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Brazil government plans to dilute unpopular pension reform bill

BRASILIA, Nov 8 (Reuters) - The Brazilian government will propose a watered down version of its unpopular pension reform this week because the original bill does not have enough votes to pass Congress, its deputy lower house whip said on Wednesday.

Congressman Darcísio Perondi told reporters a deal could be agreed on Thursday and the governing coalition will table a "more palatable" proposal by Friday.

The amendment will keep the establishment of a minimum retirement age of 65 for men and 62 for women, but other details such as required years of contributions must still be worked out, Perondi said. The average retirement age is now 55.

The changes could be announced later on Wednesday by Congressman Arthur Maia, who is responsible for studying the pension reform bill in the lower house. Maia has called a news conference for 5 p.m. local (1900 GMT).

Brazil's benchmark stock index Bovespa rose as officials pledged a new push on reform plans. On Tuesday, the Bovespa fell to a two-month low, a day after President Michel Temer let out that his plan to overhaul pensions and plug a budget deficit may not pass this year.

Perondi said the government has no more than 250 votes in favor of pension reform, short of the 308 needed in the lower house to amend the constitution.

"We are looking for an alternative and will build support for its approval over the next two to three weeks," Perondi said.

With general elections less than a year away, lawmakers are reluctant to back legislation that will require Brazilians to work longer before they can retire on full pensions.

The government's economic team has been reluctant to dilute the reform bill, warning that the cost of generous pensions is unsustainable and the major cause of a budget deficit that cost Brazil is hard-won investment grade credit rating.

Finance Minister Henrique Meirelles said on Tuesday that the pensions bill could reach 80 percent of the federal budget if nothing is done.

His economic policy secretary Mansueto Almeida warned that interest rates, which have fallen to 7 percent with slowing inflation, could return to double digits by 2020 if pension reform fails to reduce the government's borrowing needs.

The Bovespa stock index was up 0.71 percent at midday after closing down 2.32 percent on Tuesday, when it fell 73,000 points for the first time in two months. (Reporting by Lisandra Paraguassú and Marcela Ayres; Writing by Anthony Boadle; Editing by David Gregorio)