The Brazilian government scored a major, although costly, victory March 21 in getting the Chamber of Deputies to approve a social security amendment similar to one voted down earlier in the month.
President Fernando Henrique Cardoso got the chamber, the lower house of Congress, to pass the amendment in a 351-139 vote by promising legislators political appointments and spending appropriations. A second vote in the chamber is expected in April; the proposed amendment is expected to win approval then, too.
Brazil's Senate is expected to pass the reform measure in two votes, probably in May, then the bill will be signed into law. The amendment needs to pass twice in both the houses by a three-fifths vote.
The amendment's key reform links government social security payouts to length of contribution or age, not to the number of years worked, as is now the case. The rejected version of the amendment had linked payouts to length of contributions and age. Currently, men can retire after 30 years of work, and women can retire after 25 years.
To be eligible for benefit payments under the new amendment, men have to be either 65 years old or must have contributed for 35 years; women must be 60 years old or must have contributed for 30 years. Proportional payments would be available to men who are 65 and have contributed for 30 years or women who are 60 and have contributed for 25 years.
In the public sector, according to the amendment, men must be 55 years old and must have contributed for 35 years, while women must be 50 years old and must have contributed for 30 years. For both men and women, eligibility requires them to have worked 10 years in the public sector. The amendment also allows public sector proportional retirement only for two years after the amendment becomes law.
The amendment also maintains the current benefit ceiling of 10 times the minimum wage. Additionally, it states public sector employees, whose retirement benefits come from taxes rather than social security funds, will receive benefits equal to their final salary. Current benefits are 20% higher than final salary. The amendment also prohibits public sector workers from getting retirement benefits for more than one government job, which should end the public sector perk of cumulative retirement benefits.
Creston Portilho, a spokesman for the Association of Brazilian Pension Funds, said the amendment is a major breakthrough in the government's fiscal reform efforts because it would substantially reduce government payouts.
"The amendment is basing payouts on length of contribution or age rather than the number of years worked and (is) making the length-of-contribution eligibility period five years longer than the current eligibility period," he said.
These factors will reduce social security payouts, said Mr. Portilho. And in turn "will help the government reduce its budget deficit."
But Larry Worner, the managing director of Mercer MW Brazil, the local subsidiary of William M. Mercer Inc., said the amendment was tame and did not attack the root of the social security problem.
"Substantive social security reform will only occur when there is a minimum age eligibility requirement for private sector wage-earners and when the government does away with the high levels of retirement payouts for public sector employees," said Mr. Worner. "The lack of a benefits ceiling for public sector employees who can, with the new amendment, still receive benefits equal to their last salary, means their excessive retirement perks have been preserved."
While the amendment is expected to pass both houses, each body is allowed to modify it before a vote is taken, though no changes in key reforms are expected.
But pro-government representatives are pushing for a change that would lower the current benefit ceiling to five times the minimum wage in order to stem government payouts.
And some congressmen, worried about the unpopularity of the amendment in an election year, are pushing for a modification that would delay the effective date for two years or more. As written, the current amendment will take effect as soon as it becomes law.