BBVA sees it as unfeasible to guarantee the last salary as a retirement pension in Mexico

Mexico City, Jan 17 (EFE).- Completely guaranteeing that Mexican workers’ pensions are equivalent to their last salary is unfeasible and could affect the country’s public finances, considered Carlos Serrano, chief economist of BBVA Mexico.

“Implementing a 100% replacement rate in the entire (Mexican) population is not fiscally viable and does not occur anywhere else in the world,” he said at a press conference.

The analysis comes after the proposal of the president of Mexico, Andrés Manuel López Obrador, who has announced that he will present a package of constitutional reforms, on February 5, which would include the proposal that the State pay for a worker to receive a pension comparable to your last salary upon retirement.

Even this morning, the Mexican president pointed out that they are going to obtain the resources that would be a contribution from the Mexican Government because they are going to “propose more republican austerity” and added that everything saved will be used for this purpose, with the aim that “not cost the people so much.”

However, Serrano estimated that the low withdrawal rates of those who retire in Mexico were addressed with a legal change in 2020, in which the contribution of employers to the retirement savings system of each Mexican worker was increased.

“There is a challenge in terms of the replacement rates of those who begin to retire under the new scheme, they are going to be very low. To a large extent that was already addressed with the 2020 reform because what was needed was to have higher contribution rates , that already happened,” he said.

He explained that this is a solution and it is necessary that it continue to increase, but above all, he highlighted that “public finances must be monitored”; although he emphasized that the greatest challenge will be to reduce informality in the country.

“A certain increase in the contribution rate is desirable, as long as public finances are monitored, and we believe that the main challenge in pensions, like other fiscal issues, is to reduce informality,” he commented.

In this sense, the chief economist of BBVA Mexico warned that just over half of the population that is in the informal economy will not have access to any type of contributory pension scheme if this factor is not addressed. EFE

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