Tue. Oct 22nd, 2019

Pensions corner Brazilian states on the brink of bankruptcy

The deep crisis that plagues the Brazilian states could be aggravated by the exclusion of regional and municipal officials from the reform of the pension system proposed by the Government, whose final approval in the Chamber of Deputies was for the month of August.

The Executive of President Jair Bolsonaro won this week an important victory in Congress after the House gave the first push to the project, but is still pending a second vote before going through the senate.

The original document proposed by the Executive, which modifies the rules for access to retirement for private sector workers and federal officials, underwent some changes by the deputies and finally did not include the states and municipalities.

Its exclusion does not compromise the savings provided by the Government, but, according to economists consulted by Efe, it may increase the imbalance of regional accounts, pressured by the payment of payroll to public officials and the items destined for pensions.

Brazil has more than 11.4 million public officials in the three spheres of power (federal, regional and municipal), 83% more than 20 years ago, according to the Atlas of the Brazilian State, launched in 2017 by the Institute of Research in Applied Economics (Ipea).

The data, referring to 2016, reveal that municipal public officials represent 57% of the total in the country, while the regional equivalent to 33% and the federal just 10%, although they have the highest salaries and pensions.

In addition, economist Paulo Tafner, author of the book "Pension Reform: Why Brazil Can not Wait," explained to Efe, several states in Brazil, such as Rio Grande do Sul or Rio de Janeiro, already spend more with retired officials than with those who are active.

"The population pays a lot of taxes and does not have a return in the form of a public service, a very large part is aimed at paying pensions and the situation is dramatic," Tafner said.

The inclusion of the states and municipalities in the reform was in the initial version proposed by the Government, but the point ended up being eliminated in the absence of a unanimous agreement between the governors of the 27 states of Brazil, especially those from the northeast, who questioned some of the points of the original document.

"The reform of the pension and retirement system dealing only with the problems of the State is a fiction, it is extremely abstract, the State does not provide any service in relation to the citizens", emphasized the governor of Goiás, Ronaldo Caiado, arduous defender of the inclusion of states and municipalities.

In this way, added Caiado, Brazil could certify "the bankruptcy" of the states and municipalities.

In case the proposal is not finally annexed in the Senate, as it could still happen, the 27 states and the 5,570 municipalities of the country should carry out their own pension reform, which draws a complex scenario and that can aggravate still plus the weakened financial situation in various regions of the country.

Most of the Brazilian states, with some exceptions, go through a deep financial crisis since the beginning of 2015, when the collection of regional governments was hit hard by an unprecedented crisis, and has intensified in the first months of the year in medium of a not very encouraging economic scenario.

"It is a complex picture, which begins with the fall in turnover due to the economic crisis and the fall in the price of oil in some states," Gustavo Fernandes, professor of public administration at the Getulio Vargas Foundation, explained to Efe (FGV ).

On the edge of the fiscal cliff, Rio de Janeiro has become one of the emblems of the chaotic situation of regional public finances after years of prosperity stimulated by the rise of oil.

Since then, the "wonderful state" has entered a path of decline that has put in check services that depend on the regional government, such as health, education, public safety and infrastructure.

According to a report released by the Federation of Industries of Rio de Janeiro, the state of Fluminense registered in 2017 the third largest pension deficit in the country, with 10,600 million reais (about 2,841 million dollars), behind Rio Grande do Sul ( 2,795 million dollars) and Sao Paulo (4,825 million dollars).

Alba Santandreu

. (tagsToTranslate) pensions (t) corner (t) Brazilian (t) edge (t) bankruptcy

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