New ‘final salary’ pensions proposed by Mexico’s president to be capped By Reuters

© Reuters. FILE PHOTO: Mexico’s President Andres Manuel Lopez Obrador speaks throughout his every day press convention, in Acapulco, Mexico December 20, 2023. REUTERS/Daniel Becerril

By Ana Isabel Martinez

MEXICO CITY (Reuters) – A reform proposed by Mexican President Andres Manuel Lopez Obrador for retirees to have a pension equal to their ultimate wage will include a cap on month-to-month funds, in line with a doc despatched to Mexico’s Congress.

The draft plan for workers to obtain such beneficiant pensions has morphed into one of many stand-out initiatives of Lopez Obrador’s sweeping reforms that embrace judicial, electoral, environmental and different modifications.

Nonetheless, the suggestion has raised questions on sustainability and whether or not Mexico can afford it. Opponents and critics have dismissed the plans as an unrealistic political ploy forward of the June presidential polls.

The doc despatched to the Mexican Congress and reviewed by Reuters on Tuesday states the proposal would solely be accessible to those that began contributions to Mexico’s social safety institute IMSS after July 1, 1997, in addition to these holding accounts with authorities staff’ social safety physique, ISSSTE.

However the month-to-month funds can be capped at 16,777 Mexican pesos ($984.61) and the determine can be adjusted for inflation yearly, the doc states.

At current, 4.5 million folks obtain retirement pensions from IMSS in a rustic of some 126 million inhabitants, whereas 1.3 million folks drawn pensions from ISSSTE.

To fund the proposal, Lopez Obrador steered the federal government would create a fund with 64 billion pesos and supply cash from state governments, whereas additionally diverting money destined for autonomous establishments that he needs to disband.

Nonetheless, some estimates have steered the price of the proposal could also be 430 billion pesos in 2025 (1.3% of the GDP) and climb to 2.0% of GDP by 2035, in line with Eurasia Group, a world danger consultancy.

The opposition’s line that it might help pensions reforms if it doesn’t hurt fiscal stability was a political tactic geared toward shielding themselves from the president’s assaults on the marketing campaign path, Eurasia Group stated in a be aware to shoppers on Tuesday.

“It’s extremely unlikely that opposition events will help this initiative given its influence on public funds,” the be aware added.

($1 = 17.0392 Mexican pesos)