Brazil says can pass pension reform in 2016 despite headwinds

[BRASILIA] Brazil's government aims to pass an overhaul of the costly public pension system in 2016 despite a delay in drafting a proposal and municipal elections looming in October, Presidential Chief of Staff Eliseu Padilha said on Tuesday.

Mr Padilha gave the outlook after three senior government officials told Reuters on Monday they believed the complex reform was unlikely to be approved before next year as lawmakers are reluctant to endorse the unpopular legislation before municipal elections in October.

Interim President Michel Temer's plans for pension reform - including the introduction of a minimum retirement age to cut costs - have drawn harsh criticism from unions in a nation that has lost nearly 2 million jobs in over a year amid a crippling recession.

The interim government said shortly after taking office in mid-May that a working group including union leaders and government officials would present a draft proposal of the pension reform within a month.

A meeting on Tuesday of government officials, business heads and union chiefs had been expected to unveil the initial blueprint.

However, Mr Padilha instead announced a new working group would meet to discuss the reform next week. He said there was no fixed date for it to present a proposal.

Brazil's generous pension system makes up around 40 per cent of public expenditures and a constitutional reform to lower costs was due to be the centrepiece of Mr Temer's efforts to regain investor confidence.

Mr Temer, the former vice president, took over when President Dilma Rousseff was placed on trial in the Senate last month on charges of breaking budget laws. He inherited a fiscal deficit running at 10 per cent of gross domestic product last year and the deepest recession since the 1930s.

Around 100 lawmakers are planning to run for mayoral seats in elections on Oct 2 and are unwilling to publicly support the pension reform ahead of the vote, the sources said.

The approval of an amendment is a lengthy process that requires three-fifths of the votes in Congress in two rounds of votes at the two houses. The process usually takes several months.

REUTERS