In his new Pension Watch briefing Larry Willmore explores the recent increase in pension coverage in Mexico. In this blog he provides an overview of some of the issues, which are covered in greater depth here.
Despite having one of the highest per capita incomes in Latin America, Mexico was a “latecomer” in terms of introducing non-contributory social pensions. This meant that in 2000 only 22% of older Mexicans received income from a pension, and all pensions were contributory. By 2013, thanks to social pensions, coverage had risen to 88%.
The rise in pension coverage began in 2001, with the introduction of a universal pension for residents of Mexico City (the Federal District) aged 70 and older. The pension proved to be extremely popular and the governor, Andrés Manuel López Obrador, left office with high satisfaction ratings. He left to campaign for the presidency, vowing to extend his universal pension scheme to the rest of the country. He was the only candidate to support a social pension in the 2006 presidential race. Although the promise of a universal pensions resonated with voters, Mr López narrowly lost to Felipe Calderón, who disliked non-contributory pensions in general, and universal pensions in particular.
Despite President Calderón’s opposition to social pensions, parliamentarians were able to launch the universal 70 y más pension scheme, providing monthly benefits of MX$500 (US$45) for rural residents aged 70 and over. In January 2012 the unthinkable happened – Calderón announced that he was extending the 70 y más scheme to urban Mexico. The target population (rural and urban) increased 75 per cent, to 3.5 million, even though the scheme now excluded those with earnings-related pensions, so was no longer universal.
In the meantime, 17 of Mexico’s 31 states had followed Mexico City’s lead by introducing social pensions on their own. Interestingly, the federal entities that introduced social pensions have little in common in terms of health, education, income or coverage by earnings-related pensions. Sub-national schemes also vary significantly in terms of coverage and benefit level. Interestingly, the only two federal entities to introduce universal pensions were, respectively, the most developed (Federal District) and the least developed (Chiapas).
By 2012 social pensions in Mexico had shifted from a marginal political issue supported by a single political party, to one supported by the presidential candidate of each major party. Enrique Peña Nieto promised to provide a pension to every Mexican from the age of 65. He won the election and, on assuming office, reduced the age of eligibility from 70 to 65 years.
Mexico has moved quickly from limited to near universal pension coverage. By the end of 2014 all resident citizens, and non-citizens with at least 25 years residency, from age 65 are expected to receive some sort of federal pension. This rapid expansion of pension coverage is commendable, but much remains to be done. In early 2014 nearly 1 million older people received no federal pensions, and the social pension of MX$580 (US$44) a month covered only half the cost of food needed for bare subsistence.
Larry Willmore is a Research Scholar at the International Institute for Applied Systems Analysis (IIASA) in Laxenburg, Austria. He has an MA in international affairs and a PHD in economics. Larry has published widely on globalisation and development issues, including old-age pensions. He blogs at Thought du Jour