"Everyone will lose with this pension reform."

By George Marques, for the The Intercept Brazil - In a week in which the National Congress is targeted by revelations from the Odebrecht construction company, the proposed pension reform will face its first major test: the text sent by the Presidential Palace begins its process in the Constitution, Justice and Citizenship Committee of the Chamber of Deputies. A thorny issue, few governments in Brazil have dared to stir up this hornet's nest. Afraid of losing votes, that precious commodity in times of political denial, parliamentarians only decide to tackle the necessary reforms when the finances are on the verge of collapse.

The way the text was presented by the government, everyone is bound to lose in some way. At least, that's the assessment of Wagner Balera, a law professor at the Pontifical Catholic University of São Paulo (PUC-SP). With a Master's degree in Tax Law, Balera spoke with The Intercept Brasil about the pension reform, a discussion that promises to continue for some time and will impact the lives of all Brazilians.

Myths, half-truths, and a lot of conflicting information are being spread about Social Security. In Brasília, the bureaucrats can't even agree on the numbers to identify the real number of the Social Security deficit. In this tangle of tables and graphs, two plus two will hardly ever equal four. Typical bureaucratic stuff.

The pension reform was also criticized by former Minister of Social Security Carlos Gabas, in an interview with 247. Watch the main excerpts: 

 

 

 

According to Balera, the government is using a false argument to justify the Social Security deficit. He argues that the problem isn't revenue collection, but rather that part of the Social Security budget is constantly diverted to other purposes. The professor also criticized the government's approach of treating the military pension reform separately, as if they were a superior group to the rest of society. See below for the main points of the interview:

THE INTERCEPT BRAZIL: Professor, starting with the basics, I ask: is pension reform really necessary?

Wagner Balera: I consider it absolutely necessary. And the first fundamental point is that the average life expectancy of Brazilians is constantly increasing. The system was designed for a different reality. The reasoning behind the pension system is: you're living longer, you're going to have to work longer. That's the main reason why reform is necessary. It's a matter of statistical data due to the increase in life expectancy.

The reform is also justified in view of the declining birth rate, because the social security system operates on an intergenerational basis. The current generation is responsible for financing the benefits of the previous generation, and the future generation will finance the benefits of the current generation.

The government has been using a false argument, a lying argument, when justifying the need for pension reform. The Brazilian State – and it's not this government, nor the previous one, nor the one before that – uses the falsehood that the pension system is bankrupt.

TIB: Isn't the Social Security system bankrupt, professor?

WB: That's a huge lie. What is the Brazilian State doing? It's destroying a model that our Constitution created called Social Security. The 1988 Federal Constitution originated Social Security, which integrates health, social security, and assistance. Three sectors encompassed in a single reality. And the Constitution created a budget separate from the State Budget for Social Security.

The Union has its revenues, Social Security has its revenues. Therefore, Social Security is part of the Social Security budget, which was provided for in the Constitution with various sources of revenue.

TIB: What sources are these?

WB: The first, the oldest, is the payroll tax. You, as an employed worker, pay a contribution on your salary. Your employer pays a contribution on your salary, and that is the payroll tax, which is called payroll deduction. That's one of the contributions.

I can't say, "The social security system is bankrupt." In fact, what's collected from payroll contributions doesn't even cover the benefits owed by the INSS (Brazilian National Institute of Social Security). There would be a shortfall. But that's why Social Security exists, the Social Security budget exists, and the expenses are for Social Security, not for the pension system. It's a conceptual issue that didn't just come out of my head; it's what's in the Constitution.

COFINS (Contribution to Social Security Financing) is one of the taxes with the highest revenue in Brazil, second only to Income Tax. Therefore, it represents an immense source of money that the Brazilian government collects.

TIB: And where is all this money being raised going?

WB: So much money came in that they started diverting it. That's why the deficit argument is false. Because, starting in 1994, they began diverting money from social security contributions and they continue to do so.

This year, the diversion has increased. Before, they were diverting 20%, then they started diverting 25%, and now they're going to divert 30% from something called DRU (Disconnection of Union Revenues). This means nothing more than taking money from Social Security and throwing it into whatever else the State wants to do with that money. How can you say the system is broken if they're diverting money from this segment to other areas? So, that's the false argument of the reform. The reform is necessary, it's essential, but not under the argument that [Social Security] is broken.

TIB: What is the main problem with this reform? Is there a major point of contention?

WB: I consider it essential to establish a minimum retirement age. Nothing explains the fact that there isn't such an age today. It only failed to pass in 1998, in Constitutional Amendment No. 20, because Antônio Kandir, who was a congressman [PSDB-SP] at that time, made a mistake in his vote.

The other important point of the reform is that it prohibits the accumulation of retirement benefits with pensions. Social security means that the State will guarantee your basic needs. Social security did not promise, nor does it promise anyone, the maintenance of status. So, if someone already receives retirement benefits, why would they also receive a pension from someone else? It makes no sense. This is completely inappropriate in a universal and solidarity-based system, such as the social security system.

TIB: In the proposal sent by the Temer government to Congress, the military was left out.

WB: The military are Brazilians just like you and me. From a social security standpoint, just as I am entitled to minimum social protection, they are too. It's a bit strange to treat this group as if it were a separate group. I'm speaking from a social security perspective.

From a pension perspective, military personnel get old just like I did, they get sick just like I did, and so on. So there's no reason for it. They can't be treated separately. The reform is moving forward, but this exclusion of this group remains, as if this group were better than the others.

TIB: What do you think about men and women retiring at the same age?

WB: It's a societal achievement, the equality between men and women. Especially regarding the requirements for obtaining social security benefits, because there's no technical justification for them to be treated differently. Besides, it's statistically proven that women live longer than men.

TIB: You mentioned that unifying the rules for the general regime and public employees would correct an injustice, since today we have two worlds. What injustice would that be, and what worlds would those be?

WB: The world of public servants is the world of the privileged. Their salaries are the basis of their contributions and the basis of the benefits they receive. For example, if a public servant earned R$ 10 working 35 years of service, which is the requirement for so-called full retirement, they will continue to earn R$ 10, their salary. Meanwhile, under the INSS (Brazilian Social Security Institute) system, if someone earns R$ 10 and the current INSS ceiling is R$ 5.189, they will receive, at most, R$ 5.189. From a social security perspective, this is unfair because it creates two classes: class A, which has the best social security; and class B, which has a social security benefit of up to R$ 5.189.

What would be just? Social security guarantees basic needs. If our social security system has a general limit of R$5.189, it has to apply to everyone. "Ah, but I want a better retirement." Perfectly. You buy a private pension plan. Only you will pay for it, not the whole society. It is in this sense that I speak of injustice.

"The world of public servants is the world of the privileged." TIB: Do you think some occupations should have a differentiated regime, such as that of rural workers?
WB: There are two perverse points in the proposal sent by the government. One is this one about rural workers. How do they contribute today? With a percentage of the proceeds from the sale of their production. Because that's how the life of a rural worker is. They earn based on what they produce. According to the proposal, the rural worker will contribute with a salary, therefore it's a fiction. The rural worker who receives a salary is the exception, it's the one who works in agribusiness. So it's a fiction because they're inventing that the rural worker earns a minimum wage, and that's not true, because many don't even earn a minimum wage.

It's a different reality. So, they're leveling everyone down to the minimum wage, and what's worse: this group will be required to have made ninety contributions. That is, they're postponing rural pensions for eight years from now. Scandalous. A matter of this seriousness being handled so hastily.

TIB: So, the way this reform is being discussed, would the rural producer be harmed?

WB: Very negatively affected. I found it to be one of the most perverse aspects of the PEC.

Another aggravating factor for the poorest is this: how are maintenance benefits adjusted? They are adjusted according to the minimum wage readjustment criterion. Every time the minimum wage increases, the value of the protection benefits increases proportionally. This is the current criterion. This is not adequate because it ties one reality, which is the social security reality, to another reality, which is the minimum wage. These are different things, because it is not every time the minimum wage increases that revenue increases.

The government maintained the link to the minimum wage, except for the BPC (Continuous Benefit Payment). So, further down the line, the benefit that is currently the minimum wage could be 70% or 60% of the minimum wage tomorrow, further worsening the situation of the poor. It makes no sense.

TIB: In this reform being discussed in Congress, who will be the biggest beneficiaries, the companies or the workers?

WB: Everyone will lose.

TIB: Is everyone going to lose?

WB: Everyone will lose. It's a restrictive reform of rights, which is normal when you're in a crisis, on a path to cut expenses.

If the state in Brazil were ideal, it would stop diverting money; it wouldn't extend the DRU (Social Security Reform Bill), but rather end the DRU altogether, and stop diverting funds. That is a true responsibility of the state. Regardless of their political affiliation, all governments have sponsored this mess that is the DRU. So, the ideal thing would be to end it. Social security money must end up in social security.