Brazil\u2019s government threw in the towel on its efforts to vote on a flagship social security reform this year, kicking the bill back to February and raising the prospect that nothing will be done about the country\u2019s ballooning pension obligations until after next year\u2019s elections.<\/p>\n
Lower house debate on the constitutional amendment that would rein in Brazil\u2019s pension spending will begin on Feb. 5 and the bill will be put on the voting schedule on Feb. 19, lower house speaker Rodrigo Maia told reporters in Brasilia on Thursday afternoon. Both the currency and the benchmark stock exchange fell on the news, following sharp sell-offs on Wednesday as the chances of a vote dwindled.<\/p>\n
President Michel Temer\u2019s efforts to overhaul Brazil\u2019s unsustainable pension system has dominated political debate in Latin America\u2019s largest economy throughout the year. With pressure mounting to pass the unpopular measure before lawmakers start concentrating on 2018 elections, negotiations between the presidential palace and congress reached fever pitch in recent days. The government\u2019s plans started falling apart this week as several policy makers contradicted themselves on the potential vote date while Temer was hospitalized for a surgery.<\/p>\n
“We don\u2019t have all the votes now and we\u2019ll have to keep on working,” Maia told reporters after a meeting with government allies in Brasilia. “I\u2019m sure we\u2019ll have the votes in February.”<\/p>\n
Maia added that he\u2019s confident the government will obtain 320-330 votes in favor of the bill, which is more than the 308 needed to secure its approval in the lower house. The legislation would also require Senate backing.<\/p>\n
Analysts consider the pension reform crucial to manage the country\u2019s rising levels of public debt. If the current rules remain in place, Brazil would end up spending 23 percent of its GDP on pensions by 2060, according to the finance ministry. Failure to approve the bill could also contribute to a further downgrade of the country\u2019s sovereign credit rating, government officials have warned.<\/p>\n
“The delay in presenting the pension reform for a vote is credit negative,” Samar Maziad wrote in a note for Moody\u2019s Investors Service shortly after Maia\u2019s announcement. “This raises the possibility that the reform will not be approved next year, given political uncertainty surrounding the presidential elections.”<\/p>\n
Fitch Ratings wrote in a note that the delay highlighted the downside risks included in Brazil\u2019s negative outlook BB credit rating and that the window is closing for significant reforms before the election cycle begins.<\/p>\n
Finance Minister Henrique Meirelles told reporters in Brasilia that he would explain the delay to the vote to the ratings agency, and added that the new timetable would allow for more time to discuss the reform.<\/p>\n
Meanwhile leaders of the PRB and the PSD, two government-allied parties whose members had been reluctant to back the bill, said the extra time would help build support among wavering lawmakers.<\/p>\n
“It improves the situation,” said Marcos Montes, the leader of the PSD. “The proximity of the election weighs against it, but there are good chances of approval.”<\/p>\n
Eurasia Group, meanwhile, has cut the odds of the pension reform bill passing from 40 percent to 30 percent.<\/p>\n
“We are still of the view that approval, while more unlikely, is still possible,” the consultancy wrote in a report published on Thursday evening.<\/p>\n
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