Pension reform announced, but still vague

In today’s issue: Pension reform announced, but still vague. The implosion of the president’s party. And the new faces in the Bolsonaro economic team.

What to make of the government’s pension reform proposal

President Jair Bolsonaro has settled on a minimum retirement age for Brazilian workers: 65 for men, 62 for women—with a transition period of 12 years. These pieces of information alone managed to push the São Paulo stock market index up 2.27% yesterday. A detailed bill, however, should only make it to Congress next week.

Markets were excited because Mr. Bolsonaro had defended lower minimum ages in the past. Many doubts, however, still loom—which are fundamental to calculate the effectiveness of the reform:

• At what age will the transition period start?

• Will pensions be halved, with 10% extra for each dependent, as initially intended?

• Will the minimum wage remain as the floor for benefits?

• What will the rules be for rural workers? Congress resists any changes on that front.

• How will the government deal with the rapid changes to the labor market—caused by new technologies and automation?

• How do these changes affect how much people will contribute to social security in the future?

While opinion polls show that there is less resistance to the pension reform this time around, this could rapidly change once people know about the details. Especially if the government caves to civil servants lobbies and refuses to slash their privileges. It won’t be easy—even a Supreme Court justice recently wrote an op-ed saying “there are limits” to the reform.

It is worth remembering that former President Michel Temer proposed a pension reform welcomed by markets—but butchered in (and never voted on by) Congress.

The implosion of the president’s party

Accused of using dummy candidates to siphon public money during the 2018 campaign, Secretary-General of Government Gustavo Bebianno has refused to resign—goading President Jair Bolsonaro to fire him. Mr. Bebianno has exchanged verbal shots with the Bolsonaro clan, which seems determined to drag his name through the muck.

But Mr. Bebianno has warned: he will not go down without a fight. Sources in Brasília say Mr. Bebianno has threatened to reveal embarrassing—and potentially incriminating—campaign secrets.

Many have questioned why Tourism Minister Marcelo Antonio, who operated the same dummy candidate scheme at a smaller scale, has been spared. Behind the scenes, Carlos Bolsonaro—the president’s son who has been more vocal against the cabinet member—accuses Mr. Bebianno of using his position to commit influence peddling, selling “access to the president.”

If he fires Mr. Bebianno, Jair Bolsonaro could lose support from allies (who believe Mr. Bebianno is owed some gratitude for his campaign work). That could make the difficult negotiations around the pension system even tougher. But if Mr. Bebianno keeps his job, it would send a message that the president has caved after being blackmailed.

How the dummy candidate scheme works: Parties direct a big chunk of their publicly-financed electoral fund to uncompetitive candidates—who, despite getting a lot of money, were not featured in political ads.

Their campaign money instead goes to companies connected to party leaders. Over BRL 15m—from 14 parties—went to potentially phony candidates.

New names for Central Bank, securities commission

Economy Minister Paulo Guedes has chosen a new director for Brazil’s Securities Commission (CVM): Flávia Perlingeiro, who was serving as a lawyer at Brazil’s National Development Bank (BNDES). Her name, endorsed by CVM’s President Marcelo Barbosa, must first be confirmed by the Senate. Ms. Perlingeiro’s term ends in December 2023.

For the Central Bank, President Jair Bolsonaro has formalized the nomination of two new directors: João Manoel Pinho de Mello (Organization of the Financial System) and Bruno Fernandes (Monetary Policy). Soon-to-be Central Bank President Roberto Campos Neto should be confirmed by the Senate on February 26, according to the government.

What else you should know

• Energy. Brazil’s demand for energy from renewable sources—especially biofuels—is set to grow by 175% between now and 2040, according to a projection by BP. That would replace 71m tons of oil. While it may seem like a lot, the number suggests a loss of steam in the expansion of the renewable energy sector. By 2040, biofuels should account for 22% of all fuels used in Brazil.

• Human rights. For the second time this year, weekly magazine Época will publish accusations that an NGO led by Human Rights Minister Damares Alves kidnapped an indigenous child. Ms. Alves defends herself, saying her NGO was protecting children from infanticide carried out by Amazon tribes.

• Mining. The National Mining Agency votes today on a resolution to forbid “upstream dams,” such as the one Vale owned in Brumadinho—which collapsed on Jan.25 killing at least 166 people. These dams are the cheapest, most unsafe kind, where embankments, made from tailings, are piled on top of one another, creating a staircase effect moving the dam upstream. The agency also wants to enhance the list of mandatory safety items.

• Congress 1. After a rocky start, the government’s House whip Major Vitor Hugo is ready to name 15 deputy-whips in order to gather more support around himself. The congressman has been criticized for his inexperience and suffered a boycott from the government’s allies during his first week in office.

• Congress 2. A 4-party left-wing parliamentary front has named Rio de Janeiro Congressman Alessandro Molon, of the Brazilian Socialist Party, to act as the opposition leader in the House. His pick is another sign of how the Workers’ Party has got weaker in Congress—as the biggest left-wing party in the House, it would normally be able to choose someone from its own ranks to lead the opposition against Jair Bolsonaro.

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