Brazil's pension system already consumes 8% of everything the economy produces in a year, as if R$ 8 out of every R$ 100 the country generated went straight to retirees. That is the bill presidential candidate Flávio Bolsonaro (PL) promises not to touch. In an interview with TV Globo on Friday (28), he said that, if elected in October, he will carry out a fiscal adjustment without changing pensions or the minimum wage appreciation policy.
"There is no need to save money on the backs of retirees," the senator said, according to Folha de S.Paulo. "I will not save money at the expense of those who earn the minimum wage," he added. In practice, that means keeping the annual adjustments that restore inflation losses for millions of beneficiaries of the INSS, Brazil's social security agency.
Instead, Flávio said the adjustment would come from fighting pension fraud, cutting ministries, political appointees and taxes. "I will run a lean government, reduce the number of ministries, cut bureaucracy, take the scissors to taxes," he said. He told G1 he also plans to revoke more than a thousand regulatory acts early in his term, without detailing the size of the cuts in reais or a deadline for the target.
Why the minimum wage matters
In Brazil, the minimum wage works as a ruler for the federal budget: INSS pensions and the BPC, a benefit paid to poor elderly and disabled people, are adjusted by the same index. Today the formula adds 12-month inflation through November of the previous year plus GDP growth from two years earlier. Any change to that rule hits some of the government's biggest expenses and, at the same time, the pockets of those who live on one minimum wage a month.
Despite the promise, Flávio did not say whether he would keep the current adjustment formula, both Folha and G1 noted. He also dodged questions about the level of public debt under his government. Gross debt closed May at 81.1% of GDP, up from 80.2% the previous month, a ratio comparable to a household owing 81% of everything it earns in a year.
The statement comes in the same week that economists led by Paulo Tafner, a leading voice in the pension debate since the 1990s, are preparing a new pension reform proposal to present to the candidates. By the authors' math, without changes spending would jump from 8% to 17% of GDP by 2100, or R$ 17 out of every R$ 100 produced, while their proposal would stabilize it at around 10%. "The pension system as it stands cannot hold up," Tafner told Folha.