Back | Programme Area: Social Policy and Development (2000 - 2009)
Recent History, Perspectives and Challenges to Social Insurance: the Brazilian Case (Draft)
The paper aims to describe the general background of pension policy and reform in Brazil.
It starts by depicting the normative fundamentals of the three regimes of the Brazilian pension system: the Regime Geral de Previdência Social (RGPS), which is related to private sector workers; the Regime Próprio de Previdência Social (RPPS), where public sector employees are affiliated; and, finally, the optional complementary pension funds for high income workers in the RGPS. Besides these three regimes, there are means-tested and age-tested non-contributory social pensions.
The paper then examines the contradictions and tradeoffs in the pension system between fiscal costs, equity enhancement and poverty reduction. Most of the recent reforms in social insurance were motivated by the goal of reducing the total amount of pension expenditure. Nevertheless, the pension system presents a very complex structure regarding equity issues. Social security in Brazil is one of the most important policies for reducing poverty, especially for the elderly; however, depending on the analytical point of view, it can be classified as either progressive or regressive. For instance, from a geographical perspective, social insurance reduces regional inequalities as it transfers income from richer zones to poorer ones. However, it is regressive as it reallocates resources from the whole society to well-off public servants.
With this background in mind, it is possible to understand the continuous process of reforming social insurance in Brazil. The objectives of pension reform are threefold: enhancing equity, reducing fiscal and actuarial imbalance, and/or achieving more efficiency for the economy as a whole—for example, by establishing contributions less distortive to labour markets or by allowing the savings generated by pension funds to increase the investments in the economy.
In Brazil, social security reforms are mostly motivated by fiscal issues and, to a lesser but not negligible degree, by equity perspectives. In fact, pension reforms in Brazil affected the middle class more than the poor. This redistribution from the middle strata to the poor was one the objectives of the pension reform.
Finally, the paper recognizes that although Brazil has gone through a number of reforms, many efforts and changes are still needed. In particular, three main issues are identified as key matters to be debated in future reforms: coverage expansion, reducing differences between public and private sector schemes and facing the future of an ageing population in a country that to date displays a young demographic profile, but where social insurance already represents a large fiscal burden.
This paper was prepared for the UNRISD project on Pension Funds and Economic Development.
Please use the links on the right of this page to access this paper.