Brazil’s government outlined a major pension reform proposal on Tuesday in the hope of shoring up public finances and pulling Latin America’s largest economy out of recession.
But trying to get the measure, already sure to be unpopular, passed got harder when a judge ordered the Senate leader and a key ally of the president removed from his post because he is being investigated for corruption. Then in a shocking move that caused yet more political uncertainty, Renan Calheiros refused to step down until the full Supreme Court ruled, calling the decision “monarchic.”
Justice Marco Aurelio Mello on Monday stripped Calheiros of his leadership position pending a full court decision expected Wednesday. If Mello’s decision is confirmed, Calheiros will be replaced by a member of the opposition Worker’s Party, which could throw the government’s hopes of pushing through a raft of reforms into disarray.
Brazil’s economy is in a deep recession. Its central government finances are in serious deficit, and at least two state governments are essentially bankrupt.
President Michel Temer’s government has presented the reform as do-or-die, saying it is the only way to save the system from eventual collapse.
“This is an opportunity to present a fundamental reform for the country, a reform for my parents’ generation, for my generation, for the generation of my children, and for the generation of my grandchildren, yet unborn,” said Marcelo Caetano, the social security minister who presented the reform on Tuesday, when it was also registered in Congress.
Most economists agree the system is in serious trouble.
“The long-term model is unsustainable,” said Fabio Zambitte, a professor at the prestigious IBMEC business school. The only question is: “Is the social security system at the edge of the precipice or 10 kilometres from the precipice?”
When Temer came to office earlier this year after his predecessor was impeached, many hoped that with his careful demeanour and deep connections in Congress he was uniquely placed to implement a likely unpopular but necessary set of reforms to put Brazil’s faltering economy back on track.
But a steady drip of scandal has thrown Temer’s reform agenda into doubt. Six of his ministers have resigned in the six months he has been in office, and recent accusations have raised the possibility that the president himself abused his authority. Twice in two weeks, manoeuvres by Congress viewed as attempts to insulate lawmakers from corruption charges led to large protests.
Now, Temer may not have the help of Calheiros in steering the reform through Congress.
The reforms would set a minimum retirement age of 65 and would require at least 25 years of contribution to the system. The retirement age would also rise as life expectancy in Brazil does.
Currently, Brazilians can choose to retire based on how many years they’ve worked. The current system also has different rules for men and women and for public and private sector workers, and the reform will bring the vast majority of Brazilian workers under the new age and contribution requirements.
It’s now less clear than ever if the reform will pass.
The political situation will get even more difficult if Calheiros is replaced by Worker’s Party Sen. Jorge Viana, and unions are positioning themselves against the reform. Paulo Pereira da Silva, president of the Forca Sindical union, has said the reform could not pass as it stands.
If the left throws itself into the fight, it could sink the reform, said Matthew M. Taylor, a senior fellow at the Council on Foreign Relations. But it’s unclear how much firepower it is willing to expend.
The uncertainty in the Senate leadership means any approval of the proposals will likely drag out, and time is not on Temer’s side: With elections coming in 2018, Temer always knew his best shot at passing difficult reforms was to move them through Congress as quickly as possible before lawmakers started to think about their campaigns.
“Once we advance into 2017 and the focus shifts to 2018, and the elections in 2018 . . . it is very possible that we won’t see the social security reform go through at all,” said Monica de Bolle, a senior fellow at the Peterson Institute for International Economics and a professor at Johns Hopkins’ School of Advanced International Studies.
And that would spell catastrophe, according to Taylor, who says a reform is “about avoiding a train wreck.”