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  #261  
Old 02-13-2018, 05:30 PM
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UNITED KINGDOM

https://www.rt.com/uk/418579-state-p...veloped-world/

Quote:
Britain pays out the worst state pension in the developed world
Spoiler:
The UK pays retirees the worst state pension of any country in the developed world, official figures show, as Brits currently under the age of 30 are warned they could have to wait until they’re 70 to receive anything at all.
The basic payout of £122.30 a week in Britain is the least generous in the West — worth just 29 percent of average earnings, according to the latest figures from the Organisation for Economic Co-operation and Development (OECD).

The report shows that in Poland the state pension is equivalent to 39 percent of average earnings, while Germany and France offer 51 percent and 75 percent respectively.

Read more
Job centre, UK. © Chris Winter / Global Look PressUniversal Discredit: How Britain’s welfare system is actually plunging people further into poverty
The Netherlands, Portugal, Italy and Austria all pay state pensions equivalent to more than 90 percent of average earnings. In Mexico, an emerging rather than developed economy, pensioners receive 29.6 percent of average earnings from the state.

The Government Actuary’s Department has projected that unless action is taken the state pension fund will run out in 2035 thanks to the strain caused by Britain’s ageing population.

It has also predicted that the state pension age will reach 70 by the end of the 2050s, and 71 by the end of the 2060s, affecting those in the UK currently under the age of 30.

Malcolm McLean, of retirement specialists Barnett Waddingham, told the Express the qualifying age could rise even more. “It wouldn’t surprise me to see the age go up to 70 before 2050 and conceivably reach 80 or even 85 by the end of the century.”

Former pensions minister Ros Altmann has also warned the situation could get even worse. Altmann told the Telegraph: “Despite the UK offering the lowest state pension in the developed world, the costs have not yet been brought under control. Policymakers face difficult decisions and are likely to need to increase the state pension age further.”

She added that with an ageing population and the decline in generous, final-salary type pension schemes, the UK “faces rising risks of old-age poverty.”

“Beyond the 2030s, the new state pension will be lower than the old system for most people. The lowest paid, predominantly women, will lose out significantly,” she said.


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  #262  
Old 02-20-2018, 03:34 PM
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BRAZIL

https://www.reuters.com/article/us-b...-idUSKCN1G31VQ

Quote:
Brazil government acknowledges pension bill going nowhere

Spoiler:
BRASILIA (Reuters) - Brazil’s political affairs minister Carlos Marun said on Monday that passage of a bill to overhaul the country’s costly social security system has effectively ground to a halt in Congress and would become a campaign issue in this year’s election.

FILE PHOTO: Armed Forces members patrol in Jacarezinho slum during an operation against drug gangs in Rio de Janeiro, Brazil January 18, 2018. REUTERS/Ricardo Moraes/File photo
Marun spoke to reporters after the head of the Senate, Eunicio Oliveira, said the federal government’s military intervention in Rio de Janeiro would, by the rules of the country’s constitution, block any vote on pension reform or any other measure requiring a constitutional amendment.

But Marun acknowledged what President Michel Temer’s critics believe is the real reason for holding up a pension vote: the unpopular bill never gained enough support and the government faced certain defeat.

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“We don’t have the votes. I couldn’t guarantee we would have the votes by the end of February,” he said. That was the government’s deadline for passing the bill before lawmakers turned their attention to securing their seats in the October general election.

Pension reform is the cornerstone policy in Temer’s efforts to bring a bulging budget deficit under control. Generous pension benefits and early retirement have turned social security into the main driver of a deficit that cost Brazil its investment grade.

Marun, the cabinet minister charged with mobilizing coalition support in Congress, said pension reform would become a key issue in the election campaign if Congress did not take it up again.

The legislation to streamline social security, which required amending the constitution, was lined up for a first vote in the lower house of Congress this week.

But on Friday the government ordered the army to take over command of police forces in Rio de Janeiro state in a bid to curb violence driven by drug gangs, an intervention that blocks any constitutional changes during its duration.

Temer decreed the Rio intervention through Dec. 31, his last day in office.


https://www.reuters.com/article/braz...-idUSE6N1JU01F

Quote:
Brazil's Senate head says Rio military intervention blocks pension vote
Spoiler:
BRASILIA, Feb 19 (Reuters) - Eunicio Oliveira, the head of Brazil’s Senate, said on Monday that the federal government’s military intervention in Rio de Janeiro would, by the rules of the country’s constitution, block any vote on pension reform or any other measure requiring a constitutional amendment.

President Michel Temer last week ordered Brazil’s army to take command of all security forces in violent Rio de Janeiro state. Temer argued that he could “lift” that decree for a few hours to allow congress to vote on pension reform. Oliveira disagreed, saying no vote would go forward. Temer is counting on pension reform to bring the deficit under control. (Reporting by Mateus Maia; Editing by Alistair Bell)


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  #263  
Old 02-23-2018, 05:55 PM
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BRAZIL

https://www.ai-cio.com/news/brazil-d...-intervention/

Quote:
Brazil Drops Pension Reform in Favor of Military Intervention
Moody’s determines measure 'credit negative.'


Spoiler:
After nearly a year of assuring its citizens that a pension reform was imminent, Brazil has pulled the plug on its controversial bill, citing the recent military actions in Rio de Janeiro and a lack of Congressional support.

While the first vote on the reforms was set to take place in the Congressional Lower House this week, a wave of violent crime in Rio de Janeiro linked to drug gangs caused President Michel Temer to call for military intervention. In response, Senate leader Enunicio Oliviera said Monday that the pension reform and any other constitutional amendment-related measures would be blocked while this policy is in effect, as it is part of the constitutional rules.

The intervention will occur until Temer’s last day in office on December 31.

In addition, political affairs minister Carlos Marun agreed Monday that the controversial bill is indeed stuck in its tracks. Marun told reporters that the bill never had enough traction to begin with.

“We don’t have the votes. I couldn’t guarantee we would have the votes by the end of February,” he said.

Although polls show that he is one of the most unpopular presidents in recent history, Temer pushed his pension reform package as the centerpiece of his agenda. The reform looked to raise the country’s retirement and social security collection ages as a means to cut its budget.

Upon dropping its pursuit of the reforms, Reuters reports that Moody’s Investors Service sent a note to clients Tuesday where it dubbed Temer’s decision a “credit negative” for Brazil.

“While we already expected that a major pension reform was unlikely, ditching off the plans to pursue its approval is a credit-negative development that will severely restrict the authorities’ ability to comply with the government spending ceiling in the coming years,” the note said.

Marun noted that if Congress did not again take up the pension predicament, the reform would become a key topic in this year’s elections.


https://www.reuters.com/article/us-b...KCN1G31VQ?il=0

Quote:
Brazil government acknowledges pension bill going nowhere

Spoiler:
BRASILIA (Reuters) - Brazil’s political affairs minister Carlos Marun said on Monday that passage of a bill to overhaul the country’s costly social security system has effectively ground to a halt in Congress and would become a campaign issue in this year’s election.

FILE PHOTO: Armed Forces members patrol in Jacarezinho slum during an operation against drug gangs in Rio de Janeiro, Brazil January 18, 2018. REUTERS/Ricardo Moraes/File photo
Marun spoke to reporters after the head of the Senate, Eunicio Oliveira, said the federal government’s military intervention in Rio de Janeiro would, by the rules of the country’s constitution, block any vote on pension reform or any other measure requiring a constitutional amendment.

But Marun acknowledged what President Michel Temer’s critics believe is the real reason for holding up a pension vote: the unpopular bill never gained enough support and the government faced certain defeat.


“We don’t have the votes. I couldn’t guarantee we would have the votes by the end of February,” he said. That was the government’s deadline for passing the bill before lawmakers turned their attention to securing their seats in the October general election.

Pension reform is the cornerstone policy in Temer’s efforts to bring a bulging budget deficit under control. Generous pension benefits and early retirement have turned social security into the main driver of a deficit that cost Brazil its investment grade.

Marun, the cabinet minister charged with mobilizing coalition support in Congress, said pension reform would become a key issue in the election campaign if Congress did not take it up again.

The legislation to streamline social security, which required amending the constitution, was lined up for a first vote in the lower house of Congress this week.

But on Friday the government ordered the army to take over command of police forces in Rio de Janeiro state in a bid to curb violence driven by drug gangs, an intervention that blocks any constitutional changes during its duration.

Temer decreed the Rio intervention through Dec. 31, his last day in office.

Reporting by Lisandra Paraguassú and Mateus Maia; Writing by Anthony Boadle; Editing by Paul Simao and Marguerita Choy


https://www.reuters.com/article/braz...-idUSS0N1M005G
Quote:
Brazil's move to ditch pension reform effort "credit negative" - Moody's

Spoiler:
BRASILIA, Feb 20 (Reuters) - Moody’s Investors Service said the Brazilian government’s decision to drop its efforts to seek approval of the pension reform proposal in Congress was credit negative.

“While we already expected that a major pension reform was unlikely, ditching off the plans to pursue its approval is a credit negative development that will severely restrict the authorities’ ability to comply with the government spending ceiling in the coming years,” the credit rating agency said on Tuesday in a note to clients. (Reporting by Anthony Boadle Editing by Chizu Nomiyama)


https://www.voanews.com/a/president-...m/4263528.html

Quote:
Temer's Failure on Brazil Pension Reform Leaves Tricky Task to Successor

Spoiler:
President Michel Temer's decision to throw in the towel on reforming Brazil's loss-making pension system leaves the unpopular measure as a campaign issue for October's elections and a major headache for his successor.

Monday's announcement that Temer was abandoning an overhaul of the social security system — billed as the centerpiece of his efforts at fiscal reform — sparked immediate concern from credit rating agencies that Latin America's largest economy was failing to put its financial house in order.

Brazil's generous pension system is at the heart of budget deficit that ballooned from 3 percent of GDP in 2013 to a massive 10 percent in 2015, before edging back to 8 percent last year as the $1.8 trillion economy emerged from recession.

The official reason for dropping the pension bill was a military intervention in crime-plagued Rio de Janeiro state, decreed on Friday after unprecedented violence during Carnival.

Constitutional amendments such as the pension bill are blocked during federal intervention of a state.

Deploying the army in Rio will go down well with voters in a nation where polls show public safety is the top concern. Brazil has 60,000 murders a year and its cities are among the world's most dangerous.

FILE - A soldier stands in guard on a street, before a meeting with Brazil's President Michel Temer and local authorities about the implementation of a decree that has placed the military in charge of Rio's state security, at the Guanabara palace in Rio de Janeiro.
FILE - A soldier stands in guard on a street, before a meeting with Brazil's President Michel Temer and local authorities about the implementation of a decree that has placed the military in charge of Rio's state security, at the Guanabara palace in Rio de Janeiro.
Temer's critics, however, said he merely found a pretext to avoid acknowledging an embarrassing defeat.

While Temer, 77, came close to the super majority needed to pass the bill last year, he lost political capital fighting off corruption charges and the government soon discovered it had run out of time, as lawmakers seeking re-election this year refused to back the unpopular legislation.

"Now the government does not have to admit it lost the battle for pension reform," said Fabio Sousa, a congressman for the centrist Brazilian Social Democratic Party, which backed the reform.

"The next president will have to do the fiscal adjustment, which is fine, because he will have a mandate from voters to do something about it," Sousa said in an interview. "The good thing is that pension reform will now be an election campaign issue."

Markets relaxed

Temer, a former vice president, replaced impeached leftist Dilma Rousseff in 2016. But he has single-digit approval ratings that rule out a presidential bid of his own.

Brazilian markets were stable Tuesday, with Sao Paulo's BOVESPA stock index gaining 1.2 percent in mid-afternoon as investors had largely expected an already watered-down pension reform to sink in Congress.

In an effort to reassure investors, Temer's cabinet on Monday announced plans to accelerate 15 other policies — ranging from tax breaks to privatizing Brazil's largest utility and strengthening the central bank's autonomy.

Yet Moody's Investors Service promptly warned on Tuesday that the government's pension decision was credit negative and would restrict its ability to comply with a spending ceiling approved last year.

The government is expected to meet its 2018 deficit target but it is doubtful it can do so in 2019, as a sluggish recovery from Brazil's worst recession on record has left tax revenues struggling.

According to the main industry lobby, the CNI, the reform would have saved government coffers about 1 trillion reais ($308 billion) over the next decade.

Brazil's gross public debt already stands at 4.9 trillion reais ($1.5 trillion) or 75 percent of GDP — relatively high for an emerging economy. Without steps to reduce heavy mandatory spending, it will continue climbing, said Felipe Salto, head of the Independent Fiscal Institute, a bipartisan Senate office that aims at transparency in government accounts.

Government projections have the debt stabilizing in 2020 at 80 percent of GDP, but without pension reform that is in doubt.

"You have to show investors it will stabilize. If there is no horizon of stabilization, the market will see a risk of insolvency and higher interest rates will be needed to finance a snowballing debt," Salto said.


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  #264  
Old 02-26-2018, 06:44 AM
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BRAZIL

https://www.nytimes.com/2018/02/25/w...hel-temer.html

Quote:
Retire at 55? In Brazil, It’s the Norm. But
Can the Good Times Last?

Spoiler:
SÃO PAULO, Brazil — In much of the world, workers would find it hard to imagine
being able to retire at 55, earning 70 percent of their final salary for the rest of their
lives.

But in Brazil, that has been the norm for decades, which helps explain the
abundance of silver-haired joggers along Copacabana Beach in Rio de Janeiro at 11
a.m. on a recent weekday.

It also accounts for about a third of all government spending in Brazil, and
contributed to a record budget deficit in 2016.

Analysts and politicians across the political spectrum have long recognized that
the pension system is unsustainable and a major factor in the country’s continuing
economic struggles.

“Brazil has one of the most generous systems in the world,” said Chris Garman,
managing director of the Americas for the Eurasia Group, a political risk
consultancy. But without a pension overhaul, he added, “Brazil is heading for
insolvency and debt crisis.”

A jarring reminder of that came last month when Standard & Poor’s downgraded the
credit rating of Brazil, Latin America’s largest economy, sending it even further into
so-called junk territory, or below investment grade. The downgrade came amid
dimming hopes that Brazil’s Congress would reform the country’s social security
system during this election year.

It turns out the ratings agency was right. President Michel Temer and Congress
have now officially given up on trying to pass any pension legislation — handing off
the problem until after the October election.

On Friday, Fitch Ratings followed suit, also cutting Brazil’s credit rating.

Mr. Temer had vowed that pension reform would be one of his signature
achievements when he was sworn in after the impeachment of President Dilma
Rousseff in 2016. But instead of enacting what he had billed as a business-friendly
agenda, his presidency has been notable for its turbulence and scandals.

The Temer administration worked with Congress to create pension overhaul
legislation for both public- and private-sector workers that, among other changes,
would set the minimum retirement age at 65 for men and 62 for women. Currently,
there is no minimum retirement age.

Mr. Temer sought to build support for the proposal with a simple, bleak warning
plastered across government websites and promoted in a social media campaign:
“Everyone for social security reform so Brazil doesn’t go bankrupt.”

But despite Mr. Temer’s stated determination, a decision he made this month
effectively blocked any further movement on the pension proposal. He signed a
decree to put the military in charge of security in Rio de Janeiro to rein in violent
crime, and under Brazil’s Constitution, lawmakers are barred from making broad
legal changes during any military intervention.

Mr. Temer initially insisted the pension overhaul could still be voted on by
temporarily lifting the security decree. But the dire warning about bankruptcy
disappeared from government websites this past week, and both the president of the
Senate, Eunício Oliveira, and the political affairs minister, Carlos Marun, have since
said the bill has been shelved.

“After debating and consulting with judges from the Supreme Court, the
conclusion is that the reform is suspended as a result of the decree for intervention,”
Mr. Marun told journalists last week.

The court’s opinion was not the only factor. Mr. Marun conceded that “we don’t
have the votes to approve the reform — I couldn’t guarantee the government that we
would have them by the end of February.”

Even some of Mr. Temer’s supporters said that the president had issued the
security decree, in part, to avoid an embarrassing loss in Congress.

“It was an excuse to avoid the vote — the nail in the coffin of pension reform,”
said Congressman Alex Canziani, a member of the governing coalition.

The timing of the pension debate could hardly have been worse for supporters of
an overhaul. With elections in the fall, few lawmakers are willing to tell voters they
will have to work longer and then get less money in their golden years.

Selling that message to the electorate is especially hard given how unpopular the
country’s political elite has become amid an avalanche of corruption scandals and
growing scrutiny of the high salaries and generous perks that lawmakers and other
federal employees enjoy.

“It doesn’t fly when voters are angry at politicians,” Mr. Garman, the political
consultant, said. Voter reaction, he added, has been one of outrage: “‘You’re stealing
from us and now you expect us to work more?’”

Elisabete Lopes Santos, 57 and retired, agrees. “Everyone contributed to the
pension system — how could it be broke? The money was siphoned off,” she said.
Brazilians have taken to the streets to vent their anger, not only in protests and
strikes, but also in Carnival parades. Union groups in São Paulo put the following
words to a catchy samba beat: “Mr. Congressman, Mr. Senator, beware, look at the
rebellion. If you vote for Temer’s reform, you won’t be back!”

On average, men in Brazil retire at 56 and women at 53, according to the
Organization for Economic Cooperation and Development, which concluded that the
system was unsustainable.

The longer someone works, the more they earn in retirement. Retirees receive
an average of 70 percent of their pre-retirement salary, and the amount is indexed to
a constantly climbing minimum wage. When pension recipients die, widows and
widowers may inherit the full pension of their spouse and add it to their own.
Pension spending in Brazil rose to 8.2 percent of gross domestic product in 2016
from 4.6 percent in 2014. Brazil’s population is comparatively young compared to
the global median, and pension spending could soar to 17 percent of its G.D.P. by
2060 if the rules remain unchanged.

The Chamber of Deputies, the lower house of Congress, repeatedly watered
down the extent of the proposed changes and delayed a vote in hopes that more
political factions would come onboard. But the latest tallies show the government is
still at least 40 votes short of the two-thirds majority needed for approval.

The bill appeared to be gathering momentum until May, when Mr. Temer was
implicated in the broadening corruption scandal and charged in two criminal cases.

Getting allies in Congress to block the cases from moving forward exhausted much of
Mr. Temer’s political capital, significantly setting back his broader agenda.

After postponing a pension vote in December, the government switched tactics,
with a new campaign focusing on inequities in the system and targeting big earners
in the public sector.

“Pension reform is aimed at combating privileges,” Mr. Temer said, pointing to
the benefits politicians and high-level civil servants get. “What the reform does is
protect the poor who pay for those who earn a lot in the public sector.”
Mr. Temer was perhaps not the ideal figure to champion that message. The
president has been collecting a pension for more than two decades, having retired as
a state prosecutor at 55, which has significantly padded his earnings as an elected
official.

But regardless of the president’s own pension history, the government tried to
tap into the widespread anger and frustration over inequality in Brazil, pointing out
that the pensions of the well-off have been subsidized largely by the working poor.
Pension distribution is highly unequal, according to the World Bank, with 35
percent of pension subsidies — the part of the pension that isn’t accrued worker
contributions — paid out to the richest 20 percent. The poorest 20 percent receive
just 4 percent of pension subsidies.

“I know there won’t be enough money to cover my retirement if the government
doesn’t do something,” said Edmilson Santos, a 28-year-old Uber driver. “But I don’t
have any faith that they won’t just keep helping the same politicians and public
workers that have always benefited.”
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  #265  
Old 03-02-2018, 10:26 AM
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BRAZIL

http://www.americasquarterly.org/con...reform-failure

Quote:
The Real Cost of Brazil President Michel Temer’s Pension Reform Failure

Spoiler:
The rules of the game of chicken are simple, and its stakes are high: two cars accelerate toward each other, and the first one to swerve loses. Do nothing, and both players end up in a fiery collision that threatens bystanders. Brazil’s executive and legislative are playing this game, without a failsafe. Brazilians could be the ones who suffer if the game ends in disaster.

Many countries face looming crises in this sector, but Brazil’s situation is unique: its combination of a rapidly aging population, extremely generous pensions and a low minimum retirement age is unmatched in middle-income countries. Under the current pension system in Brazil, for example, the average retirement age of individuals who pay into the system is 55 years old; women who began to contribute as 15-year-olds can retire at 45. These lax rules are, in part, responsible for a public pension system that comprises more than 50 percent of all federal expenditures, once you discount transfers to the states, crowding out other public services, according to the authors’ calculation using government data. Its payouts are triple what they were thirty years ago (see the graph below) and are expected to accelerate further. We estimate that under current conditions, pension expenditures will rise more than 3 percent per year in real terms.

In the terms of the game of chicken, given current conditions, the crash is unavoidable.

Figure 1 – Federal government expenditures on public pension as percent of GDP.

Source: Authors’ estimates based on data from various government sources.

This situation has been building for years. The last two reforms were under Presidents Fernando Henrique Cardoso, in 1998, and Luiz Inácio Lula da Silva, in 2003, but neither tackled the minimum age requirement. President Dilma Rousseff ignored the subject, and hired more public employees. In 2016, when President Michel Temer assumed the presidency in the wake of Rousseff’s impeachment, Brazil was mired in the deepest recession in modern history. The population was hurting; per capita GDP shrunk by 8 percent between 2015 and 2016, and the country faced a record public deficit.

Temer promised to pursue a business-friendly agenda. Reforming the pension system would be the capstone of his short tenure in office. He started by pursuing incremental reform to curb the rising deficit. His administration’s first significant piece of legislation was aimed at reforming the labor legislation. Later, came Lei do Teto (The Law of the Ceiling, meaning an expenditure ceiling). Under this hard budget cap, the federal government expenses cannot rise in real terms, after taking into account inflation, for the next 9 years, at least.

Temer’s strategy was clear. A hard budget cap would work as a commitment device to force pension reform through an unwillingly Congress and past the lobby of special interest groups, especially the powerful judiciary, which benefits the most from ridiculously generous pension promises. With the cap, there is no way out – Brazil either embraces reform or faces chaos.

And so, Brazil’s current game of chicken was set up. If nothing changes, we estimate that the federal budget for expenditures beyond payroll and Social Security payment would have to shrink by almost 20 percent (in real terms) through 2026. The math is simple: given that the budget cannot increase in real terms and that pensions, which already account for half of the budget, will increase by 3 percent a year, then other spending has to decline. Health and education are protected by the new cap rules but everything else would be fair game. Brazilian society will not accept this. Our conclusion: If nothing changes, the current budget structure would eventually collapse, likely by 2022.

This should be the moment to act. Indeed, Temer’s administration had worked out a plan with Congress that would revamp the private and public pension system by, among other measures, establishing a minimum retirement age of 65 for men, and 62 for women. Brazil’s economy is finally recovering from the deepest recession in modern history. During 2018, analysts expect the Brazilian economy to grow 2.8 percent, and inflation to be around its target, at 3.8 percent. Failure to pass pension reform could impact this, creating uncertainty and making any sustained recovery over the next few years much harder.

The only other option, getting rid of the hard cap, can postpone the collapse but doing so will result in either a deep recession or a spike in inflation. After all, expectations matter to macroeconomic outcomes. Backtracking on the newly-minted cap rule will make real interest rates increase and investments shrink. Brazil has already one of the highest interest rates in the world, with lending rates up to 50 percent; aggregate investments are relatively small in relation to GDP, at around 15 percent. Either the Central Bank will respond by trying to force interest rates down, accelerating inflation, or it will sit passively and watch another bout of recession and unemployment, currently at around 12 percent.

And yet, here we are, dancing on the edge. After taking a step in the right direction for the economy, President Temer’s government lost its drive, diverted by many scandals. Survival cost him much of his political capital, leaving very little for pension reform.

So, what are the potential outcomes of Brazil’s current quandary? This is the best scenario: a pension reform plan sails through Congress and the Senate and the economy continues to recover. Whoever wins the presidential election in 2019 continues to reform the Brazilian economic system, tackling the cumbersome tax code, opening the economy (it has the lowest ratio of export and import to GDP in the world), cutting red tape that makes Brazil one of the most challenging places to do business, and more.

Recently, the federal government decided for a military intervention in the state of Rio de Janeiro, which has been experiencing a surge in violence and where 1 percent of all murders in the world take place. This prevents the constitutional change that would be necessary for pension reform. Elections are in October, and the current lame duck president can at best pass a half-decent reform before stumbling to the finish line. Meanwhile, Brazil’s debt has been downgraded further into junk territory.

Given that scenario in Brazil’s current game of chicken, what will happen as that 18-wheeler loaded with burgeoning public pension costs continues to pick up speed, with no reform in sight? The government – that is, the millions of Brazilians who depend on it – will suffer.

The conclusion is unmistakable: pension reform is essential, particularly under Brazil’s hard budget cap. But all is well that ends well, the saying goes. Much hope hangs on the October presidential elections. Hopefully, we don’t get turned into chicken soup.

--

Rodrigo Zeidan is a business and finance professor at New York University in Shanghai and Fundação Dom Cabral.

Fabio Giambiagi, chief economist at Brazil's National Development Bank (BNDES), is also a columnist and author of 25 books about Brazil's economy, including four about the pension system.


https://www.reuters.com/article/us-b...-idUSKCN1GC1YB

Quote:
OECD sees Brazil pension reform as urgent litmus test

Spoiler:
BRASILIA (Reuters) - Pension reform will be the“litmus” test of Brazil’s ability to bring its fiscal deficits under control and avoid unsustainable growth of its already high public debt, the Organization for Economic Cooperation and Development (OECD) said on Wednesday.

Jose Angel Gurria, Secretary-General of the Organisation for Economic Co-operation and Development (OCDE), speaks during the presentation of a new OECD Economic Survey of Brazil, in Brasilia, Brazil February 28, 2018. REUTERS/Ueslei Marcelino
In its annual survey of the Brazilian economy, the OECD said the streamlining of Brazil’s generous social security system was urgent because it costs 12 percent of GDP.

“Aligning Brazil’s pension rules with those practiced in OECD countries would imply a minimum pension lower than the minimum wage, with eligibility to some prorated pensions for shorter periods,” the survey said.

Brazil’s President Michel Temer failed to muster enough support for his pension reform proposal this month and it has been put off until after the October elections and will likely be left for the next government to deal with.


“Brazil is back on a positive growth path, but there is no time for complacency,” OECD Secretary-General Angel Gurría, said, presenting the survey in Brasilia.

Brazil needs more investment, higher productivity and greater integration into the global economy, for which it must continue on the reform path to ensure the sustainability of its fiscal accounts, Gurría said.

The OECD report warned that if Brazil fails to reduce mandatory public spending and the government’s primary deficit is not turned to a surplus, the country’s debt relative to GDP“will continue to rise without bounds and not be sustainable.”

Failure to comply with a spending cap introduced by the Temer administration, which limits real growth in public spending to the rate of inflation for 20 years, would undermine confidence in Brazil and trigger a return to recession.

“Successful implementation of the pension reform, without which the expenditure rule cannot be met in the medium term, will be a litmus test for the ability of the authorities to implement further structural reforms,” the survey said.

Gurría said Brazil was the best placed of the six countries seeking to join the 35-member Paris-based OECD. The others applying are Argentina, Bulgaria, Croatia, Peru and Romania.

Business lobbies, such as the International Chamber of Commerce, back Brazil’s accession because it will spur the country to improve its tax system and become more competitive.

The OECD sees the Brazilian economy growing by 2.2 percent this year and 2.4 percent in 2019, a lower forecast for next year than the government’s projection of 3 percent.

As Brazil puts its worst recession in decades behind it, inflation will creep up to 4.2 this year and next, from 3.9 last year, the OECD estimates.

Gross public debt, assuming that the current fiscal reform plan will advance, will rise to 77.1 percent of GDP this year and to 81.1 percent in 2019, according to the OECD’s forecast.

Reporting by Anthony Boadle; editing by Nick Zieminski and Jonathan Oatis


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Old 03-13-2018, 11:06 AM
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PHILIPPINES

https://www.bloomberg.com/news/artic...r-yield-abroad

Quote:
Duterte Pension Boost Sends State Fund Hunting for Yield Abroad
By
March 12, 2018, 6:00 PM EDT
SSS may invest overseas for first time, buy more local stocks
Fund to hire eight local asset managers to help boost returns
Spoiler:
The Philippine state-run pension fund for private sector workers will invest overseas for the first time and buy more local stocks to boost returns after President Rodrigo Duterte delivered on a campaign pledge to increase pensions.

The 500 billion peso ($9.6 billion) Social Security System may invest as much as 37.5 billion pesos abroad, the fund’s President Emmanuel Dooc said in an interview. SSS, which covers 36 million workers, may also buy up to 35 billion pesos more of Philippine stocks, adding to a 100 billion peso equities portfolio that is overweight utilities, he said.

“We want better returns,” Dooc said. “We also don’t want to put all our eggs in one market.”

The Philippines joins a global trend of pension funds struggling to meet their commitments as longevity increases and investment returns dwindle -- which the World Economic Forum in June said will lead to a $400 trillion shortfall in retirement savings globally.

Duterte’s boost to pensions will cause SSS to run out of money by 2032, 10 years sooner than forecast, while a proposal to nearly double maternity leave entitlements could add a further 5 billion pesos to the fund’s annual payments, Dooc said.


Dooc said that while he supports Duterte’s initiatives “it has to be done in such a way that it will not deplete the fund.” He said he hopes lawmakers will this year amend the fund’s charter to give it greater independence in making decisions, including raising member contributions.

SSS also needs more flexibility in investing, he said. Currently, it can hold 40 percent of funds in Philippine government bonds, 30 percent in local stocks and 10 percent in loans to members. It is authorized to invest 7.5 percent overseas, but hasn’t previously done so.

Dooc also wants to offer more member loans but is near the ceiling. About 23 percent of the fund is invested in stocks, giving room to buy more equities.

The fund generated a 6.7 percent return last year, and placing some of its portfolio overseas will hopefully reap higher yields, he said. The benchmark Philippine stock index has fallen 1.2 percent this year after rising 25 percent in 2017.

SSS also plans to hire as many as eight domestic fund managers to each manage 1 billion pesos of stocks, fixed income or a mix of both, Dooc said.


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Old 03-13-2018, 11:07 AM
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https://www.brookings.edu/research/t...latin-america/

Quote:
The troubled state of pension systems in Latin America

A quarter of a century since Chilean-style pension reforms swept Latin America, the state of the region’s pension systems is worrisome. Old and new problems are increasingly rearing their ugly heads, some setting off serious alarms, all posing thorny political and technical challenges. Pension issues have therefore once again taken center stage in the policy debate. This paper provides a bird’s eye view of the quilt-like landscape of contributory pensions systems left in the wake of the 1990s reforms and of the rise of non-contributory “social” pensions in the 2000s. It then documents and analyzes the key problems ailing different pension arrangements, including the threat to fiscal sustainability posed by over-extended and typically inequitable pay-as-you-go defined-benefit (PAYGDB) systems, the root causes of the underperformance of fully-funded-defined-contribution (FF-DC) systems, and the issues involved in the mushrooming of non-contributory social pensions. The paper concludes by outlining policy prescriptions.

https://www.brookings.edu/wp-content...olph_20182.pdf
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Old 03-18-2018, 11:53 AM
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SPAIN

https://www.usnews.com/news/business...d-pension-hike

Quote:
Retirees Protest Across Spain to Demand a Pension Hike
Tens of thousands of elderly Spaniards rallied in protests across the country Saturday to ask for an increase in public pension payouts for retirees.


Spoiler:
MADRID (AP) — TENS OF thousands of elderly Spaniards rallied across the country Saturday to demand an increase in public pension payouts.

Unions and retiree groups called for protests in over 100 cities and towns across Spain to demand that pension payouts rise in line with inflation. Many pensioners complain that the government's 0.25 percent increase in 2017 is insufficient.

Protestors braved rain and cold weather in Madrid to march behind a banner saying "Protect Pensions in the Constitution."

Thousands also marched through Barcelona and most other major cities in Spain.

"The cost of life is going up and the pensions are only increasing by 0.25 percent. So the pension is not enough," 70-year-old retired cook Antonia Marroqui said in Barcelona. "Before I paid 150 euros ($184) in electricity. Now I pay 200 ($246). So, it is not enough to get by until the end of the month."

Experts have warned about the future of Spain's pension system as the population ages, with fewer workers contributing to the national pension fund as the number of retirees rises.

This is the second wave of protests for better pensions in recent weeks in Spain, putting pressure on the conservative government of Prime Minister Mariano Rajoy.

The government says 139 billion euros ($171 billion) , or 29 percent of total public spending, was paid last year in state pensions.


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Old 03-22-2018, 02:19 PM
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CHINA

https://www.reuters.com/article/us-c...-idUSKBN1GX0LB

Quote:
Global fund managers eye trillion dollar pension business in China
Spoiler:
HANGHAI (Reuters) - Global asset managers are lobbying Beijing to offer tax benefits and other incentives to entice China’s aging population to invest in mutual funds for their retirement, as funds eye a multi-trillion dollar opportunity in commercial pensions.

FILE PHOTO: A resident is pictured at a park on a sunny winter day in central Beijing, China, December 1, 2016. REUTERS/Jason Lee/File Photo
Their hopes for a bigger role in China’s pension market and its reform process received a boost this month when regulators published guidelines for the introduction of Western-style pension target funds.

Although such fund-of-fund (FoF) pension products are popular in mature markets like the United States, they will have a hard time getting off the ground in China without supportive policies that are now lacking, such as preferable tax treatment, fund managers say.

“The guideline is a very important piece of China’s entire pension reform jigsaw ... but tax benefits - another eagerly anticipated reform measure - have not come out yet,” said Calvin Chiu, Asia head of pension development at Manulife (MFC.TO), the Canadian financial services group.

Manulife is sharing its expertise with Chinese regulators through a pension committee under the China Securities Regulatory Commission (CSRC), hoping that the government will eventually grant tax benefits to a broad range of investment products, Chiu said.

But he conceded that desired policy changes could be slow, as China’s pension reform involves coordination between several government agencies.

Nevertheless, fund managers are racing to be the first to roll out pension target funds in China. They include the Chinese mutual fund ventures of Manulife, Blackrock, BNP Paribas (BNPP.PA) and Eurizon Capital SGR.

PENSION REFORM
Unlike in markets such as the United States, where the burden of social security is shared between the government, employers and individuals in a three-pillar system, China’s pension coverage is heavily reliant on state funding.


To meet the challenges of a rapidly-aging population, Beijing kicked off a program in February to build a commercial private pension market that gives individuals more responsibility for their old-age protection, though it has not announced a timeframe for implementation.

“The commercial pension business will be a huge opportunity for asset managers,” said Ivan Shi, head of research at Z-Ben Advisors, predicting the business could account for 40 percent of China’s total mutual fund assets in 10 years, reaching $4.8 trillion.

Such optimism sounds outlandish for a market that has not yet taken root, but is not baseless.

In the U.S. pension market, 48 percent of assets in Individual Retirement Accounts (IRAs), or $4.1 trillion, was invested in mutual funds in 2017, according to the Investment Company Institute (ICI).

FILE PHOTO: A man performs a split as he practices Kung Fu at Beihai Park in Beijing, China August 20, 2017. REUTERS/Stringer/File Photo
PLENTY OF HURDLES
But obstacles abound.

Mutual fund managers are competing for a place in China’s commercial pension program with insurers, who are also lobbying for tax benefits.

“It remains to be seen how the commercial pension program will be designed ... and which kinds of financial institutions can participate,” Shi said.

Another daunting challenge is the need to build a new distribution channel, and educate China’s often fickle fund investors on the need for retirement planning.

Manulife Financial Corp
24.35
MFC.TOTORONTO STOCK EXCHANGE
-0.30(-1.22%)
MFC.TO
MFC.TOBNPP.PA
Ren Cheng, founder of Fidelity Freedom Funds, and nicknamed father of target date funds (TDF) - the popular pension tool in the United States - said the right policies are key to underpinning investments that could span over decades.

“It’s a huge, huge mistake to treat retirement protection as an investment issue,” the Boston-based senior consultant at Fidelity Investments said during a recent trip to China, where he advises securities regulators on pension market development.

“Rather, it’s about setting up a legal framework and mechanism to address weakness in human nature, such as inertia, and short-sightedness,” he said, adding that trial and error in the U.S. pension system - now probably the world’s best - had many lessons to offer China.

Ren attributed success in the U.S. of the employer-sponsored pension plan 401(K) partly to a government-backed default investment mechanism that enables automatic enrollment, and protects employers from fiduciary liability in case of investment loss.

“Without the right system, money doesn’t stay long. China’s financial market is flush with liquidity, but where is the system (to make it stay)?”

The CSRC’s chief accountant Jia Wenqin told local media earlier this month that China should explore applying a default investment mechanism, as well as tax benefits, to pension products.

Fidelity International, which doesn’t yet have a mutual fund license in China, is angling for a seat at the table.

“For us, our ultimate goal is to participate in the pension market in China,” Fidelity’s China Country Head Jackson Lee said, adding that in the short term, its main focus in China is investor education.

Related Video
“By sharing our experience and insights on global pension market, we are eager to be an active player in the journey of pension reform in China.”
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Old 03-27-2018, 02:58 PM
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SWEDEN

http://www.aei.org/publication/autom...-reform-model/

Quote:

Automatic Adjustments Within Entitlement Programs: A Look at the Swedish Pension Reform Model
Spoiler:
Abstract

The United States has significant fiscal challenges due to population aging. While the finances of all advanced economies are under pressure from similar demographic trends, some countries have responded more aggressively and creatively to the problem than have US political leaders. In 1998, Sweden enacted a reform of its public pension system that combines a defined-contribution approach with a traditional pay-as-you-go financing structure. The new system includes better work incentives and is more transparent to participants. It is also permanently solvent due to provisions that automatically adjust payouts based on shifting demographic and economic factors. No pension system is entirely problem-free or can be replicated easily in a different political context. Nonetheless, US policymakers should examine the Swedish model and consider what they could do to make Social Security more personalized and self-correcting, too.
https://www.aei.org/wp-content/uploa...t-Programs.pdf
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