The lower house of Brazil’s Congress will delay a vote on a bill trimming social security benefits until Feb. 19, Speaker Rodrigo Maia said on Thursday, pushing a decision on the cornerstone of President Michel Temer’s fiscal reforms into an election year.
Temer had said he hoped for a vote by next week, but he has struggled to rally lawmaker support for the unpopular pension cuts, which many investors consider essential to reining in Brazil’s surging public debt.
Brazil’s currency, the real, weakened to a seven-month low of 3.34 per U.S. dollar and the benchmark Bovespa stock index fell 0.8% after Maia’s comments.
Investors fear that failure to streamline social security could weaken Brazil’s recovery from a deep economic downturn, forcing the central bank to raise interest rates from an all-time low and potentially triggering new sovereign rating downgrades in 2018.
Finance Minister Henrique Meirelles said he plans to meet next week with credit rating agencies to discuss the fate of the legislation, adding that he hoped it could be enacted by March.
The bill would require Brazilians to work longer before retiring and cut generous pensions for public-sector employees. However lawmakers may be more reluctant to back that as elections approach in October, but Maia suggested they would rise to the challenge.
“Even though 2018 is an election year, the fiscal crisis is so big that it will be possible to get pension reform approved,” he said.
Temer’s last-ditch effort to sell the bill this year was cut short on Wednesday, when he had to fly to Sao Paulo for surgery to treat a narrowing of his urethra. His office said the surgery was successful and that he would remain in the hospital until Friday to recover. But it forced Temer to cancel meetings to muster votes.
It became clear this week that Temer did not have the three-fifths super majority, or 308 votes, needed to pass the bill in the lower house of Congress.
While ministers were still working to gather more votes, the government’s chief whip in the Senate stunned the administration on Wednesday by saying the vote had to be put off to February.