President Michel Temer’s decision to throw in the towel on reforming Brazil’s loss-making pension system leaves the unpopular measure as a campaign issue for October’s elections and a major headache for his successor.
Monday’s announcement that Temer was abandoning an overhaul of the social security system, billed as the centerpiece of his efforts at fiscal reform, sparked immediate concern from credit rating agencies that Latin America’s largest economy was failing to put its financial house in order.
Brazil’s generous pension system is at the heart of budget deficit that ballooned from 3 percent of GDP in 2013 to a massive 10 percent in 2015, before edging back to 8 percent last year as the $1.8 trillion economy emerged from recession.
The official reason for dropping the pension bill was a military intervention in crime-plagued Rio de Janeiro state, decreed on Fridayafter unprecedented violence during Carnival.
Constitutional amendments such as the pension bill are blocked during federal intervention of a state.
Deploying the army in Rio will go down well with voters in a nation where polls show public safety is the top concern.
Brazil has 60, 000 murders a year and its cities are among the world’s most dangerous.
Temer’s critics, however, said he merely found a pretext to avoid acknowledging an embarrassing defeat.
While Temer, 77, came close to the super majority needed to pass the bill last year, he lost political capital fighting off corruption charges and the government soon discovered it had run out of time, as lawmakers seeking re-election this year refused to back the unpopular legislation.
“Now the government does not have to admit it lost the battle for pension reform,” said Fabio Sousa, a congressman for the centrist Brazilian Social Democratic Party, which backed the reform.
“The next president will have to do the fiscal adjustment, which is fine, because he will have a mandate from voters to do something about it,” Sousa said in an interview. “The good thing is that pension reform will now be an election campaign issue.”
Temer, a former vice president, replaced impeached leftist Dilma Rousseff in 2016, but he has single-digit approval ratings that rule out a presidential bid of his own./Reuters