Latinnews Daily - 28 August 2003
BRAZIL: Pension reform goes to senate as tax reform looms
The lower chamber of congress approved the government's pension fund reform last night. The bill now goes to the senate. It has to get through two committee votes and two by the full senate. Only if the senate alters the bill will the lower chamber get a further chance to vote on it. The government is confident that the bill will become law by mid-November.
Despite the threat from one of its nominal allies, the Partido Democrático Trabalhista (PDT), the government held its alliance together in congress. In the first round, the voting had been 358 to 126 with nine abstentions. Last night it was 357 to 123 with six abstentions. The PDT wanted to extend the privileges granted to judicial employees to those employed by legislatures and state and federal governments. This would have cost more money and, more importantly, annoyed the state governors, all of whom are still backing the government's proposal. The core of the government's proposal is to tax larger state pensions (at 11%), raise the pensionable age and reduce some of the most extravagant pensions. Judges get some of the juiciest pensions in Brazil.
The PDT does have a valid point that the new system is riddled with inconsistencies. For example, state and municipal employees will be exempt from tax on their pensions, provided their pensions are less than R$1,200 (US$400) a month. Federal employees can get up to R$1,440 a month before being taxed.
The proposal produced splits in President Lula da Silva's Partido dos Trabalhadores (PT) and led to some of the PT's allies breaking with it over the issue. The proposal also triggered a series of strikes in the public sector. The most strike-hit parts of the bureaucracy were the customs service and the social security agency. These strikes are now petering out.
The government reckons that it will take at least a couple of weeks for things to get back to normal at the Instituto Nacional do Seguro Social. After all, officials have been on strike for almost two months. The pension ministry reckons that there is a backlog of 227,000 pension applications which need to be verified. On top of this there are probably another 200,000 applications which need to be submitted. The pension minister, Ricardo Berzoini, said that office hours would be extended by two hours a day until the backlog is expunged. Even this may not be enough: the ministry's computer systems keep on crashing because of the extra workload.
The question for the government is whether the splits in the PT will heal as easily. Last night, the former PT leader in the lower chamber, Walter Pinheiro, joined three of his radical colleagues in voting against the government. In May, the PT started expulsion proceedings against members, notably Heloisa Helena, a senator from the north-eastern state of Alagoas, who publicly campaigned against the government line on pension reform. The PT is being gentler with its dissidents and abstainers in the lower chamber: they face suspension for a month (or possibly three months) according to the party president, José Genoino.
The soft-peddling in the lower chamber seems to have paid off. Lindberg Farias, an outspoken opponent of pension reform when it was launched four months ago, amazed his colleagues by making an impassioned speech in support of the reform last night: he argued that the bill had been improved by the concessions the government has made. Farias sprung to fame in 1992 as one of the student leaders who led the campaign for the impeachment of President Fernando Collor de Mello.
The ruling alliance in congress provided 297 of the 308 votes (two-thirds of the lower chamber) to push through constitutional reforms. The centre-right parties such as the Partido da Social Democrácia Brasileira (PSDB) and the Partido da Frente Liberal (PFL) provided 60 votes. The PFL itself split over the reforms: supporters of Antônio Carlos Magalhães, from Bahia, backed the government while supporters of the party's leader, another Bahian politician, José Carlos Aleluia, opposed the reforms. The only party in the governing alliance that was 100% pro-reform was the Partido Liberal, which has 26 seats.
The government needs to treat its supporters tenderly because the pension fund reform is to be followed by a tax reform proposal. Even the arch-conciliator, finance minister Antônio Palocci, admits that it will be tough to get the fiscal reform through congress. Palocci's technique, he admits, is not to blame the previous government for the dodgy financial position and to be open to any suggestions from governors and mayors.
Despite the threat from one of its nominal allies, the Partido Democrático Trabalhista (PDT), the government held its alliance together in congress. In the first round, the voting had been 358 to 126 with nine abstentions. Last night it was 357 to 123 with six abstentions. The PDT wanted to extend the privileges granted to judicial employees to those employed by legislatures and state and federal governments. This would have cost more money and, more importantly, annoyed the state governors, all of whom are still backing the government's proposal. The core of the government's proposal is to tax larger state pensions (at 11%), raise the pensionable age and reduce some of the most extravagant pensions. Judges get some of the juiciest pensions in Brazil.
The PDT does have a valid point that the new system is riddled with inconsistencies. For example, state and municipal employees will be exempt from tax on their pensions, provided their pensions are less than R$1,200 (US$400) a month. Federal employees can get up to R$1,440 a month before being taxed.
The proposal produced splits in President Lula da Silva's Partido dos Trabalhadores (PT) and led to some of the PT's allies breaking with it over the issue. The proposal also triggered a series of strikes in the public sector. The most strike-hit parts of the bureaucracy were the customs service and the social security agency. These strikes are now petering out.
The government reckons that it will take at least a couple of weeks for things to get back to normal at the Instituto Nacional do Seguro Social. After all, officials have been on strike for almost two months. The pension ministry reckons that there is a backlog of 227,000 pension applications which need to be verified. On top of this there are probably another 200,000 applications which need to be submitted. The pension minister, Ricardo Berzoini, said that office hours would be extended by two hours a day until the backlog is expunged. Even this may not be enough: the ministry's computer systems keep on crashing because of the extra workload.
The question for the government is whether the splits in the PT will heal as easily. Last night, the former PT leader in the lower chamber, Walter Pinheiro, joined three of his radical colleagues in voting against the government. In May, the PT started expulsion proceedings against members, notably Heloisa Helena, a senator from the north-eastern state of Alagoas, who publicly campaigned against the government line on pension reform. The PT is being gentler with its dissidents and abstainers in the lower chamber: they face suspension for a month (or possibly three months) according to the party president, José Genoino.
The soft-peddling in the lower chamber seems to have paid off. Lindberg Farias, an outspoken opponent of pension reform when it was launched four months ago, amazed his colleagues by making an impassioned speech in support of the reform last night: he argued that the bill had been improved by the concessions the government has made. Farias sprung to fame in 1992 as one of the student leaders who led the campaign for the impeachment of President Fernando Collor de Mello.
The ruling alliance in congress provided 297 of the 308 votes (two-thirds of the lower chamber) to push through constitutional reforms. The centre-right parties such as the Partido da Social Democrácia Brasileira (PSDB) and the Partido da Frente Liberal (PFL) provided 60 votes. The PFL itself split over the reforms: supporters of Antônio Carlos Magalhães, from Bahia, backed the government while supporters of the party's leader, another Bahian politician, José Carlos Aleluia, opposed the reforms. The only party in the governing alliance that was 100% pro-reform was the Partido Liberal, which has 26 seats.
The government needs to treat its supporters tenderly because the pension fund reform is to be followed by a tax reform proposal. Even the arch-conciliator, finance minister Antônio Palocci, admits that it will be tough to get the fiscal reform through congress. Palocci's technique, he admits, is not to blame the previous government for the dodgy financial position and to be open to any suggestions from governors and mayors.
End of preview - This article contains approximately 750 words
Subscribers: Log in now to read the full article
Not a Subscriber?
Enquire Now