A billion-dollar pension scandal has rocked Brazil’s government in advance of elections next year, forcing a minister to resign and recalling memories of past corruption cases under the party of president Luiz Inácio Lula da Silva.
Older voters are a key constituency for Mr Lula and, at least until recently, were one of few groups where the veteran politician maintained a net positive approval rating.
Investigators probing the scandal have said officials colluded with fraudsters to siphon as much as R$6.3 billion (€1 billion) from payments to an estimated six million retirees between 2019 and 2024.
Neither the president nor cabinet members are alleged to have been involved in the scheme, which began during former president Jair Bolsonaro’s term. But the opposition has accused the government of failing to tackle the scam swiftly, seizing the chance to attack Mr Lula just as some polls showed a slight rise in his popularity after a nearly year-long slide.
Pensioners “complained and nothing happened”, right-wing congressman Nikolas Ferreira said in a video viewed more than 130 million times on Instagram. “We’re talking about embezzlement in the billions [of reais] from sick or elderly people.”
A polls aggregator by CNN Brasil and Ipespe Analítica last month showed an overall 53 per cent disapproval of Mr Lula’s administration. Despite economic growth and low unemployment, stubborn inflation has sparked widespread discontent.
“It couldn’t be worse news for the government,” said Andrei Roman, founder of data consultancy AtlasIntel. “This event is very negative, not only in terms of approval, but also for the president’s chance of being re-elected.”
Police arrested six people last month on suspicion of fraudulently signing retirees up to unions and other associations supposedly providing services such as healthcare discounts or funeral care, which then took small deductions from their monthly cheques. The average state pensioner in Brazil receives R$1,882 (€299) a month.
Critics point out the social security minister was first alerted to complaints in 2023, but only last year began taking measures such as changing the rules on pension deductions. The extent of the alleged fraud was revealed in an investigation by federal police and the comptroller-general, an anti-corruption authority.
It seems the government was more concerned with avoiding blame, transferring responsibility and debating where it started, than clarifying to society what was actually going on
— Rafael Cortez, political analyst
Half the respondents in an AtlasIntel survey believed the government took too long to act, and then did so incorrectly.
Mr Lula (79) is widely expected to be the candidate for his Workers’ Party in next year’s general election, despite questions about his age and fitness after emergency surgery last year on a brain bleed. His once-famed political judgment has been called into doubt by a ponderous response to the scandal.
“It seems the government was more concerned with avoiding blame, transferring responsibility and debating where it started, than clarifying to society what was actually going on,” said Rafael Cortez, political analyst at Tendências Consultoria.
The president took heat for backing the minister in charge for more than a week, in an apparent attempt to keep the Democratic Labour Party (PDT) in his governing coalition. It withdrew when the minister resigned this month.
“The PDT’s exit signals a political weakening of the government, which is already facing difficulties in maintaining loyalty among its allies,” said Carlos Pereira, professor at the Getúlio Vargas Foundation.
Former union boss Mr Lula governed for two terms between 2003 and 2011, earning international acclaim for lifting millions out of poverty with welfare programmes.
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But corruption is considered a weak spot for his party. Its last period in office ended with a vast bribery scandal that led to the imprisonment of dozens of businessmen and politicians of all stripes, including Mr Lula.
His convictions were later overturned, paving the way for a dramatic comeback against hard-right populist Jair Bolsonaro in 2022.
The pension scandal “will have an impact in 2026, because corruption is the most problematic issue for the Workers’ Party”, said Mr Roman.
Among 11 organisations targeted by police was a pensioners’ union whose management includes Mr Lula’s older brother. He was not personally investigated, but the president’s adversaries leapt on the connection. The government has promised to reimburse victims and sought to blame its predecessor.
“It was during the Bolsonaro administration that gangs created shell entities to rob retirees, without anything being done to investigate them,” said cabinet minister Gleisi Hoffmann.
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Yet the issue has provided rare cheer to supporters of Mr Bolsonaro, who is due to stand trial on charges of plotting a coup to remain in power. Right-wing lawmakers are seeking a parliamentary inquiry into the fraud, which could prolong negative publicity for the government.
José Antônio Mateus, a pensioner in São Paulo, noticed an unexplained charge of R$77 (€12) on his pension slip in 2024 and believes he was defrauded for two years. The 75-year-old said the scandal was a symptom of Brazil’s rotten political establishment.
“The whole system is to blame,” he said. “We’ve been suffering from corruption for a long time.” − Copyright The Financial Times Limited 2025
