Brazilian judge set to challenge pension cuts

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Brazilian judge set to challenge pension cuts

By Raymond Colitt, Financial Times

June 23, 2003

Sao Paulo - The head of Brazil's Supreme Court was expected on Monday to challenge the government's controversial social security reform and to present an alternative proposal exempting the judiciary from many of the proposed pension cuts.

It is the most serious threat yet to the government's all-important pension reform, which aims to reduce an annual social security deficit of 5 per cent of gross domestic product. Pension reform has been introduced into Congress as a constitutional amendment.

The reform is being watched closely by investors as an indication of Brazil's ability to balance its large budget deficit in coming years.

Following a protest meeting last week of the country's leading judges, Maurcio José Corrêa, the Supreme Court's chief justice, is demanding the right for the judiciary to present its own reform plans. The magistrates reject the government proposal to have their pensions taxed and capped at R$2,400 (US$832, £499) per month along with those of other civil servants.

"The judiciary is a state career," said Nilson Naves, head of the country's second highest court, arguing that judges deserved different treatment to government employees.

Currently judges enjoy some of the most generous benefits of any employee in Brazil, with an average pension of R$8,000 per month. By comparison, government pensions for the private sector average R$380. Concessions to the judiciary, political analysts say, could open a Pandora's box of demands from other civil servants, who are planning protest marches and strikes in coming weeks.

The governing Workers' party (PT) signalled on Monday it would stand firm. "A separate reform for the judiciary is unacceptable," José Genoino, PT president, told Globo TV. Any privileged treatment for the judiciary, he said, "could undermine the coherence of the pension reform".

Yet the judiciary's petition carries particular weight, as any constitutional pension reform passed by Congress is likely to be challenged in the supreme court.

In 1999 the supreme court ruled that a similar pension reform - albeit in the form of simple legislation rather than a constitutional amendment - was illegal.

The government expects the reform bill to be approved by a committee of Congress's lower house in mid-July and to gain final approval in the Senate before the end of 2003.

Yet informal vote-counts in the committee suggest the result hangs in the balance. The bulk of opposition to key parts of the package comes from politicians in the rightwing Liberal Front party, as well as legislators from fringe centrist and extreme leftwing parties.