By Ricardo Amorim
The Brazilian Senate CPI (Parliamentary Commission of Investigation) concluded: there is no deficit in the pension system! Rather, it shows a surplus. They further concluded that we are wealthier than the Swedes, there was never any corruption in the country and that, with Brazil winning the 2014 Soccer World Cup, the country is the only world hexa-champion.
It is easy to fool us when we want to be fooled. This is no news. I issued a warning hereabout the use of that by politicians before the 2014 election. Next year, with the highly justified desire for political renewal which sweeps the country, simplistic proposals shall abound coming from a record number of saviors of the motherland.
Come think of it, it won’t be easy to beat the record of this CPI. We have the most brilliant senators in the whole World! Can there be a better way to solve a problem than to decree that it does not exist?
The CPI concluded that not only there is no deficit, but also that the cap on INSS (private sector employees’ pension benefits) can be raised by nearly 70% from the current R$ 5.531 to R$ 9.370. The number of pensioners grows more than 3% due to the aging of the population? Irrelevant. Brazil already spends more on its retirees than Germany and Japan, even though in proportion they have three times more elders than us? Who cares?
The CPI’s creative accounting puts Dilma’s fiscal manoeuvres to shame. According to it, the figures that really matter are not the pension figures, but rather the numbers for Broad Social Security, which covers Pensions, Healthcare and Social Welfare. So if we add the three together we come to a surplus? No. Last year we had a deficit of R$ 257 billion just at Federal level, without even considering an additional deficit of about R$ 100 billion in the states and municipalities.
What is the CPI’s magic trick then? Start by disregarding the R$77 billion of the pension deficit for federal government’s public servants, though it is covered by the same taxes that cover the gap in the INSS budget. Next, ignore the DRU, which let’s the government use revenues that should be spent in certain programs to be spend in different programs. One should bear in mind that it is exactly the DRU that let’s the government draw on funds from Healthcare to make up for the deficit in Pensions. Finally, pretend that the benefits can be paid with income that was never collected, such as income from social wavers and tax evasion of more than R$ 400 billion that the INSS is owed but will never fully collect because most of it comes from companies that no longer exist, such as Varig, Transbrasil and Vasp, just to mention the airline sector.
Will Social Security have a surplus once all this is done? Not yet. According to the very CPI, even with this bogus accounting Social Security had a deficit of R$ 57 billion last year. It is easy to fool us when we want to be fooled. This is no news.
The CPI then deals its blow of mercy: despite the fact that even this insane accounting keeps getting worse every year since 2013 – even before the recession started – figures will get significantly better this year, and will eliminate the deficit. The magic trick? Accelerated economic growth will inflate revenue over the growth of expenses. Presto!!
In short, the CPI presided by Paulo Paim – PT (Workers Party) and having Hélio José (PROS) for rapporteur, seems to be convinced that thanks to the reforms to be performed by Temer and his administration, Brazil shall start growing faster than China.
It’s lovely to live here in Switzerland! The only thing better than this is to be a senator in Brazil.
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”.
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Translation: Simone Montgomery Troula