Lula Prepares to Send Pension Legislation to Congress
July 17, 2003
President Luiz Inacio Lula da Silva plans to present legislation today to
reduce the nation's annual $20 billion pension system deficit after
opposition by federal workers forced him to accept a compromise bill that
limits cuts to retirement benefits.
proposal would reduce pension costs by 16.5 billion reais ($5.8 billion),
or 4 percent less than Lula's original plan, according to the government.
Two days of negotiations between Lula's administration and 27 state
governors failed to reach agreement on whether government pensions and
wages should be raised by the same amount every year, FolhaNews reported.
currency and benchmark bond have climbed this year on investors'
confidence that Lula will succeed in passing legislation to reduce
spending and ensure the government can keep up payments on about $400
billion of debt. The currency lost a third of its value last year on
concern the government may follow neighboring Argentina in defaulting on
market is putting a lot of confidence in Brazil,'' said Raphael Kassin,
who helps manage $750 million of emerging- market bonds at ABN Amro Asset
Management in London. ``Brazil has to take advantage of that
bill would maintain pension benefits for current state and federal
employees, rather than slash benefits as Lula originally proposed, part of
a compromise aimed at overcoming opposition by government workers who are
staging a partial strike to protest the plan.
for state workers hired after the bill's passage would be reduced. The
government also plans to raise the minimum retirement age in an effort to
cut pension costs.
Brazilian real has climbed 24 percent this year to 2.8443 per dollar at
9:16 a.m. in New York, the best-performing currency among 59 tracked by
Bloomberg. The benchmark 8 percent bond due 2014 has climbed to about 89
cents on the dollar from 70, cutting the yield to about 11 percent,
according to J.P. Morgan Chase & Co.
Jose Pimentel, a federal deputy and the bill's sponsor in the lower house, plans to deliver the final legislation to lawmakers at 11 a.m. in Brasilia.