Brazil’s President-Elect Urges Pension Reform ASAP

Jair Bolsonaro, Brazil’s new president-elect, doesn’t want to wait until his January inauguration to tackle the nation’s pension reforms as he plans to hash things out with current President Michel Temer as early as next week.

Bolsonaro, who captured 55% of the votes in Sunday’s election, wants to tackle the issue as early as possible by reviving an unpopular bill, since he will not have much time to revise it once he takes the torch from Temer as the first of lower parliament’s two sessions begins in February.

“Any step taken now could help us next year,” he told Bandnews TV in a Tuesday interview.

Paulo Guedes, Bolsonaro’s economic advisor, also urged a quick overhaul, calling Brazil’s pension funds “an airplane with five bombs on board that will explode at any moment.” In an interview with Voa news, he said, “We’re already late on pension reform, so the sooner the better.”

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Plans to solve Brazil’s pension predicament come amid a backdrop of towering public debt and a troubled economy. Tuesday’s 3.7% rise in the Bovespa index was seen as an expression of confidence in the nation’s new leader.

Some political staffers in the legislative branch, such as Rodrigo Maia, speaker of the lower house, think rushing a reform is not in Brazil’s best interests.

“Voting any matter regardless of what it is, welfare or not, for the future government to suffer a defeat I think it is bad for the incoming government. We must have patience,” Maia said, as reported by the UOL news agency. “The conditions to approve it are still a long way from reality.”

Temer had originally hoped to resolve the pension crisis last year by cutting benefits, bumping up the national retirement age, and adding years of service clauses for retirees to obtain their full benefits. But corruption charges and public protests slowed the process. After the protests led to military action, Temer decided he would leave the pension question to his successor.

Although the bill is still unpopular, Brazil’s economy isn’t getting any healthier, and the pension reform is the first of many steps Bosonaro must take to stabilize it.

“It remains an unpopular reform which a lame-duck leader has little power to push through Congress,” Leonardo Barreto, a Brazilian political consultant, told The Wall Street Journal. “This is a great opportunity to get it done.”

Tags: Brazil, Jair Bolsonaro, Michel Temer, Pension, Pension Reform

A study committee of Pennsylvania officials is trying to find ways to help plug the $70 billion in total debt between the Public School Employees Retirement System (PSERS) and the State Employees Retirement System (SERS).

Focusing on fee reductions and other steps, the Public Pension Management and Asset Investment Review Commission held its final hearing last week in Harrisburg, the state capital, to figure out how to get out of this dilemma, with the help of experts.

The pension funds could save up to $6.5 billion if they cut back on manager fees, which would clear the $1.5 billion minimum the committee requires for each, Marcel Staub, CEO of Novarca Group, an independent cost specialist manager for institutional investors, told the panel.

Plus, innovation can help, said Ashby Monk, research director of the Stanford Global Projects Center. The pension plans could utilize new technology to help bolster returns, he contended.

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The goal of the study commission, said Joe Torsella, the state’s treasurer and the commission’s vice chair, is to find out how to “do better for our beneficiaries, for our taxpayers, and for the Commonwealth as a whole.”

The public school fund’s executive director, Terry Sanchez, said it is continuing to provide “as much transparency as possible,” and publicly reports all investment and related expenses, including fees.

Its chief investment officer, Brian Lewis, said the organization is looking into and implementing several cost-reduction tactics. It is also examining its public and private assets internally.

The state employee plan’s executive director, Glen Grell, said it does not “waste system assets,” nor does it hide fees. Grossman also noted a savings plan involving renegotiating fees with managers—fees would get cut in exchange for profit-sharing on returns above an agreed benchmark. The strategy is aimed at saving $2.4 billion over 30 years.

“We are open to considering any fee savings recommendations,” said CIO, James Grossman Jr. “The investment professionals at PSERS are always looking to negotiate the fairest fee deal possible.” Grossman added that all fee negotiations are now formally documented.

The state employees’ pension took offense at the commission’s speculations that it was hiding fees, said Grell. He labeled it a “false allegation” that “creates sensational headlines, it is incorrect and irresponsible.”

Last month, in a previous hearing, the coalition discussed a report by Ludovic Phalippou, an Oxford finance professor, which found that the two pension funds had been underreporting one-third of fees paid to private equity firms over the past decade. Phalippou found about $3.8 billion in unaccounted fee money between the plans.

The study was conducted to show the risk factors in the plans’ private equity investments. The committee’s mission is to improve the funded statuses, which are 56.3% for the public school retirement plan and 59.4% for the state employees system.

Tags: Pennsylvania Public School Employees Retirement System (PSERS), Pension, PSERS, Public Pension Management and Asset Investment Review Commission