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Brazil’s controversial pension reform proposal cleared a key congressional committee on Wednesday as President Michel Temer seeks to push through one of the most ambitious reform packages in decades, aimed at plugging a yawning budget deficit amid the worst recession on record for Latin America’s largest economy.

The reform gathered 23 votes in the 37-member lower house committee, after rapporteur Arthur Maia withdrew a last-minute addition of benefits for prison guards.

Investors are betting the pension overhaul would put Brazil’s finances on a straighter path amid a budget gap that stands at over 9 per cent of gross domestic product. But it is a hot potato for many lawmakers, as opinion polls show a majority Brazilians oppose it – a general strike last Friday was spurred by Mr Temer’s reforms programme.

The plan to make Brazilians work longer by instituting new universal retirement ages – 62 for women and 65 for men – is now expected to be debated by the full house in the second half of May. If it is finally approved by at least two-thirds of votes on the floor of the lower house, it should then be passed by the Senate later this year.

Copyright The Financial Times Limited 2017. All rights reserved.

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