March 21, 2019 / 9:48 PM / 4 months ago

Poorest 10 percent of Brazilians to gain most from pension reform: ministry

FILE PHOTO: A street vendor of cleaning products walks past a big Brazilian flag in Sao Paulo, Brazil June 28, 2018. REUTERS/Nacho Doce

BRASILIA (Reuters) - Reform of Brazil’s overloaded pension system would reduce income inequality in Latin America’s largest nation, according to an Economy Ministry study published on Thursday, with the country’s poorest set to enjoy the biggest gains.

Average income per capita across the poorest 10 percent of Brazilians would rise 3.48 percent per year through 2023 if some kind of pension reform was passed, the study found, with a narrower rise of 2.63 percent a year across the top 10 percent of earners.

The study comes as Congress begins debate on a controversial government proposal to overhaul Brazilian social security, which has faced setbacks as lawmakers complain that military personnel are sacrificing less than civilians.

The research follows an Economy Ministry study last month that predicted Brazil would slide into a deep recession next year if the social security system was left in its present state, continuing to bleed huge amounts of public funds.

The government said its proposed overhaul would save more than 1 trillion reais ($265 billion) over the next decade, boosting economic growth, lifting wages and generating around 8 million new jobs between now and 2023.

The lion’s share of that will be seen in the lower income strata where unemployment and reliance on informal jobs are significantly higher, the Economy Ministry said.

Failure to reform the system would see average incomes in the bottom 10 percent of earners fall an average 0.54 percent a year over the next five years, while the top 10 percent would see average income fall by 0.41 percent, the study found.

Brazil’s economy has struggled to recover from a devastating 2015-16 recession. Unemployment in the three months to January rose to 12 percent, the first increase in 10 months.

Reporting by Jamie McGeever, Editing by Rosalba O'Brien

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