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Renata Prata and Ryan Strong
Recently, The Scoop decided to conduct a mock debate between the editor in chief of the esteemed newspaper, Renata Prata, and the editor of Student Life, Ryan Strong. It was determined that the topic would be on Social Security reform in Brazil, the Draft Constitutional Amendment (PEC) 287, as a complement to the recently passed limit (“teto”) of public expenditures Constitutional Amendment 95. Ryan and Renata decided to role play defending the reform, while Renata’s persona came out representing its opposition. The Scoop invites all readers to consider the arguments of the two sides and decide for themselves what they think.
In Favor of PEC 287
By: Ryan Strong and Renata Prata
No one doubts that Brazil’s finances are in dire straits. Last year, the primary budget deficit for the country was $22.7 billion dollars, and its real budget deficit, including interest payments was 562.8 billion reais. That is equal to 8.93 % of GDP, a terrifying number for any country on the globe. It is thus clear that there needs to be major fiscal reform in order to save the future of the Brazilian economy. A clear target for this would be pensions. That is exactly what President Michel Temer intends to do.
President Temer’s proposed reform would do several things. It would make a minimum retirement age of 65, and it would require men and women to work longer than they do now to obtain their pension. Retirement age increases would now not require an amendment to the constitution, and most pensions would no longer be linked to the minimum wage.
Critics, however, do not like such reforms. They claim that Mr. Temer will hurt the poor, and should instead focus on taxing the rich. There are several problems with such a claim. First off, the poorest would still have their benefits linked to the minimum wage, thus reducing the harm done to them. Second off, those that advocate only taxing the rich and simply underestimating the problem of pensions. Brazil spends more as a percent of GDP on pensions then does Japan. People on average retire in Brazil at 58, and pensions take up more than half of non-interest spending.
The current Social Security system runs by the 85/ 90 rule. These two are the minimum values for women and men respectively of the sum of years as a taxpayer, and ages. Despite there being a minimum amount of years contributing (for men 35, and for women 30), there is not in age. This makes sense since the only relevance in age when calculating Social Security is the expense of maintaining a citizen. If one has already paid in advance, then there should be no problem. Thus one can start paying the INSS at 25 and retire at 60. The math supposedly works. The Brazilian life expectancy is of 70 years old. With our current system one is contributing for even more years than needed since 60 plus 25 is 85.
That logic would work, did we not have the “Principle of Solidarity”. Our contributions do not remain locked until we seized them later on. Instead Brazil adopted the “principle”. Current taxpayers pay the retirement of their contemporary older ones. Only among men, in 2000, 3.9% of our population was over 60. In 2010 it rose to 5%.
Mind that in the calculations below the predictions of From 2019 on, one point will be added around every 2 years.
2030: 78 life expectancy (similar to the current survival rate for over 61)
2030 - 2019 = 11 years
11 years/2 points = 6 extra points
6 extra points + 90 original points = 96 points
61 years old
35 years contributing
Starts contributing at: 26
Or could start contributing earlier and retire earlier than 61 years old.
78 - 61 = 17 years seizing retirement
2060: 80 life expectancy (similar to the current survival rate for over 70)
2060 - 2019 = 41
41 years/2 points = 21 extra points
21 extra points + 90 original points = 111 points
70 years old
41 years contributing
Starts contributing at: 21
80 - 70 = 10 years seizing retirement
Case study: One earns a salary of 1.659,38 R$ and thus deposits 8% of it to the INSS.
That investment would be os 132.7504 per month for 41 years, which equals 65313.1968 R$.
One will live off those funds for 17 years while being promised to continue with the same salary. If that fund is divided into 17 years and 12 months, it mounts up to just over 320 reais: about 20% of one’s original salary.
In short, pension reform is exactly what Brazil needs. Push it, Mr. Temer.
Against PEC 287
By: Renata Prata
This week the Brazilian delegation cast a controversial vote in the United Nations Human Rights Council. Since its membership, it had never voted against a resolution, at the most it abstained. However, the content in the resolution presented, expressing concern on the jeopardy of human rights with the curtailing of pension systems cringed the new perspective of our ambassadors. Our country’s foreign policy is tragically morphing from our domestic turbulences and change in governance. Nevertheless, the resolution passed. It is uncertain, however, whether our domestic opposition against the Social Security reform in the draft Constitutional Amendment, PEC 287, will be as successful.
It is often said that a reform in the Brazilian Social Security system is unavoidable. The seeming deficit we have in our public banks is due to the change in the demographics, the increase in life expectancy, matched with the “principle of solidarity”, in which the current retired generation fruits from the contemporary workers and taxpayers.
When one goes fact checking, beneath all governmental and media distortions, one concludes that we have a superavit. That superavit however is leaked to other expenditures, remarkably for the government paying interest rates (also known as Selic) to the private bankers. Suffice it to say that Brazil is the country with the greatest interest rates in the world. A true concentration of income in the hands of private bankers. This expenditure of the superavit is done through the Desvinculação de Receitas da União (DRU), which reads literally Disassociation of the Union’s Income. In order to fix our Social Security System we need to first tear down this unconstitutional rule.
Furthermore, there is the social issue. The current Social Security system runs by the 85/ 90 rule. These two are the minimum values for women and men respectively of the sum of years as a taxpayer, and ages. Despite there being a minimum amount of years contributing (for men 35, and for women 30), there is not in age. This makes sense since the only relevance in age when calculating Social Security is the expense of maintaining a citizen. If one has already paid in advance, then there should be no problem. Thus a woman can start paying the INSS at 25 and retire at 60.
With the proposed reform in PEC 287 however, there would be the minimum age of 65 years old for one to retire. In several Brazilian regions one does not even expect to reach that age. That includes not only regions in the North and the Northeast, but also unprivileged neighborhoods in capitals, including Grajaú in São Paulo, for example. Regardless, that minimum age is not even realistic. For one to retire at 65, one must have worked uninterruptedly since 16, and unreal estimation in a country with high indexes of unemployment and work rotation, according to UnB professor Maria Lúcia Lopes. That is so because the Draft Constitutional Amendment is increasing the minimum years of contribution from 35 to 49 years. Thus reasonably, we would start contributing at 23, do so until one turns 72 immaculately, while the national life expectancy is currently 75 years old. We are being told: Arbeit macht frei.
The new reform does not set different minimum points for men and women. Despite that being socially ideal, sadly we still live in a profoundly sexist society. Women have achieved their right to work in environments traditionally regarded as masculine. However, we still keep our house duties. School buses and full time schooling is not a public service. Thus we have a double journey summed up to 57 hours, four hours greater than for men. It is thus unfair that we do not remain with some kind of distinction. If the PEC 287 passes, the affirmative action we have today of five less minimum retirement years would be extinct.
The pressure for popular mobilization is real. Most recently, Temer has declared that he has enough promised votes for it to pass. Hence we must react while keeping in mind that the problem is not that we are working too little. It is the interests system that demands reform. Increasing the minimum contributing time in years and life years will not solve the real issue we have at hand.