Brazil Country Dialogue April 2003

Michael Orszag, David Lindeman, and Sarah Brooks comprised the IPD team. Michael Orszag is co-director of the Initiative for Policy Dialogue’s Pension Reform and Social Insurance Task Force as well as a Visiting Research Fellow of the Oxford Institute of Ageing. David Lindeman is a principal analyst on pensions at the Organization of Economic Cooperation and Development (OECD) and former Executive Director of the 1994-97 Quadrennial Social Security Advisory Council of the US Government. Sarah Brooks is Assistant Professor of Political Science at Ohio State University. Her work covers the process of pension reform in Argentina, Brazil, Mexico and Uruguay.

IPD opened the dialogue and presented different reforms to the pension system, drawing on the experiences of other countries. Through the reform, Brazil aimed to reduce the deficit in the civil servants pension regime. The IPD team held meetings with the major actors involved in pension reform, such as the Council for Economic and Social Development, which brought together civil society to formulate a proposal for pension reform, the Secretary of Social Security of the Ministry of Social Security and members of the House of Representatives Committee on Social Reform. The IPD team also met officials from the Ministry of Finance and from the Institute for Applied Economic Research (IPEA), a pension expert from the Department of Economics at the University of Brasilia, and held a conference call with the National Bank for Social and Economic Development (BNDES). Shortly after IPD’s visit President Lula sent a proposal for pension reform to Congress.

At the time of the dialogue the Brazilian government was seeking to reduce the deficit in the civil servants pension regime and increase coverage in the private workers pension regime. Some sectors of society that attended the meetings seconded an increase in the value of benefits paid in the private workers pension scheme. It was noted that a reduction of the governmental deficit was even more important since the fiscal target established by the Federal Government for 2003 is a 4.25% of GNP primary surplus (revenues minus expenses without considering the payment of interest rates in governmental debts).

However much agreement there may be regarding the goals themselves, the experience of the last administration in Brazil has shown that it is rarely easy to build a consensus on how to reach these goals. The IPD team played a crucial role in illustrating to government officials the different ways they might achieve their objectives. IPD laid out in detail the successes and failures of other countries struggling with similar issues. The team also examined the different proposals put forth by the Brazilian government.

The consensus reached was that the first effort of the pension reform would be directed at the civil servants regime. Four proposals received strong support: (i) to increase the minimal period that a civil servant has to work in the government in order to take part in the civil servants pension scheme; (ii) to increase the minimal age required to retire; (iii) to establish a ceiling for the value of the retirement benefits paid, and (iv) to reduce the value of pensions to 70% of the retirement benefit paid to the spouse before his death. Based on the projected results, the IPD team alerted the government officials that other measures would be necessary to achieve the intended deficit reduction.

Overall, the policy dialogue was a profoundly important beginning to IPD’s involvement with Brazil. For a full description of the forum and forum notes, please see the Brazil Country Dialogue Notes.