NCPA - National Center for Policy Analysis

Brazil's Nightmarish Pension System

September 9, 1999

Because Brazil is one of a handful of countries without a minimum retirement age, some people spend more of their years in retirement than they ever spent working. Experts say the system shows how not to construct a national pension scheme. Moreover, if Brazil's economy goes haywire again as it did last year, scaring world financial markets, a major reason will be its permissive pension policy.

The situation should be of some concern to U.S. taxpayers, since in the event of a future financial meltdown in Brazil their money, in the form of payments to agencies such as the International Monetary Fund, will be called upon to bail Brazil out.

  • The average Brazilian retires at age 49.
  • In 1998, about two-thirds of retiring civil servants were younger than 55 and 14 percent were younger than 45.
  • In the private sector, nearly 4 percent of the more than 400,000 workers who retired in 1997 were in their 30s.
  • As a result, benefits paid to retirees in the public and private sectors will run nearly $30 billion in the red this year -- equivalent to 5 percent of economic output and more than double the government's spending on health care.

Some 75 percent of this year's government deficit will come from mailing checks to just three million of Brazil's 20 million retirees -- that is, to former state bureaucrats.

Observers say politicians there lack the will to stem the flood of payments. A growing number of experts say the only solution is for the government to declare the system bankrupt and to seek protection from its creditors -- meaning the retirees.

Source: Peter Fritsch, "In Brazil, Retirement Has Become a Benefit Nearly All Can Enjoy," Wall Street Journal, September 9, 1999.

 

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