Pension system deficit hits $ 84.173 billion in 2017

Brazilian state pension system for private-sector workers  ended 2017 with a $ 57.133 billion deficit. It amounts to 2.8% of the Gross Domestic Product (GDP) projected for this year. The figures were released this Monday (Jan. 22) by Brazilian Ministry of Finance.

It is the worse deficit since 1995, when Brazilian government's time series began. Until now, 2016 had seen the worst deficit, of $46.887 billion.  There was a 21.8% increase from one year to another.

The government's projection for the pension system deficit in 2017 was $ 57.9 billion.  According to Marcelo Caetano, Social Security secretary, the deficit came in below the forecast because it was "an estimation with a very high order of magnitude". For 2018, it is possible that there is still a review of the projected $60 billion deficit.

As for the pension system covering public-sector workers, which also comprises the army, the deficit in 2017 was $ 27 billion, with a 11.9% increase in comparison to 2016.

Considering the two sectors, private and public, Brazilian pension system accumulated a $ 84.173 billion deficit in 2017.

"The expense exceeds the revenue. The expenses grow faster than the revenues, therefore the deficit grows in a very sharp speed, not only in terms of real deficit, but also the deficit in relation to the GDP", he explained.

Pension system reform

In the Social Security secretary's opinion, the figures make clear the need for a reform of the pension system.  "It is fundamental. We watch as the figures jump from tens to hundreds of billions every year".

Relating to a possible postponement of the overhaul vote, slated to February 19 in the Brazilian lower house, the secretary was emphatic:  "The government believes in the approval in mid-February".

Mainly, the reform proposes the adoption of a minimum age for retirement -65 years for men and 62 years for women. It also provides that public servants have the same retirement rules as workers of the private sector, with monthly salary cap of $ 1.722 (current value, yearly adjusted based on inflation and GDP). Currently, public servants retire with the same salary they have earned while working.

If approved this year, says the secretary, the overhaul is expected to reduce the pension system deficit projected for 2018 by $ 1.8 billion.

Translated by Mariana Branco