(Bloomberg) — Mexican President Andres Manuel Lopez Obrador presented a reform agreed upon with business leaders to overhaul the nation’s $266 billion pension system that requires companies to pay more toward employee retirement.
In a Wednesday morning press conference, the president said that the effort will stave off a retirement crisis. The bill would focus on boosting pensions for low-income workers and increase them for employees overall by 40%, Finance Minister Arturo Herrera said at the same event, talking alongside business, union and congressional leaders.
The plan mandates that employers more than double the amount they pay toward pensions to 13.87% of worker salaries. The deal was reached with top business leaders, signaling a rapprochement between the president and companies, which have fought with the government over the lack of fiscal stimulus and the administration’s cancellation of key investment projects in the country.
Not changing the system “would have caused a crisis, and those who would have suffered the most are the workers,” Lopez Obrador said in the press briefing. “For this reason, a commitment was made for a new pension system reform, and it had the support of the business sector and the labor sector.”
Among the key proposals is a reduction of the required weeks a person must work to have access to their pension in the first place. The government will lower the requirement to 750 weeks from 1,250 previously.
The move by Lopez Obrador is in keeping with his pledge to protect Mexico’s poor. A Finance Ministry presentation showed that workers who earned minimum wage will receive 103% of their salaries upon retirement, while those who make 5-times the minimum wage will receive 54%.
For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.