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Mansueto: Pension Reform Will Not Solve All the Problems, But it is First Step

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National Treasury Secretary Mansueto Almeida said Tuesday that pension reform will not solve all of Brazil’s problems, but it is a first step in resolving many other “very difficult” issues.

Speaking at an Inter-American Development Bank (IDB) event, Mansueto stressed that, once the social security stage has expired, the government has to focus on increasing productivity, through better education, to boost the potential for economic growth.

In saying that Brazil is “totally out of the loop” of other countries, Mansueto said that two-thirds of state civil servants are in special regimes, retiring at 49, 50 years of age.

“It’s very new, it’s absolutely very new for the 21st century,” he said, pointing out that at the other end, poor people who can not formally contribute for the minimum time required are already retired by age today, and the rule is 60 years for women and 65 years for men.

Mansueto argued that a serious and profound debate be held on pension reform. The speech of the secretary occurred hours before the first session in the special committee of the House of Representatives on the Proposal of Amendment to the Constitution (PEC) that changes the rules of pensions.

“We need a lot of debate in this country, a lot more transparency, in an open debate.” “Do you want a different proposal for Social Security?” “We want to preserve the ministry budget X and not Y? clearer, “he said.

Mansueto emphasized that the country needs to revise its structure of public spending, with control over the compulsory expenses, due to its already deteriorated fiscal framework.

The secretary of the Treasury recalled that Brazil already has a very high tax burden, from 33 to 34 percent of the Gross Domestic Product (GDP), 10 points above the average in Latin America. Gross debt, in turn, is close to 80 percent of GDP, compared with an average of 50 percent of emerging countries.

On public investment – which is expected to fall this year to around 35 billion reais, or 0.5 percent of GDP – Mansueto estimated that this “is the worst kind of public spending control”, since it affects growth of the economy.

But he pointed out that, faced with a budget heavily plastered by compulsory spending, the government has little room for maneuver for different choices.

In a study published on Tuesday, the IDB announced among its policy recommendations the adoption of fiscal rules that go beyond fiscal sustainability to protect investments, setting specific limits to increase current expenditures so that the government assures resource allocation for capital expenditures.