Will Brazil Be Able to Fix its Pension System Problems?

Latin America Advisor | Anastasia Chacón

Pedro Rossi, professor at the economics institute of the State University of Campinas: “First, it must be remembered that the public pension system in Brazil is responsible for making poverty in old age a residual problem. There are important corrections to be made, especially with regard to the pensions of public service workers, such as the military, but a radical switch to a model of capitalization can have important distributional effects, including increasing poverty.

In addition, it is necessary to understand the Brazilian fiscal deficit within the context of the greatest crises in the country’s recent history, where austerity measures have had an important role. Social security is not responsible for the huge fall in revenues due to the crisis, the rise of unemployment and informality. Restoring a normal scenario of growth and an increase in employment are important for a healthy fiscal adjustment. Therefore, one should think about the impact of the fiscal adjustment measures on growth, in addition to its distributional impact.

In this context, a balanced pension reform focused on the reduction of privileges can make an important fiscal contribution in the medium term, but it is not the short-term solution for the Brazilian economy.”