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Insper Researcher, Marcos Mendes, Warns in Interview to InfoMoney That, Without Increase in Contribution and Limit on Benefits, Social Security System Is at Risk.
An estimated deficit of R$ 700 billion, stemming from the Individual Microentrepreneur (MEI) scheme, represents a direct threat to the sustainability of the Social Security system in Brazil. The warning, made by economist and Insper associate researcher, Marcos Mendes, indicates that if no measures are taken, the system could “collapse” in the next decade. The analysis was detailed during the specialist’s participation in the podcast Outliers from the InfoMoney portal, where he advocated for a package of structural reforms to avoid an imminent fiscal crisis.
Mendes’ diagnosis points to the urgent need for the government to address sensitive and politically complex issues. In addition to changes in the MEI, he highlights the urgency of reforming the Social Security system more broadly, controlling so-called “super salaries” in the public sector, and reducing the record volume of parliamentary amendments. For the researcher, only a coordinated set of actions can stabilize public debt and create a trustworthy environment for sustained interest rate reductions.
The Diagnosis of the Problem: Why Has the MEI Become a Threat?
The main concern, according to the analysis released by InfoMoney, lies in the disproportion between the MEI’s social security contribution and the benefits to which it is entitled. Currently, the microentrepreneur pays a reduced amount but retires with at least a minimum wage, just like other workers who contribute a higher rate on their incomes. This difference has generated an actuarial deficit that has already reached R$ 700 billion over time. “If we don’t solve this (MEI), we will collapse Social Security in ten years,” Mendes stated categorically.
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To correct this trajectory, the researcher suggests measures that, although unpopular, would be essential for the health of the system. The central proposal is to increase the social security contribution of microentrepreneurs and limit access to certain benefits in order to make the system more balanced. Additionally, Mendes advocates for the resumption of rules that correct the minimum wage and the health and education floors solely based on inflation, preventing an increase in expenses above the State’s revenue capacity.
Short-Term Revenue Measures: A Risk for the Future
Marcos Mendes also harshly criticized the government’s strategy of focusing on short-term revenue measures to balance the budget. He characterizes these initiatives, such as the reinterpretation of regulations by the Federal Revenue Service to increase tax collection, as “predatory revenues.” According to the researcher, while they may provide temporary relief to the treasury, they create a legal insecurity environment that drives away investors and stimulates excessive litigation. “When desperation sets in, you start to anticipate revenue,” he warned, as reported by InfoMoney.
This scenario of fiscal uncertainty and distrust, Mendes explained, undermines the willingness to invest productively. “No one wants to invest when there is insecurity,” he stated. As a direct consequence, the Central Bank is forced to keep interest rates high to contain inflationary pressure generated by expansionary fiscal policy. In the economist’s view, the Central Bank acts as “the adult in the room, holding things together to prevent inflation from skyrocketing,” but this solution has a high cost for the country’s economic growth.
The Political Obstacle and the Lack of Consensus
When asked about the political feasibility of such a deep fiscal adjustment, Mendes directly pointed out the resistance of the National Congress as the main obstacle. According to him, the parliamentary base, especially the group known as Centrão, directly benefits from the current structure of spending, including large parliamentary amendments that, he claims, could generate an annual saving of R$ 25 billion if cut. “Even if a new government is elected, the base in Congress will remain the same, and it benefits from these policies,” he pointed out in the interview with InfoMoney.
The problem, according to the researcher, is deeper than a simple divergence of diagnosis; it is a matter of entrenched interests. Author of the book Why Brazil Grows Little, Mendes argues that low social cohesion hinders the formation of consensuses in favor of structural reforms. The political culture is based on a “negative-sum game,” where different groups try to maximize their gains from the public budget without contributing equally, making any long-term planning for Social Security and fiscal balance unfeasible.
Is the proposal to increase the MEI contribution and review benefits the right solution for Social Security? How could this change impact millions of microentrepreneurs in their daily lives? Please share your opinion in the comments; we want to hear from those who live this in practice.
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