President Andrés Manuel López Obrador once again focused part of his speech on the pension system, specifically on the role of the Retirement Savings Fund Administrators (Afores) and what has happened in these two years, before the start of the adjustment that will gradually increase the percentage of contributions from employers to workers’ savings accounts, for a decade.
But the president pointed out some criticisms in which the media should delve deeper, to duly inform the millions of workers.
The options were: individual accounts, or the bankruptcy of public finances
The president said last Thursday that the creation of the Afores had been a hard blow to the workersa system that was created during what he calls the neoliberal period.
Likewise, he warned that his government will review the system, and of course what the Afores do, to see if it is correct and if they are satisfied with the results, to express question about the disabilities that the system has registered throughout this year.
It is important to remember that, as the system was until 1997, public finances, the country in general, went straight to bankruptcy, once again.
Many times things are pointed out without remembering the contexts in which decisions are made. 25 years after the entry into force of the individual account system, it is important to remember that before workers’ pensions were paid with the resources of other workers. The contributions of the assets were intended for the payment of those who were retiring. This system was unsustainable in Mexico and in the whole world, the above has been proven endlessly.
Therefore, the individual accounts system was not a blow to the workers; on the contrary, it was a measure that applied justice because now each worker saves for his own pension and does not have to pay the pension of others, while the collapse of the country’s public finances was avoided.
In fact, the relative stability of public finances, the one that the government presumes so much, and that they have been able to maintain, it must be said, is largely due to the reform of the pension system in the neoliberal period.
Yes, that inheritance from the past is not bad in any way, whether you want to admit it or not.
The option to increase the contribution rate was correct
The Mexican president recalled that at the beginning of his administration two options were analyzed to improve or try to improve the system.
The first was to eliminate the system of individual accounts and return to the previous one, something that at the time we spread widely in this space, to the anger of the pension system authorities at the time, denying what our well-informed sources sent us. The president of Mexico has recognized it on several occasions, on Thursday it was one more.
The second option was to increase the contributions to the workers’ accounts, which was finally achieved, a success without a doubt of the government in officea measure that of course should improve workers’ pensions over time.
It must be said with all its letters, the Reform to the Pension System of the present administration was a great step, it is the most important in the 25 years that the system has been in force. doSo why does the government criticize the system and say that it has not worked, or that it continues to affect workers??
Economy, the SAR problem
There are two underlying problems in the Retirement Savings System (SAR), one of them is the low contribution rate, which will undoubtedly be corrected in the coming years with the government reform carried out in 2020.
The other problem is a very complex one, in which the SAR can do absolutely nothing, it is the country’s own economy.
The next revision that the government will make to the SAR, as announced by the president last Thursday, may reach many conclusions, possibly measures will be taken, which we hope will not be a return to the old system, that in fact would represent a nationalization of the resources of the workers.
But there will be no relevant changes in workers’ pensions as long as the Mexican economy is in the conditions in which it finds itself.
The variations in the yields of the Afores are natural in the context of the financial markets and the economy, the recent capital losses are striking, there is no doubt, and they will continue to be so as the money supply of the system rises. It is not the same to lose when you have two pesos in the bag than when you have 20for example.
But, unfortunately, at this time what is striking is the magnitude of the losses (which many media mistakenly call losses), but little is highlighted when there are significant capital gains.
The problem is that this factor, that of disabilities, is taken for political purposes.
The SAR of Mexico is one of the most successful, despite the fact that for decades it was denied reform by those who, paradoxically, are today the government.
And when things continue to be done well, after the system withstood the attacks of nationalization that were intended, another element of uncertainty arises, protected by a natural phenomenon in the system, capital losses, as well as capital gains.
What should be reviewed of the Afores?
What must be reviewed in the SAR is the economic context that surrounds it, the economy.
As long as Mexico has an economy that does not grow, or grows littlepensions in general will not be decent.
For example, United States pension systems have also recorded large losses this year, much higher than those registered in our country, including most of them have variable income instruments; that is, actions.
But, they are systems whose economic context that surrounds them is very different from ours, their economies have decades of growth and momentum for development and well-being that we are light years away from having.
It is said that today the foundations of a different economy are being laid, the problem is that workers in general and those of us who contribute to the SAR are going to lose a full six-year period economically, it is already inevitable.
Hopefully the foundations of a pension system that is one of the bastions of the economy will not changeTrying to fix what isn’t broken always leads to failure. It would be better to concentrate on promoting growth, generations of Mexicans will be grateful in the future.
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