Brazil Powerbrokers Squabble Over Substance of Pension Bill By Bloomberg

© Bloomberg. Paulo Guedes, Brazil

© Bloomberg. Paulo Guedes, Brazil’s economy minister, speaks during a public hearing on pension reform before the Lower House Justice and Constitution Committee in Brasilia, Brazil, on Wednesday, April 3, 2019. Guedes sparred with lawmakers over a proposed pension reform during a crucial period for the government as it works to build congressional support for the bill. Photographer: Andre Coelho/Bloomberg

(Bloomberg) — Brazil’s Lower House Speaker Rodrigo Maia defended lawmakers against government criticism of Congress’ handling of a key pension bill, as tensions between the executive and the legislature over this reform spilled out into the open once more.

“We’re going to protect this reform from crises generated by the government,” Maia told reporters in Sao Paulo on Friday afternoon. “There’s a great atmosphere for approval of this reform.”

Earlier in the day Economy Minister Paulo Guedes described the modifications proposed to the bill at a special lower house committee as a setback to the reform, accusing lawmakers of giving into pressure from civil servants. Brazil’s Congress isn’t interested in implementing a new pension system, he said.

“They showed that they aren’t committed to future generations,” Guedes told reporters in Rio de Janeiro. “The old pension system is winning.”

Maia described Guedes’ comments as “sad” and “unfair”, insisting that the savings from the measure would be “spectacular”. He added that he would strive to put the bill to a vote before the congressional recess starts in mid-July.

Guedes’ comments come one day after the rapporteur of the bill at the committee presented modifications that included scrapping plans for individual savings accounts, a point the minister has long touted. The pension reform is the centerpiece of President Jair Bolsonaro’s efforts to cut debt and get Latin America’s largest economy back on track.

Guedes’ remarks contrasted with those made earlier by Bolsonaro — who said lawmakers can modify the proposal as long as they keep most of the intended savings — and drew an immediate rebuke from the head of the lower house committee where the changes were proposed.

“Investors liked the changes, too bad Guedes didn’t,” deputy Marcelo Ramos said. The statements come at a crucial moment for bill in Congress but “won’t prevent our work on the reform,” he added.

Brazil’s real fell to an intraday low following Guedes’ remarks. In early afternoon trading, the currency was down 1.6% against the U.S. dollar. Though it recovered a little, the real was the day’s worst performer among 24 emerging market currencies tracked by Bloomberg.

Read more: Why the Future of Brazil’s Economy Rides on Pensions: QuickTake

The government’s proposed pension reform aims to save government coffers over 1 trillion reais ($256.4 billion) in 10 years by toughening access to benefits. The legislation may also help Brazil regain the investment-grade status it lost in 2015 as fiscal accounts worsened.

A general strike, called by opposition groups to protest the reform, failed to gain much traction on Friday, with only minor disruption observed in the country’s major cities.

(Retops following reaction from House Speaker Rodrigo Maia.)

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