Brazil’s Underestimated Social Benefit Costs Raising Concerns Among Experts

The Brazilian government’s proposed budget increases for pensions and BPC in 2025 are deemed to be underestimated. Experts suggest that the discrepancy could lead to significant financial pressures on the federal budget. Observations indicate that actual spending may exceed government estimates due to optimistic beneficiary projections and inflation adjustments. The reliability of the budgetary framework has also been questioned amid these challenges.

The Brazilian government has proposed an increase of R$8.3 billion for pension spending and R$678 million for the Continuous Cash Benefit (BPC) in the 2025 Annual Budget Bill (PLOA). Despite this proposal, public finance experts warn that these estimates remain significantly underestimated, particularly with respect to pension expenditures and BPC funding, which are exerting considerable pressure on the federal budget due to growth rates exceeding the established 2.5% spending cap.

Rogério Nagamine, a Social Security expert, estimates that the pension expenditures in the budget are underestimated by R$10 billion to R$20 billion. He also indicates a potential underestimation of around R$5 billion for the BPC. Financial forecasts from XP Investimentos anticipate a pension spending of R$1.028 trillion for 2025, surpassing the government’s revised estimate of R$1.01 trillion by R$12.5 billion; they project BPC expenses at R$129.8 billion compared to the government’s R$119.1 billion.

According to Santander, their forecasts indicate pension costs of R$1.03 trillion and BPC expenses of R$123 billion, exceeding the government’s projections by R$17.5 billion and R$4 billion, respectively. Sources noted that the economic team’s adjustments primarily accounted for inflation, but did not align with actual inflation rates that were higher than those projected when the budget was submitted in August 2024.

The government’s optimistic projections regarding the number of program beneficiaries have also contributed to the underestimations, which were not clarified in the official submission to Congress. Congress is expected to vote on the revised budget proposal next week. In the previous year, the government underestimated pension spending by R$29.9 billion, while BPC underestimation amounted to R$7.6 billion, leading to criticisms regarding the reliability of the government’s fiscal planning.

Public finance experts argue that the current strategy of making adjustments through bimonthly reviews fails to provide a realistic portrayal of the budgetary situation. An inquiry to the Ministry of Planning and Budget was met with no response, and the Ministry of Social Security also did not provide feedback on the concerns raised.

The Brazilian government’s budget estimates for pensions and the Continuous Cash Benefit (BPC) have been criticized by experts for being significantly underestimated, potentially leading to financial strain on the federal budget. Projections by financial institutions suggest greater expenses than those acknowledged by the government. Furthermore, discrepancies in beneficiary projections and inflation considerations exacerbate the issues with fiscal management, raising concerns regarding the credibility of the budgetary framework as legislators prepare to vote on proposed amendments to the budget bill.

Original Source: valorinternational.globo.com