Defusing the Time Bomb

Sep 10, 2003

Lula has put the brakes on a social security system run wild. The benefits of pension reform are small, but they will at least head off a payments crisis.

For years, Brazil's state-run social security system was a ticking time bomb that nobody seemed able to defuse. Governments came and went, and apart from a little tinkering here and there, they did nothing to stop the system's gargantuan deficits. Political opposition was just too great, particularly from public employees - who stood to lose the most - and the Workers Party. Once the party's leader, Luiz Inácio Lula da Silva, became president, he made dealing with the problem the first item on his list of economic reforms. In August, the PT and its Congressional allies won enough support to overhaul the system in Lula's first political triumph since taking office in January. In an oblique reference to his predecessor Fernando Henrique Cardoso, a former university professor, Lula boasted, "I learned, not in the university but on the factory floor, how to negotiate and talk to people." Lula personally worked to win a majority in Congress, but his success was due less to his ability to "talk to people" and more to a brutal deployment of government patronage, threats and...

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