A proposed social security overhaul in Brazil will increase internal savings and boost GDP growth in Latin America's largest economy by at least 3% per year, Reuters reported, citing Presidential Chief of Staff Onyx Lorenzoni.
The reform proposal, which will be forwarded to Congress in February, will entail individual defined contributions into private pension funds. This structure would eventually replace Brazil's current system, which involves a guaranteed bundle of retirement benefits.
"We will fix this sinking ship called the pension system which has a hole on its hull," Lorenzoni was quoted as saying in a radio interview. The government is looking to present a complete pension reform proposal that would eliminate the need for further overhaul in the next 20 to 30 years, he added.
However, a final decision on the reform has not been made yet as new proposals will be presented to President Jair Bolsonaro next week, Lorenzoni said.
In a recent interview with the SBT television network, Bolsonaro said the reform would introduce a new retirement age of 62 for men and 57 for women, higher than the current age but lower than what was proposed by Brazil's last government.
Meanwhile, Reuters reported separately that investors are concerned over Bolsonaro's ability to implement much-needed fiscal reforms due to internal conflicts between members of his administration.
"The political and economic teams are at odds," said Leonardo Barreto, the head of Brasilia-based political consultancy Factual. "There is a lack of cohesion and even coordination between President Bolsonaro's closest aides."
The social security reform is a key priority for Bolsonaro's government since it is the primary cause of growing public debt, which has climbed to 77% of GDP.