Mexico urged to avoid Chilean-style pension turmoil

Specialists and economists gathered Tuesday and Wednesday in Mexico City for the first annual convention of the country's private pension fund managers, known as Afores, with the focus on the future of Mexico's pension system.

Afores manage the retirement savings of 54mn workers worth 489bn pesos (US$26.3bn) as of end-Q1.

However, the Mexican pension framework was based on the Chilean AFP system, which is the target of widespread protests and is facing dramatic changes to boost contributions, and Mexico is now looking at major legislation to change its own system in the near future.

Hundreds of thousands of Chileans took to the streets in protests on July 24 and again last Sunday to demand the government take action on pensions, which are considered unacceptably low.

Chilean President Michele Bachelet's plan to raise contributions to 15% from 10% of salaries, with employers making up the difference, has received a mixed reaction, and a general strike on November 4 now looms.

Speaking at the event in Mexico City on Tuesday, Carlos Noriega, president of the Afores association (Amafore), called for a hike in contributions by individual workers from the current 6.5% to 15% over the next 10 years.

He also called for a three-part approach, involving workers, employers and the government.

The president of pension regulator Consar, Carlos Ramírez, voiced similar sentiments, noting the current level of 6.5% will not provide the benefits Mexicans desire, and pointed to mistakes made by Chile in not warning citizens they would not receive the level of pensions they expect.

He also said that while Chileans are receiving 50% to 60% of their final salary, Mexicans are only going to receive 28% of their last paycheck each month.

"What Chileans are demanding is to have better pensions. To that end, we must dedicate ourselves to improving the pensions of Mexicans," Ramírez said, according to newspaper El Financiero. "We still have a window of opportunity; we still are in time."

Deputy finance minister Fernardo Aportela agreed. "On the issue of pensions in Mexico, we are at a stage where the possibility still exists to get to work on having a more solid social security system," he said, according to El Economista.