RIO DE JANEIRO, Brazil -- Brazil's government is planning another attempt to persuade Congress to toughen social security eligibility requirements in an attempt to cut the system's growing deficit.
The body last year passed reform tightening eligibility requirements for public sector employees already in the system. But an age eligibility proposal for private-sector employees already in the system did not make it into the law. The government argues tougher standards are needed to sufficiently curb payouts (Pensions & Investments, Jan. 11).
The government plans this month or next to introduce a social security amendment before Congress that is identical to an eligibility requirement clause for private-sector employees already in the system that was voted down last year. The new amendment would make eligibility contingent on age, as well as years of contribution, as is the case with public-sector employees.
Eligibility requirements for public and private-sector employees should be identical, said Social Security Minister Waldeck Ornelas, adding the social security reform passed in November was "too timid" to reduce the program's growing deficit -- $35 billion as of Dec. 31. Last year's watered-down social security amendment will curb payouts by $2.5 billion in 1999, $5 billion in 2000 and $7.3 billion in 2001.
Mr. Ornelas said he is certain the proposal will pass, but others are less optimistic.
"Though Congress last year voted down, by only one vote, a social security clause that linked private-sector eligibility to age as well as years of contribution, the political makeup of congress hasn't changed since then, which means the government will have an uphill battle in getting an identical amendment proposal through Congress this year," said Creston Portilho, press spokesman for ABRAPP, the national association of Brazilian pension funds.
The government suffered another social security-related blow when the Supreme Court recently agreed to rule on the constitutionality of two tax proposals meant to help reduce the overall fiscal deficit.
One of the measures increased the social security tax on the portion of civil servant earnings above 1,200 reals ($670) per month. The other measure imposed taxes on payouts to retired civil servants, depending on the sizes of their monthly checks.
Mr. Portilho said the Supreme Court, expected to rule in August or September, "may permit an increase in civil servant social security taxes, but will likely consider the measure that taxes payouts to retired civil servants to be unconstitutional."