BRAZIL: Pensions – An Impossible Dream for Most Workers

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 23 2003 (IPS) - The current debate on pensions reform in Brazil cannot get around the fact that a majority of the country’s workers depend on the informal economy for their livelihood, and have no labour rights or prospects for retirement.

The growing social security deficit, which the administration of leftist President Luiz Inácio Lula da Silva aims to check by pushing a drastic overhaul of the system through Congress, could be resolved if all of the workers currently excluded were drawn into the system, argue critics of the government’s pensions reform project.

According to the Brazilian Institute of Geography and Statistics (IBGE), 54.3 percent of the country’s 75.4 million working people do not pay into the social security system and thus will have no right to a pension.

Like other countries of Latin America, Brazil has attempted to include informal sector workers in the social security system by creating the category of ”autonomous” or ”self-employed” workers, who range from street vendors to professionals and others providing varied services.

But that is a mechanism ”for the rich,” which excludes those who earn very little, said Guacira de Oliveira, co-director of the Feminist Centre of Studies and Advising, a non-governmental organisation in Brasilia that advocates policies and measures aimed at achieving gender equality.

”Autonomous” workers are required to pay a contribution of 20 percent of the amount they would draw as a pension upon retirement, and impoverished Brazilians cannot renounce one-fifth of their paltry incomes for a retirement check they would begin to receive at some uncertain point in their future, said the activist.

Luis Barbosa, who sells fruit and vegetables in the open-air markets that are set up every day on different streets of Rio de Janeiro, explained that he found it impossible to make contributions towards a future retirement pension.

For the past five years, Barbosa, 22, has been getting up at 02:00 and working until 15:00 six days a week selling fresh produce at his own stand. ”You earn very little and have a lot of expenses,” he told IPS.

Another vendor, Gilberto Lemos, 43, does make the effort to pay monthly contributions of 48 reais (17 dollars), in order to draw a pension equivalent to the official minimum monthly salary of 240 reais (85 dollars) when he retires. ”That’s not enough to live on, but this is all I can afford to pay,” he said.

One idea currently being discussed in the debate on pensions reform is lowering the contribution of ”autonomous” workers to the equivalent of 10 percent of their future pensions, in order to attract more people from the informal sector.

But it would still be difficult to draw in many informal sector workers, as 10 percent remains a heavy burden for people who just barely survive on what they earn, Mario Theodoro, a researcher at the Planning Ministry’s Institute of Applied Economic Research, said in an interview.

Economist Anselmo dos Santos, with the Centre of Research on Trade Unions and the Economy of Labour at the University of Campinas, in the southern state of Sao Paulo, argued that a pension of at least one minimum monthly salary should be universal, since all workers are taxpayers.

Dos Santos, a member of the leftist governing Workers’ Party, pointed out that people in the informal economy also pay sales taxes and other contributions to the state coffers.

A ”true reform should present solutions for the nearly 52 million workers who have no social security coverage,” instead of ”condemning them to die without a pension,” he maintained.

Those 52 million people include 40.9 million workers who are not enrolled in the social security system and 11 million unemployed, said dos Santos.

Universal coverage would be possible, he insisted, by making better social use of other taxes levied by the government, and through policies of support for small companies and micro- enterprise, which would also generate more jobs.

In Brazil, 34.5 million people are paying into a social security system that supports around 21 million private sector pensioners – a ratio of 1.6: 1.0, half of the ratio seen in the United States, for example, said dos Santos.

The government’s draft amendment, aimed at resolving that problem, is now under debate in Congress and is scheduled to come up for a vote within the next few months. The proposed reform would reduce the public sector social security deficit, which currently amounts to 20 billion dollars a year.

The reform would raise the minimum age of retirement for public employees by seven years, to 55 for women and 60 for men, and put a cap on the pensions they draw, which are currently equivalent to their last paycheck.

But the trade union representing public employees has announced that it will protest the proposed reforms by declaring an indefinite strike, starting on Jul. 8.

The government says the idea is to reform a system marred by inequality, under which the pensions of private sector workers have a ceiling of 1,561 reais (550 dollars) a month, seven times lower than the average pension of public employees.

Analysts say the crisis facing Brazil’s social security system cannot be compared with the problems faced in countries of the industrialised North, where the main cause of social security deficits is the ageing of the population and the resultant shift in the ratio of pensioners to active workers.

Unlike the world’s rich countries, Brazil is ”in the best possible position, from a demographic point of view,” said Theodoro at the Institute of Applied Economic Research.

That is because people of working age outnumber children, whose share of the population has dropped due to a decline in the birth rate, as well as the elderly, who comprise just 9.1 percent of Brazil’s population of 172 million.

But the existence of such a huge informal sector curbs economic growth and makes it difficult to address acute social problems, said Theodoro, who has published several studies on pensions reform and the informal economy.

He also said that economic growth alone would not reduce the size of the informal sector, which he described as a ”structural” problem, and that specific measures were needed to tackle the poor distribution of income and the state’s failure to ensure that rights are universally respected and enforced.