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Mexico’s president wants to guarantee people pensions equal to their full salaries when they retire

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February 6, 2024
By The Associated Press

Mexican President Andres Manuel Lopez Obrador speaks at the National Palace in Mexico City, Jan. 10, 2023. (AP Photo/Fernando Llano, File)
By Mark Stevenson in Mexico City

MEXICO CITY (AP) — Mexico’s president said Monday he will propose guaranteeing people pensions equal to their full salaries at the time they retire, something done by no other country, not even those much richer than Mexico.

It was among a raft of 20 constitutional reforms that President Andrés Manuel López Obrador has almost no hope of getting passed in the eight months he has left in office, but which could be part of a bid to attract voters in the June 2 presidential elections.

It may be just electioneering: López Obrador leaves office in September, and he really wants his party’s candidate, former Mexico City mayor Claudia Sheinbaum, to win the presidential elections. He apparently hopes the promise of full-wage pensions could also help win his Morena party the two-thirds majority in Congress it needs to amend the Constitution.

But analysts say it may also be an attempt to set the agenda for the next administration by saddling any future president from Morena with high — and expensive — expectations.

“It’s an election year, so all these reform initiatives can be seen as something to get people to vote for Morena,” said Gabriela Siller, the director of analysis at Nuevo Leon-based Banco Base. But she notes it is also “a way of setting the political agenda for the next administration, a way of placing his imprint on the next administration.”

For the moment, López Obrador doesn’t have the votes in Congress to get the reforms passed, given that they require a two-thirds vote to amend the Constitution, and opposition parties are not likely to go along with it in the few months he has left in office.

For example, he wants the National Guard — now Mexico’s main law enforcement agency — handed over to the army, a change Congress has already rejected. He also wants to e liminate most government regulatory and oversight agencies.

In announcing the measures Monday, the president claimed it was an attempt “to recover holy rights, guaranteed to Mexicans by God.” It was among a package of reforms that included guaranteed annual increases in payments to the elderly and increases in the minimum wage and above the rate of inflation.

The reform proposals also included guaranteed access to the internet, a total ban on fracking, open-pit mining, GM corn, cruelty to animals and vaping pens.

López Obrador has made other unfulfilled promises in the past, like pledging Mexico would have a health care system “better than in Denmark.” That is something that has obviously not come to pass in Mexico’s crowded, ill-equipped hospitals, which frequently lack medications. He has also proposed recognizing the the ’right’ of all Mexicans to own their own homes.

But the cost of what López Obrador is proposing for pensions is striking. Mexico’s workforce is made up of about 60 million people and the reform would presumably apply to all of them.

At present, Mexicans can retire at 65, if they have worked 38 1/2 years, or 67 if they haven’t. But there is no guaranteed pension payment. Apart from a few powerful unions representing government workers, there is no government pension program, though López Obrador has introduced supplementary payment programs for the elderly of a couple of hundred dollars per month.

Since the 1990s, about half of Mexicans — those with formal jobs — have been enrolled in privately-managed pension funds known as Afores to which they and their employers contribute. The other half of Mexicans, who work under the table in the ‘informal’ economy, have no pension program at all.

The formal-sector Afores program, after about 20 years of contributions, has built up about $325 billion in pension savings, and that only covers average pensions of about $290 per month — less than the minimum wage — for half the country’s workforce.

To cover the whole population with something approaching a ‘full wage,’ López Obrador’s program would have to increase the Afore pension fund by 2.5 times to meet the median wage, and then double it again to cover informal workers.

It seems unlikely to be achieved, so why would López Obrador propose it? It’s also odd that he didn’t allow his candidate, Sheinbaum, to announce the measures, given that she has been struggling to build an image as something other than his loyal follower.

The president — who built the Morena party around his own image and personality — is in fact far more interested in how he’ll go down in history than building a strong or independent party. So carving in stone the path for the next administration is attractive for him, analysts say.

“López Obrador is presenting these reforms to set the path for what he thinks Claudia (Sheinbaum)’s administration should be,” wrote author and analyst Viri Ríos in the newspaper Milenio.

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