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A penny saved is a penny earned


By Ricardo Amorim



If left without further changes, the Social Security Reform approved by the Lower Chamber of Congress will generate savings amounting to R$ 900 billion in the next ten years. The savings will grow in the following decades. After two decades it will amount to nearly R$ 4 trillion. Only to go on growing in the following decades.


To begin with, it will reduce the growth of the Social Security deficit. Adding up the Federal, States, municipal administrations and the INSS (Social Security System), the deficit will be of around R$ 400 billion this year. Without the reform it would be R$ 450 billion next year.


With less of a deficit in Social Security, less of the budget will be required to cover the deficit. In order to cover the Social Security deficit, investment in public education has been shrinking since 2013, investment in Health goes down every year since 2015, and public investment in infrastructure last year was the lowest in 70 years.


In time, the Social Security Reform will create the conditions to reverse this picture. Besides, it makes room for Brazil to promote a Tax Reform to simplify our tax system without having to increase the burden on taxpayers, as would be the case without the Social Security Reform.


No less essential, the Social Security Reform will revert the growth of the public debt. Without it, Brazil would endure a fiscal and economic crisis even worse than the last one.


The fiscal risk now at bay, businesses will pull their investment plans out of the drawer. With more investment we shall generate more jobs, income and economic growth.


Much of this investment will come from abroad, bringing in dollars and lowering the dollar exchange rate, which will reduce the price of imported products, collaborating to knock down inflation and creating the required environment for lowering interest rates and for more credit to be available.


In short, besides freeing resources to be invested in Health, Education and Infrastructure some time from now, the savings resulting from the Reform will accelerate Brazil’s economy already this year and the next. It is no coincidence that the Stock Exchange keeps breaking its own records.


Ricardo Amorim is the author of the best-seller After the Storm, a host of Manhattan Connection at Globonews, the most influential economist in Brazil according to Forbes Magazine, the most influential Brazilian on LinkedIn, the only Brazilian among the best world lecturers at Speakers Corner and the winner of the “Most Admired in the Economy, Business and Finance Press”.


Click here and view Ricardo’s lectures.


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Translation: Simone Montgomery Troula