Brazil senate approves pension reform in first-round vote after savings hit

BRASILIA (Reuters) - Brazil’s Senate on Wednesday approved a landmark pension reform bill in a first round of voting, in a relief for far-right President Jair Bolsonaro, although senators voted down an amendment in a move that dilutes the reform’s projected savings.

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The bill will now pass to a second and final voting round. Senate President David Alcolumbre said the process is likely to be completed by Oct. 10, or perhaps slightly later in the month.

On Tuesday, senators had easily approved the bill’s main text but rejected a key amendment, which reduced bonus salary payments to low-paid workers, diluting the bill’s overall fiscal impact by 76 billion reais ($18 billion).

Bolsonaro on Wednesday urged senators to approve the legislation, which requires two rounds of voting in the upper house because it will change the constitution.

“Reform is necessary. If it doesn’t come, Brazil will be bankrupt in two years. Sorry, you have to approve it, there’s no alternative,” Bolsonaro said in a video on his Facebook page.

“There is no plan B ... other governments have tried to do it but failed. That’s the reality.”

Lower house Speaker Rodrigo Maia was sanguine about the cuts to the bill’s potential savings.

“The fundamental part is guaranteed, it’s approved,” he said.

Overhauling the costly social security system is Bolsonaro’s economic priority this year. Through a mix of unpopular measures such as an increase to the minimum retirement age and to workers’ pension contributions, the bill aims to save the public purse more than 900 billion reais over the next decade.

The head of Bolsonaro’s political party in the Senate, Senator Major Olimpio, warned on Tuesday that the second-round vote scheduled for next week might not take place if the government reneges on promises made to lawmakers in return for their support.

The government, central bank and many economists insist that pension reform is needed to boost confidence, investment and ultimately economic growth.

Reporting Jamie McGeever and Maria Carolina Marcello in Brasilia; Additional reporting by Pedro Fonseca in Rio de Janeiro; Editing by David Goodman and Alistair Bell