Gov’t argues for keeping states, municipalities in pension reform

Brazilian Economy Minister Paulo Guedes argued for retaining Brazil’s states and municipalities as part of the scope of the reform in the country’s pension system. He said the final decision will be made by Congress, but warned that the local governments will be in difficult situation if they are left out of the new retirement rules. The statement was made today (Jun 4).

“As a republican, thinking of Brazil, I think that the states and municipalities should be on the same boat. This is redemption for the country.  Everything should be grouped together.  But there are circumstances; some people need the reform, would benefit from them, but want others to do it,” the minister declared. He was called by the lower house Commission on Finance and Taxation to explain the economic and financial impact of the overhaul.

“From a republican perspective, everyone should be under the same regime. It’s what I’ve always argued for. The circumstances in politics are such that some need the reform, are critical of it, and want others to do so as not to face the political cost,” he added.

Guedes noted that staff spending reaches over 70 percent of expenditures in some states, and warned about the risks of collapse in local governments if no action is taken. “In very little time, we’ll be running short of money for health care, education, sanitation with such compressed costs,” he pointed out.

In his view, there is no way to increase the local governments’ spending capacity other than implementing the pension reform, which is said to lead to $85 billion being spared at state level alone in the next ten years. Without the overhaul, he argued, states “will not be able to pay civil servants, or retirees. It’s not the reform we’d like to be doing. But there’s no way out,” he concluded.