Brazil minister says no decision on pension reform

www.forbes.com Reuters, 02.14.03, 3:17 PM ET SAO PAULO, Brazil, Feb 14 (Reuters) - Brazil's Social Security Minister Ricardo Berzoini denied on Friday the government had withdrawn from plans to unify the country's public and private pension systems, saying proposals on reforming social security are still under consideration. "There is no decision; the discussion is still open," Berzoini said after taking part in a conference on reforming the debt-ridden public pension system. On Thursday, Berzoini had indicated that in the government's reform proposal, the "ideal" would be for new workers to come under new pension rules and existing workers who have already accrued benefits to come under a different set of regulations. That suggested the government was pulling away from its idea of treating all civil servants in the same way as pensioners from the private sector, who have a ceiling for their retirement benefits. Civil servants currently receive pensions based on their final salaries -- meaning some workers retire with full pay, helping the bloated system bleed some $15 billion from government coffers every year. If the government only changed the system for new workers, the reform's benefits would be long delayed into the future. Financial markets are paying close attention to center-left President Luiz Inacio Lula da Silva's efforts in reforming the system after Brazil tried since the early 1990s to change it without success in Congress. Some players see Lula's success on this reform as a key test of the extent to which he has adopted market-friendly economic policies and turned away from past socialist rhetoric. However, Berzoini said the government would not change the rights of benefits already obtained by civil servants in mid-career. "I said yesterday the greater tendency is to seek specific rules for current workers," Berzoini said. "We are not going to attack acquired benefits." The challenge of reforming the public pension system has created a myriad of scenarios, not least due to questions about how to finance benefits during a transition period from one system to another. The debate is likely to get loud and public, not least because many civil servants are traditional supporters of Lula's Workers' Party. Lula's government has said it would send legislation to Congress to reform public pensions by May; but the process could be long-winded, especially as Lula created this week a special advisory council of business, labor and social leaders that will try to reach a common proposal for the government. Reconciling the interests of businesses, civil servants and labor leaders could prove difficult. "Mayors, governors, workers and business leaders will help construct the proposal," said Berzoini.