VistaBrazil Janeiro/Fevereiro 2019

It has not taken the new Brazilian government long to begin making its mark - or at least to talk about it.

The new administration is promising to eliminate the deficit through a series of bold measures such as reforming the pension system, awarding oil concessions, and privatizing state-owned companies. None of these is a new initiative and some, such as social security reform, have proven tough nuts to crack in the past.

Economy Minister Paulo Guedes indicated on 24 January that priority would be given to structural reforms to reduce public spending. The minister also said that about US$10 billion in subsidies would be eliminated at a later point, once the social security reform package has been approved.

Pensions currently consume some 50 percent of the budget, and President Jair Bolsonaro sent a message to Congress on 4 February in which he promised a sweeping new system.

Part of the plan is to establish an individual retirement savings account; a move intended to boost the private savings rate and improve growth.

Another measure being proposed to improve the efficiency of the system is to reduce the volume of disability pensions by implementing better professional rehabilitation programs to help workers get back to work. Currently less than 5 percent of those receiving disability pay are receiving rehabilitation treatment.

Globally, less than 10 percent of total pensions are granted under disability, but in Brazil the rate is 17-18 percent.

One of the most contentious issues is the minimum retirement age. Just three days into his term, the president had told reporters that his government would set the minimum retirement age at 62 for men and 57 for women: significantly lower than 65 and 62 proposed by the previous administration.

Talks reportedly then got under way with congressional leaders, state governors, and mayors on the idea of establishing a minimum of 65 for everyone, with the requirement to pay into the pension system for at least 20 years. That ambitious plan would certainly be welcomed by the markets as a key part of putting the country's fiscal house in order.

A draft of the reform was presented to the president for review on 14 February, and by the next day Bolsonaro, who favored the lower retirement ages, had reportedly capitulated to the 65/62 proposal, but with a longer transition period - 12 years.

The indecision and debate over the issue is a reflection of just how difficult it will be to get agreement on new...