazil more than $1 billion in the current quarter. 'Whole World Is Watching' But an intense lobbying effort over the past week by Mr. Cardoso and legislative allies in the ruling coalition appeared to pay off. "The whole world is watching us, watching to see if we'll be able to resolve this crisis," a stern Mr. Cardoso said Tuesday. In an appearance before lawmakers, Finance Minister Pedro Malan scolded: To ignore the structural changes Brazil needs to undertake to put its financial house in order and regain international credibility would be "ostrich policy." Congress's action Wednesday is sure to raise hopes that Mr. Cardoso can push the rest of his budget-cutting measures through with relative speed. Markets have been particularly bullish on Mr. Cardoso's chances. The Sao Paulo Stock Exchange's main index rose 146 points, or 1.9%, to 7655 Wednesday, adding to a 7.8% gain on Friday and a 6.6% gain Tuesday. The market was closed Monday for a local holiday. With 15,000 Brazilians still in their 30s retiring last year with benefits, social security has become a symbol of the state's misplaced largess. Without reform, the system's deficit of more than $35 billion this year was on track to grow to more than $42 billion next year, according to the Finance Ministry. A steep 80% of that gap comes from payouts to federal employees-including congressmen who commonly haul down two or three pension paychecks. Mr. Cardoso got so upset over the issue that he labeled as "bums" those who retire before the age of 50. Those bums will now be history, as the lower house vote appeared to ensure passage of the reform bill by taking aim at three opposition amendments. The bill closes loopholes that allow workers to retire in their 40s. Other measures keep beneficiaries from accumulating multiple pensions, link payouts to contributions and set minimum retirement ages for the first time: 48 for women and 53 for men -- eventually rising to 55 and 60 -- provided they have worked for at least 30 and 35 years, respectively. Another provision sets a monthly benefit ceiling of about $1,000 a month in federal payouts. Sweet Victory Given the timing, the government's victory was especially sweet. The vote came after national elections, a lame-duck period when little gets done. Over 200 of the 513 deputies in the lower house of Congress aren't coming back next year and administration officials worried that its legislative allies wouldn't be able to muster a quorum for Wednesday's vote. For passage, the government needed a steep three-fifths majority, or 308 deputies, on each of the three oustanding amendments. For the first amendment, 337 deputies voted for the government. Next, the government faces stiff opposition on the points of its austerity plan. Congressional leaders have already voiced pessimism over a government proposal to increase pension contributions of civil servants and require retirees to pay as much as 20% of their benefits back into the system. Opposition is mounting, too, to a proposed 90% increase in the current 0.2% tax on financial transactions such as bank withdrawals and check payments. Recent state governor races have fortified that opposition, with left-wing candidates prevailing in Brazil's four most important states. Brazil's governors exert a great degree of influence over state representatives in Congress.

To: DMaA who wrote (9432)	11/4/1998 11:24:00 PM
From: Steve Fancy	Respond to of 22640

Previous story is confusing. I don't think this is a done deal yet. Haven't seen any further news...anyone else? Wonder if it was released a little early or something? sf