Brasil: Failing Big Reforms

BRAZIL

Failing Big Reforms

Brazil’s government gave up on passing a vital pension reform this year, delaying any further action until February and raising fears that there won’t be any progress until after next year’s elections.

President Michel Temer’s attempts to fix Brazil’s unsustainable pension system has dominated political debate in Latin America’s largest economy throughout the year, Bloomberg reported.

Analysts view pension cuts as essential to dealing with the country’s rising debt. If nothing changes, the finance ministry says the government will spend 23 percent of GDP on pensions by 2060. As a point of comparison, US spending on social security is expected to rise from 5 percent of GDP in 2016 to 6.3 percent in 2046 if nothing changes, according to the Congressional Budget Office.

Brazil’s credit rating is likely to take a hit, though Finance Minister Henrique Meirelles told reporters he planned to explain why the delay makes sense to the ratings agencies. But many are skeptical the reform will be passed even next year.