| SAO PAULO
SAO PAULO Nov 30 Efforts by Brazilian states to
renegotiate debt with the federal government and sell off stakes
in public companies may prove too little, too late to prevent
their public pension woes sparking Brazil's next fiscal crisis,
a senior economist told Reuters.
Marcos Lisboa, who served as the Finance Ministry's chief
economist under former President Luiz Inácio Lula da Silva, said
the key to putting states' finances on a sustainable path was
root-and-branch reform of the costly public pension system.
President Michel Temer's center-right government has
promised a long overdue reform of the retirement system for
federal employees - which offers far more generous payments than
private sector plans.
However, efforts by his government to impose pension reforms
on cash-strapped state governments - in return for help in
alleviating their budget difficulties - have been rebuffed.
Lisboa said that, unless Temer could strike a deal with
governors and lawmakers, Brazil faced years of stagnant growth
and a resurgence in its fiscal woes following the 2018
presidential, state and legislative elections.
"State governments need to deal with retirement spending or
the crisis will be back with a punch later," Lisboa, the
president of São Paulo business school Insper, said in a Tuesday
Brazilian states, particularly oil-dependent Rio de Janeiro,
are struggling to fund public pensions as the worst recession in
decades hammers tax revenues.
A failure by states to plug pension gaps could force the
federal government to step in and pay their bills, a move that
would undermine efforts to curb national debt and recoup
Some states have turned to selling stakes in state-owned
utilities and other assets to fund the gap. Finance Minister
Henrique Meirelles has raised the possibility of allowing Rio de
Janeiro to issue debt backed by future oil revenues.
Lisboa warned that relying on such stop-gap measures instead
of structural reforms would be repeating mistakes that helped
drive Brazil into its current economic crisis.
"It's hard to avoid the interpretation that many want to
postpone dealing with the problems until 2019," he said,
referring to the year when new governors will take over after
federal, state and legislative elections.
While Brazil's stocks and currency have
rallied on Temer's efforts to limit federal spending, they have
yet to translate into economic growth.
Gross domestic product (GDP) shrank 2.9 percent in the third
quarter versus the year before.
Lisboa, who helped design Brazil's Bolsa Família welfare
program, said there has been an exaggeration in market optimism
"Either Brazil tackles structural issues involving states
and the federal government... or it will become a bigger version
of Rio de Janeiro," he said, referring to the Brazilian state
which declared a financial emergency in June.
(Reporting by Bruno Federowski and Luiz Guilherme Gerbelli;
Editing by Andrew Hay)