Brazil's Pension Deficit to Fall for First Time, Pimentel Says

By Katia Cortes and Carla Simoes, Bloomberg.com

September 9, 2008

Brazil

Brazil's social security deficit may fall for the first time this year as quickening economic growth creates more jobs and boosts pension contributions, Social Security Minister Jose Pimentel said. 

The deficit -- part of the country's budget gap -- may decline to less than 38 billion reais ($21.9 billion) this year from 46 billion reais last year and 42 billion reais in 2006, the minister said. 

``More workers earning better salaries is adding to more pension contributions,'' Pimentel said in a Bloomberg Television interview at his office in Brasilia. 

The fastest economic expansion since 1995 helped create 1.56 million government-registered jobs with benefits this year through July 30, almost the number that was added in the whole of 2007. The 2009 social security deficit may also be less than the 40.9 billion reais estimated in the budget proposal, Pimentel said.

 
Brazil's economy, the largest in Latin America, grew 5.76 percent in the 12 months ended March 31, the most in 12 1/2 years, according to the latest official data. Second-quarter gross domestic product will be released Sept. 10.

 
The deficit decline this year will be the first since 1995, when the pension system started facing shortfalls because of the incorporation of retired rural workers, the social security ministry said. Under the constitution, rural workers in Brazil don't need to contribute to the pension system to receive the benefit.

 
The government plans to propose a change in the constitution so that rural workers will be paid by the national treasury directly, Pimentel said. He expects the change to be approved by congress next year. 

``We'll have a much more transparent and efficient pension system,'' Pimentel said.

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