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TEXT-Fitch: challenges for Brazilian subnationals pensions
March 1, 2012 / 8:02 PM / 6 years ago

TEXT-Fitch: challenges for Brazilian subnationals pensions

 (The following statement was released by the rating agency)	
 March 1 - Despite the political costs, a more profound review of the
actuarial deficits and sustainability of the proprietary pension systems of
Brazilian subnationals is necessary, according to a Fitch Ratings report. 	
However, Fitch notes that the legislation on the complementary pension system 	
(Funpresp) of future federal employees is a positive step. Additionally, Fitch 	
expects that with the passing of the legislation after two votes in both houses 	
of congress, states and municipalities, which have not yet broadly implemented a	
reform of its public pension system, will now be able to mirror the federal 	
pension plan, at significantly lower political cost.	
In the latter decades, several rule changes were introduced to improve the 	
coverage of the Brazilian Subnationals pension fund systems. Fitch Ratings 	
highlights the regulation of the RPPS regime (Regime Proprio da Previdencia 	
Social) in 1998, which currently covers the public servants from 26 states, the 	
federal district and over 30% of the totality of 5,563 municipalities. 	
By law, Brazilian states and municipalities are obliged to cover for financial 	
and actuarial deficits of their proprietary pension system. Fitch also observes 	
that the consolidated pension-related expenditures of states have doubled in the	
last five years corresponding to more than a third of total expenditures and of 	
total revenues combined. 	
Thus, some subnationals are relying on the depletion of liquid assets of their 	
RPPS to avoid approaching the personal spending limits imposed by the Fiscal 	
Responsibility Law, exempting them from the negative consequences to their 	
current and future budgetary planning. 	
These conclusions and other aspects are treated in the full special report 'The 	
Pension System in Brazil: Challenges to Subnationals' available at 	
Additional information is available at ''.	
Applicable Criteria and Related Research: The Pension System in Brazil: 	
Challenges to Subnationals	
 (New York Ratings Team)	

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