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OECD/IOPS 2009 GLOBAL FORUM ON PRIVATE PENSIONS. PENSION REFORM AND DEVELOPMENTS IN LATIN AMERICA Session 1: Pension Industry Development in Brazil Rio de Janeiro-RJ, October 14, 2009. Summary I – General Panorama II – Government Action III – Pension Funds Profile

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slide1

OECD/IOPS 2009 GLOBAL FORUM ON PRIVATE PENSIONS

PENSION REFORM AND DEVELOPMENTS IN LATIN AMERICA

Session 1: Pension Industry Development in Brazil

Rio de Janeiro-RJ, October 14, 2009

slide2

Summary

I – General Panorama

II – Government Action

III – Pension Funds Profile

IV – SPC: Framework and Attributions

V –Current Situation

VI – Challenges and Perspectives

2

slide4

Prudent Fiscal Policy

Monetary Policy Control

(Oriented for 10 years)

Foreign Adjustments

(International Reserves S$ 220 bi)

Improvement of the Economic Framework

Inflation Control (4,36%a.a)

Reduction of the Exchange Rate Volatility

(1 US$ = R$ 1,75)

Virtuous Cycle

Investment in Physical and Human Infrastructure

Lower Interest Rates (8,75%a.a)

Improvement of Debt Profile

(R$ 1,5 Tri; duration: 3,5 years)

Primary Surplus (3%a.a)

BRAZIL: Moving Toward Sustainable Growth

Composition of Economic Policy Creates Protection From Foreign Shocks

C O N D I Ç Õ E S M A C R O E C O N Ô M I C A S

Economic Sustainable Growth (average: 4,5%a.a) and Improvement of Social Situation

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Public Net Debt / GDP*

Public Fiscal Result* ( 12 months)

Fonte: Banco Central do Brasil

C O N D I Ç Õ E S M A C R O E C O N Ô M I C A S

Long Term Interest Rates *

Price Stability Commitment

Fonte: STN e BCB.

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Effects of the Crises in Brazil

2 Rating Agencies Award investment grade to Brazil in mid-2008

  • Highlights
    • Continuity of economic guidelines, based on inflation goals, floating exchange rate and primary surplus
    • Considerable reduction of external vulnerability
    • Improvement of debt profile

C O N D I Ç Õ E S M A C R O E C O N Ô M I C A S

Credit (% GDP) and Default (% Total Credit)

GDP Growth

Fonte: Banco Central * Vencido há mais de 90 dias

Fonte: IBGE

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slide7

A quick look at Brazil

Why Brazil represents an opportunity ?

5) No geopolitical or religion problems

6) Low Institutional Risk

7) Numerous Energy Sources

8) Possibility of being a net exporter of petroleum in the near future (Pre-Salt)

1) Social Mobility

2) Strong Democracy

3) 5º largest population (200 millions); 5º largest area; 9º biggest GDP (US$ 1,6 trillions)

4) Only one language no minority group problems

C O N D I Ç Õ E S M A C R O E C O N Ô M I C A S

A dynamic multicultural country

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slide8

Reduction of Social Inequalities

Improving Equality

Human Development Index

Fonte: PNAD-IBGE, FGV, (2009 )

Family Assistance Program

Fonte: PNUD (2009)

  • IDI has reached a high level of human development.
  • The Family Assistance Program successfully reaches the target public.
  • Poverty has been reduced in 1/3 of the country.
  • 52% of the population represents the middle class

C O N D I Ç Õ E S M A C R O E C O N Ô M I C A S

Fonte: IBGE

Fonte: MDS

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complementary pension basic characteristics art 202 cf 1988
COMPLEMENTARY PENSIONBasic Characteristics - art. 202/CF-1988
  • Independent from the General Regime
  • Not mandatory affiliation and contractual nature
  • Reserve constitution (capitalization)
  • Regulated by Complementary Law
  • Transparency for participants
  • Autonomous in relation to the labor contract

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LEGAL ASPECTS OF THE GOVERNMENT’S ROLE

  • Formulate private pension policies as part of social and economic development.
  • Determine minimum standards of security in order to protect liquidity, solvency and actuarial and financial balance of benefit plans.
  • Supervises and apply penalties.
  • Ensure disclosure of benefit plans to the members and retirees.

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slide13

Legal Aspects – Principles

  • Estability of Rules
  • Long Term Policy
  • Specialized, Reliable Support Personnel
  • Larger capacity of supervision

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slide14

Government Action

  • MODERNIZATION AND APPROPRIATE LEGISLATION (LC 108 e 109/2001)
  • ON-STE AND OFF-SITE SUPERVISION (RBS)
  • NEW APPROACH TO TAXATION (laws 11.053/04 e 11.196/05)
  • GREATER TIMELY ANALYSIS OF PROCESS
  • INCENTIVES FOR PROFESSIONAL ASSOCIATIVE PENSIONS FUNDS
  • FINANCIAL EDUCATION
  • PREVIC FRAMEWORK (PLC nº 136/2009-SF)

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PENSION FUNDS PROFILE

  • 372 closed pension funds
  • 2.491 sponsors/ 350 professional associative pension funds
  • 1.037 benefit plans
  • R$ 460 billions in assets
  • 6,8 millions of members and retirees
  • R$ 32,51 billions of pension benefits and R$ 26,04 billions contributions/year
  • Average Contribution: 7,1% (DB); 5,0% (DC e VC)
  • Administrative fees: 7,25% AND Investment administrative fees: 0,76%
  • Average Benefit: R$ 2.828,00 (retirement) e R$ 1.351,00 (pensions)
  • Accumulated Surplus: R$ 55 billions

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slide17

INVESTMENTS: R$ 460 BI (Jun-2009: US$ 263 bi)

Distribution of Pension Funds Investments

Real state

Operations with pension funds members

Variable Income

Fixed Income

2007 – R$ 436 BI : RF (61%); RV (34%); Imov (3%); e Oper.Partic. (2%)

2008 – R$ 416 BI: RF (66%); RV (28%); Imov (3%); e Oper.Partic. (3%)

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spc attributions
SPC – Attributions
  • Authorization, Licensing, Incentive (prior approval of some SPC acts)
  • Supervison (act as a supervisory body of the sytem)
  • Legislation(propose rules and operate and regulate the CGPC decisions)
  • Registry ( keep registers of EFPC, CNPB, sponsors and managers)
  • CGPC(4 Party: regulation and judgments)
slide24

Regulação

– GOVERNANCE – Resolution CGPC nº 13, 2004

– LICENSING – Resolution CGPC nº 08, 2004

– SOLVENCY RULES – Resolutions CGPC nºs 26/2008 (surplus/deficit); 28/2009 (accounting schedule/IAS 26); 18/2006 (technical parameters); 16/2006 (DB/DC/VC); 17/1996 (sponsor’s debt)

– INVESTMENTS – Resolution CMN nº 3792/2009 [quantitative limits (30): Government Bonds (100%); Banks (80%); Credit/Securitization (20%); RV (70%); abroad (10%); infrastructure (20%); Hedge Funds (10%); Real State (8%); sponsor(10%)]; Resolution CGPC nº 04/2002 (pricing TVM)

–PROTECTION TO THE PENSION FUNDS MEMBERS AND RETIREES – Resolution CGPC nºs 06/2003 (vesting; portability); 10/2004 (insurance DC); 12/2004 (employee transfer)

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slide25

Regulação (cont.)

–ADMINIATRATIVE COSTS– Resolution CGPC nº 29/2009

–REGISTRY– Resolution CGPC nº 14/2004

–DISCLOSURE– Resolution CGPC nº 23/2007 (disclosure/relatório de informações)

–FINANCIAL EDUCATION – Recommendation CGPC nº 01/2008

(ENEF/BRASIL: http://www.vidaedinheiro.gov.br)

–SUPERVISION – Recommendation nº 02/2009 (SBR); Instruction nº 26/2008 (Laundry money)

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slide26

Authorization and Licensing

- Prior electronic analysis

- Average Time: 22 DD

Graphic 9 – Authorization of new pension funds, benefit plans and enrollment contract (sponsor/professional associative pension funds) at SPC, in 2007, 2008 and sep/2009

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slide27

High Probability

Low Impact

High Probability

High Impact

Probability

Low Probability

Low Impact

Low Probability

HighImpact

Impact

Supervision (PAF): Risk Analysis

in loco - PAF

  • Fatores de Riscos:
  • Déficit
  • Debt
  • Governance
  • Investiments
  • Actuarial statement
  • Complaints
  • Mitigation Factors:
  • Certification
  • Education
  • Risk Management

electronic

27

slide30

Profitability: +30% (2003-2008)

OECD countries/2008: (-) 23%

1º Semestre 2009/Brasil: 10%

30

pension funds solvency
Pension Funds Solvency

SURPLUS – RULES: 125%; AT-2000; 5,00%a.a; s/debt

BALANCE – RULES: 100%; AT-83; 6,00%a.a; CU (DB)

DEFICIT – RULES: 90%; 02 ANOS (context); Cash flow

BRAZIL – 126%:Coverage index of the actuarial liabilities– 2001/2008

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slide33

SPC GATEWAY (Dataprev)

SAA - TI

PORTAL SPCWEB

CAND

SICADI

Accounts

Statistics Population and Benefits

CANDSPC

Benefits: security, speed, transparency and data integration

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slide35

Challenges and Perspectives (agenda)

  • RBS (TR WB/First)
  • Sponsorship Withdrawal / Mergers / Spin-offs / Acquisitions
  • Civil Servants’ Pension Fund (1992/2007)
  • Actuarial Parameters (Longevity and Interest Rate)
  • Reinsurance
  • PREVIC

35

slide36

PREVIC – National Superintendence for Pension Funds

  • Law Project nº 136, 2009
  • Complementary Law 109 enforcement (arts. 5º e 74)
  • Autarchic:Administrative and Financial Autonomy
  • Linked to the Ministry of Social Security
  • Headquarters in the Federal District
  • Self Budget (Self-financing:TAFIC – R$ 33 millions/year)
  • Performance Management Agreement (Previc-MPS)
  • Specialized Own personnel staff (240)
  • Framework
  • SPC/MPS - Policy Formulation on Private Pension
  • PREVIC - Supervision -> (i) Board of Directors (Superintendent+ 04 Directors)
  • (ii) Appeal Chamber for Pension Funds
  • Regulatory - CNPC (current CGPC)
  • Appeal Chamber for Pension Funds - CRPC

36

slide37

Ricardo Pena

National Secretary for Pension Funds

e-mail : spc.gab@previdencia.gov.br

http://www.previdencia.gov.br/conteudoDinamico.php?id=37

Address:

Esplanada dos MinistériosBloco F, 6º. Andar – Brasília/DFPhone : (55 61) 2021-5260/5261

Fax : (55 61) 2021-5564/5726

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slide38

Activities Report

http://www.previdencia.gov.br/arquivos/office/4_090325-165717-628.pdf

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