Brazil Drops Pension Reform in Favor of Military Intervention

Moody’s determines measure 'credit negative.'

After nearly a year of assuring its citizens that a pension reform was imminent, Brazil has pulled the plug on its controversial bill, citing the recent military actions in Rio de Janeiro and a lack of Congressional support.

While the first vote on the reforms was set to take place in the Congressional Lower House this week, a wave of violent crime in Rio de Janeiro linked to drug gangs caused President Michel Temer to call for military intervention. In response, Senate leader Enunicio Oliviera said Monday that the pension reform and any other constitutional amendment-related measures would be blocked while this policy is in effect, as it is part of the constitutional rules.

The intervention will occur until Temer’s last day in office on December 31.

In addition, political affairs minister Carlos Marun agreed Monday that the controversial bill is indeed stuck in its tracks. Marun told reporters that the bill never had enough traction to begin with.

“We don’t have the votes. I couldn’t guarantee we would have the votes by the end of February,” he said.

Although polls show that he is one of the most unpopular presidents in recent history, Temer pushed his pension reform package as the centerpiece of his agenda. The reform looked to raise the country’s retirement and social security collection ages as a means to cut its budget.

Upon dropping its pursuit of the reforms, Reuters reports that Moody’s Investors Service sent a note to clients Tuesday where it dubbed Temer’s decision a “credit negative” for Brazil.

“While we already expected that a major pension reform was unlikely, ditching off the plans to pursue its approval is a credit-negative development that will severely restrict the authorities’ ability to comply with the government spending ceiling in the coming years,” the note said.

Marun noted that if Congress did not again take up the pension predicament, the reform would become a key topic in this year’s elections.

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