Brazil`s Government Workers` Pension Plan Reform a Big Bet

Brazilian President Luiz Inacio Lula da Silva, who has been pushing ahead with reform as if sailing with winds based on popular support, is currently facing adverse weather conditions.

Hundreds of thousands of government employees opposed to pension reform, at the very heart of finance reform, and which President Lula is trying to push through, gathered for protests on Wednesday in Brasilia, the nation`s capital. On the same day, President Lula met Argentine President Nestor Kirchner, who took office as President last month, but a somber mood could be felt all around.

The International Monetary Fund and western economic research institutions have been urging Brazil, currently facing a critical mass due to its accumulated deficit, to reform the pension system.

The pension plan for government workers is in a very precarious situation. Retired public servants have been paid 100% of what they were paid during their tenure in office. Even though those in power such as judges, prosecutors, officers and professors at national universities get that 100% back after retirement, and receive considerably more than others.

Moreover, even if a person on pension dies, the wife continuously receives pension benefits. If the wife passes away, the children get the pension benefits instead. Because of this system, the size of the budget deficit related to social security in Brazil was about 24 billion dollars last year, foreign media sources reported.

In order to reform it, President Lula is trying to revise pension acts soon so the retirement age of government employees can be extended and monthly payment of the pension plan can be increased. If the pension acts are changed accordingly, the government can fill up on the deficit of 1.35 billion dollars annually.

Left wingers in Brazil`s ruling Workers` Party of which President Lula belongs and the government workers` labor union are accusing him for the first time since his presidential inauguration that “such reform will cause public servants and poor people to suffer while western speculative capital will dominate the country."

However the leadership of the Workers` Party is showing their support to the President. “The basic spirit of reform will never change. It has been speculated that there will be a serious power struggle when the bill is passed this month,” they said.

Ki-Tae Kwon kkt@donga.com