January 23, 2019 / 10:00 PM / in 5 months

DAVOS-Brazil's Guedes seeks deep pension cuts to avoid Greece's fate

(Adds details of comments, prior reform proposal)

By Mark Bendeich

DAVOS, Switzerland, Jan 23 (Reuters) - An overhaul of Brazil’s pension system could save up to 1.3 trillion reais ($345 billion) over the next decade, Economy Minister Paulo Guedes told Reuters on Wednesday, aiming as much as two-thirds higher than the last government’s failed effort.

In an interview during the World Economic Forum at the Swiss ski resort of Davos, Guedes underscored the enormous scale of a pension reform that investors consider the cornerstone of new right-wing President Jair Bolsonaro’s sweeping economic agenda.

“We are studying the numbers and they range from 700 to 800 billion reais to 1.3 trillion, so it’s a significant reform and it will give us an important fiscal structural adjustment,” Guedes said.

“It will have a powerful fiscal effect and it will fix it for 15, 20, 30 years,” he said, later adding: “It’s either this or we go (the way of) Greece.”

Investors have welcomed Bolsonaro’s pledges to open up Brazil’s closed economy, reduce and simplify taxes and privatize state companies. Brazil’s currency, stock market and bonds have rallied this year on expectations that Bolsonaro can push an ambitious pension reform plan through Congress.

His predecessor, former President Michel Temer, had also proposed changes to Brazil’s social security system, originally targeting savings of 800 billion reais in 10 years before lawmakers watered that down to 480 billion reais. The proposal was then dropped as graft scandals consumed Temer’s government.

Guedes also said Brazil’s new government is considering a “brutal” cut in the corporate tax rate to 15 percent, from 34 percent currently, to boost competitiveness. He said a new tax on dividends would initially make up for the lost tax revenue.

Over Bolsonaro’s four-year term, Guedes said the government aims to reduce Brazil’s total tax burden to 30 percent of gross domestic product, from 36 percent currently.

$1 = 3.7648 reais Reporting by Mark BendeichWriting by Jamie McGeever; Editing by Brad Haynes, Christian Plumb and Cynthia Osterman

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