BRASILIA (Reuters) - Brazilian congressional leaders will meet on Thursday to agree on a watered down version of an unpopular pension reform bill after the government conceded it cannot muster enough support for its proposed belt-tightening.
Brazil's benchmark stock index Bovespa .BVSP jumped, closing 2.7 percent higher on news of the renewed push to reduce the cost of the country's generous pension system. A day earlier, the index fell to a two-month low after President Michel Temer said the pension bill might not pass this year.
Congressman Arthur Maia, who is overseeing the pension bill in the lower house, said party leaders would meet to decide on a pared-back proposal that can win approval.
The government’s deputy whip in the lower house, Congressman Darcísio Perondi, said a deal was in the works in the governing coalition to come up with a “more palatable” proposal as soon as Friday, but drawing up an amended bill could take two to three weeks.
Maia told reporters Congress has a narrow window of opportunity to pass a bill to reduce a deficit that cost Brazil its investment grade credit rating, threatening a fiscal crisis in Latin America’s largest economy.
With Brazil entering an election year in 2018, Maia said the measure must clear the lower house by Dec. 15 or wait until after the general elections in October.
The amended bill will have to include a minimum age of retirement if it is to have any impact on the deficit, Maia said, adding it also must reduce generous benefits for civil servants, who retire in their early 50s with pensions more than 50 times greater than a rural worker.
The amended proposal will keep the establishment of a minimum retirement age of 65 for men and 62 for women, but other details such as required years of contributions must still be worked out, Perondi said. The average retirement age is now 55.
Perondi said the government currently has no more than 250 votes in favor of pension reform in the lower house, short of the 308 needed to amend the constitution. He said the government would seek more support in coming weeks.
The government’s economic team has been reluctant to dilute the reform bill, warning that costly pensions are the major cause of Brazil’s budget crisis.
Finance Minister Henrique Meirelles said that without major change, social security pensions could consume 80 percent of the federal budget in a few years.
Additional reporting by Lisandra Paraguassú and Marcela Ayres; Writing by Anthony Boadle; Editing by David Gregorio