The Social Security reform proposed by the Bolsonaro government will not solve Brazil's public deficit issues and will harm citizens. The real causes of the deficit are the country's economic recession from 2014-2018, which reduced tax revenue, and the huge costs of paying interest on the public debt. The reform prioritizes private banks over citizens by transitioning to a private capitalization system that most Brazilians cannot afford and will leave many without retirement support. It is a false solution that does not address the underlying economic problems and will increase inequality if approved.

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THE TRUTH ABOUT THE DEFICIT OF THE PUBLIC ACCOUNTS OF
BRAZIL AND THE REFORM OF SOCIAL SECURITY
Fernando Alcoforado *
The Social Security reform has been placed by the Bolsonaro government as the
solution for the deficit of the public accounts that is estimated at R$ 139 billion in the
budget of 2019. It is a sham that is sold to the Brazilian population, because this deficit
and those that occurred in 2015, 2016, 2017 and 2018 were fundamentally the result of
the recessive crisis that led to the fall of Brazil's economic growth since 2014 and
contributed to the reduction of tax revenues, of the excessive burden of the federal
government with the payment of ever increasing public debt, and also the huge debt of
large companies to Social Security.
Brazil's economic growth was negative from 2014 to 2018 (-3.8% on average), which
led to a reduction in government tax revenues. The federal government annually pays
R$ 1.5 trillion to the bankers and usurers who own the public debt bonds it would give
to solve all the problems in Brazil. The estimated debt of Social Security debtor
companies in Brazil totals R$ 426 billion, which would represent the solution to the
Social Security deficit. All this contributed to the deficit of public accounts in Brazil.
In order to solve the problem of the deficit in the public accounts, a reason alleged by
the Bolsonaro government to carry out the Social Security reform, the federal
government should adopt as a fundamental strategy the reactivation of the Brazilian
economy which, in addition to tackling the unemployment problem of 13 million
workers, would contribute to raising tax collection through a broad program of public
infrastructure works (energy, transport, housing, basic sanitation, etc.) and, as a
consequence, to promote the expansion of household consumption resulting from
increased employment and wage mass and the income of companies with investments in
public works. In addition to the public works program, the Brazilian government should
develop a broad export program, especially agribusiness and the mineral sector, and
promote drastic reduction of bank interest rates to encourage household consumption
and investment by companies, reduction of costs of public administration with the
freezing of the high salaries of the public sector, the cut of stewardships and organs of
the public administration.
In addition to adopting the strategy of reactivating the Brazilian economy to raise tax
collection and reduce public administration costs, the federal government should
promote public debt auditing followed by reduction of interest payments and public
debt amortization to be renegotiated with public debt creditors. The Federal Budget for
2019 corresponds to R$ 3.262 trillion. Among the expenses, the financial expenditure
with the so-called public debt stands out, this will consume almost 44% of the entire
budget, or R$ 1.425 trillion. Expenditures on debt include an expense with "Debt
Amortizations" of R$ 1,046 trillion and "interest and debt charges" of R$ 379 billion,
totaling R$ 1,425 trillion. Spending on public servants - active and retired - will
consume R$ 350.4 billion. Expenditures on Social Security (INSS) are expected to
reach R$ 625 billion, well less than half of what will be spent on public debt. The
amount destined to investments is insignificant for a country like Brazil of only R$ 36
billion. Therefore, the deficit of public accounts is clearly located in the financial
expenditures with so-called public debt - which has never been audited, as mandated by
the Constitution and not in Social Security expenditures.

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In addition to adopting the strategy of reactivating the Brazilian economy to raise tax
revenues, reduce public administration costs, and reduce the burden of interest
payments and public debt amortization to be renegotiated with public debt creditors, the
federal government should demand the payment of the debt by the large debtors of
Social Security whose debt totals R $ 426 billion whose value would represent the
solution of the Social Security deficit. It should be noted that among the 400 largest
Social Security debtors are Bradesco (R$ 465.2 million), Itaú (R$ 88.8 million), Caixa
Econômica (R$ 549.5 million), Banco do Brasil 208.2 million), Santander (R$ 80.8
million), Banco Rural (R$ 124.8 million), CBTU (R$ 131.6 million), Friboi (R$ 1.8
billion), Jornal do Brasil (274.9 million), Lojas Americanas (R$ 166 million), Oi (126.5
million), Usina Santa Rita (R$ 205.5 million), Usina Santa Helena (R$ 159, 8 million),
Usina Santa Maria (R$ 76.7 million), Vasp (R$ 1.5 billion), old Parmalat (R$ 25
billion). These are just some of the cases of large Social Security debtors.
Besides the deception represented by the Social Security reform as a solution to the
deficit of the public accounts, the Bolsonaro government presents a draconian proposal
against the Brazilian population that will retire in the future. The Constitutional
Amendment Proposal (PEC) of the Bolsonaro government economic team resumes
measures of the first proposal of the Michel Temer government, how to equate the
retirement age between men and women in 65 years. The government wants to set the
contribution time of 40 years for those who want to receive the full value of the benefit.
But the great novelty of the text is the creation of a capitalization system. In this system,
the Welfare Fund is extinguished. Contributions go to an individual account and are
invested in investments. The amount is defined in the contracting of the plan, and the
benefit that will be received varies according to the profitability. Today, the Social
Security model is based on the distribution system: there are contributions from
workers, companies and the State. That is, a financial fund that grows when
employment grows.
With the Social Security reform of the Bolsonaro government, there would be a
minimum age of 65 for men and women. Poor seniors would receive less than a
minimum wage. The full benefit of the INSS scheme would only be obtained with 40
years of contribution. It was proposed to pay less than a minimum wage to a needy
elderly person. In addition to being cruel, it's a not very clever idea because who earn a
minimum wage uses these resources quickly for the benefit of the economy. The
problem of Social Security is not who receives a minimum. This social benefit should
be preserved. Privileges must be eliminated. The deficit is the responsibility of the high
pensions of the civil service, including the military, and also of higher value benefits of
the INSS regime to liberal professionals who are able to retire from the age of 50. It is
fair to set a minimum age, but we must preserve the poorest. If approved, the Bolsonaro
Social Security reform will increase social inequalities in Brazil.
The Social Security reform of the Bolsonaro government has only the legal prediction
of capitalization that would have a mandatory character. The social cost of this change
is as follows: only workers who can save a portion of their salary can make a reserve for
their retirement phase. With the low wages we have today in Brazil and with four out of
ten workers in the country in the informal market, very few Brazilians could have a
retirement in the future. And the Brazilian State decided to abandon this part of the
population because, simply, the distribution system with the contribution of the worker,
the company and the government would end. This model of the Bolsonaro government,

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inspired by the Chilean Social Security reform of the 1980s during the Pinochet
dictatorship, will be a disaster for the Brazilian people.
The Social Security reform will not solve the problem of the public deficit as we have
shown, quite the contrary, because the capitalization system will reduce Social Security
revenues and cause a deficit in the general distribution system, which will continue to
exist because there are retirees who belong to that scheme. The main beneficiary of
Social Security reform is the financial system. The reform of the Social Security reduces
the protection to the worker, the guarantee of income in the future and transfers public
resources to the private banks. This proposal offers no gain to society. Who wins with
this proposal are the banks. A civilized country cannot give up a social protection
system. The government cannot hand over to speculative capital the responsibility of
dealing with workers' retirement. Those who have children, grandchildren and great-
grandchildren must fight to prevent the Social Security reform of the Bolsonaro
government from being approved by the National Congress and demand that an
economic policy that reactivates economic growth be adopted, be audited the public
debt and reducing the burden of its payment and demand payment of the debt by large
debtors of Social Security.
* Fernando Alcoforado, 79, holder of the CONFEA / CREA System Medal of Merit, member of the Bahia
Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the
University of Barcelona, university professor and consultant in the areas of strategic planning, business
planning, regional planning and planning of energy systems, is the author of 14 books addressing issues
such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The
Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific,
Economic, and Social Revolutions that Changed the World.