Diplomacy & Crisis News

Congress members celebrate as Brazil’s pensions reforms cleared their first legislative hurdle after years of wrangling © Reuters

Pension reform is something that has a great effect on the future of Brazilians, Latin Americans and to be honest the rest of us as well. Brazil was always a unique case, a country that built an administrative centre in the middle of the country in the 1950s that is populated by mostly government administrators with fairly good pension packages. The citizens of Brasilia did not initially come to their careers or pensions in an average process where a union fought for reforms to match wages with those of the private sector. The creation of Brasilia was a massive national project that also created the place for a public sector that really formed much of the middle class in Brazilian society at the time, existing to this day.

With the attempt at industrializing Brazil and Latin America in the 1960s and 1970s came stronger workforces, with capable union support to fight for the rights of their workers. By the 1990s and the post economic crisis of the 80s came Worker’s Party Presidents like Lula and balanced economic policy approaches with the support of unions in pushing the economy forward. While memories of those years were positive and a somewhat healthy mix of classically liberal economic policies supported by labour unions with some targeted social programs, the last few years has shown that there was corruption feeding off corruption, and it hurt average Brazilians the most. Whether it was elite members of labour unions or elite wealth, middle and lower income Brazilians were treated as an afterthought.

The debate in Brazil and the rest of the region likely follows a similar debate in your country as well. Pensions for those who were fortunate enough to be employed in the public service seemed to become very lucrative over the years. With many private sector employers cutting back or losing their businesses altogether, many became unemployed and felt that the little income they had should not go directly towards a set raise for union employers that depended on underemployed taxpayers. Public sector jobs were now out-competing benefits-wise and pay-wise with private sector employment that no longer existed due to economic disruptions over the years. The end result is that the pension packages that were lucrative and part of the labour contracts in the past still needed to be paid, but without an economy that can sustain many of those packages.

It is understood by a community that taxes should go to support everyone in a community, for schools, hospitals, police and other utilities. What percentage however is a reasonable amount to go to a pension fund from the community’s public purse? While it is well understood that public and private sector pensions should not be cut or eliminated because those employees have spent their careers depending on those future benefits, what cost should the entire community endure to pay those pensions before other necessities? Even in the case of California, Michigan and Ontario in Canada, public pension costs are forecast to be so consequential that there is no real plan to cover them without going into permanent debt. How can an elected government make the community a priority if they have an impossible political battle over pensions when making difficult policy decisions?

The case of Brazil and Latin America may have even more desperate consequences. With much of the lower income workforce being precariously linked to the national and regional social services systems and a weakened private sector middle class, there is little political strength to pressure the government and unions to take policy decisions to benefit the average worker. Even in the case of private sector union employees who lack hours or a place to work, the private sector unions have little power if there is no employment in their sector. Such a scenario occurred in the last US election, with private sector unions pulling away from their traditional Democratic roots because their members had no employment to effectively support their union movement. While is it extremely difficult to reform contracts and take money from the pockets of active union members, it might be that the resolution of this issue determines the future health of a community.

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