20 Years On, No Golden Pond for Mexico's NAFTA Generation Retirees Kent Paterson - CIP Americas Program
go to original December 29, 2013

Twenty years after the promoters of the North American Free Trade Agreement (NAFTA) heralded a new age of prosperity, tens of millions of people in the member nations of the trinational trade and investment pact look forward to an impoverished retirement.  While in the United States and Mexico, huge segments of the working-age population could wind up with a retirement income - if any at all - befitting paupers, even in relatively better-off Canada the status of retirees is showing signs of slippage.

As all three NAFTA countries undergo workforce aging trends, the implications of a multinational retirement crisis in the coming years will be profound for the economic and social health of the region. Recent reports, including the one issued last month by the Organization for Economic Co-operation and Development (OECD), carry somber warnings for the futures of millions as they approach their golden years.

For U.S Senator Elizabeth Warren (D-Mass), the emerging retirement crunch is a “crisis that is as real and as frightening as any policy problem facing the United States today.”

Despite U.S. media fantasies of an emerging, vibrant Mexican “middle class,” the country is in the worst shape of the NAFTA states in the retirement category, according to the OECD report.  The study found that today’s Mexican workers will likely see a retirement income worth 28.5 percent of their average salary, which is an amount far lower than the OECD average of 54 percent.

According to the report, Mexico’s  retirement shortfall is even graver, when considering that nearly four out of ten workers had no retirement plan at all in 2010.  The high number, the study’s authors note, is reflective of the “great proportion” of informal employment in the country.

Another recent study by the MetLife insurance company reported that 63 percent of 434 fulltime Mexican workers surveyed expressed fears that their retirement income would be insufficient, while the percentage of Mexico workers who predicted they would have to work until age 71 doubled to 13 percent from a similar survey done in 2011.

In an interview, Elizabeth Flores, director of the Roman Catholic Church’s labor justice ministry in the border city of Ciudad Juarez, spoke about the dual laws governing Mexican retirements, the trend toward privatizing pensions, and the structural weaknesses of a system pushed by government and the financial industry since the late 1990s.

Flores said workers fall under either the pre-1997 law of benefits or a newer system of individual retirement accounts known as AFORES. A joint November 2013 report by the US-Mexico Chamber of Commerce and the federal taxation secretariat revealed that AFORES now total 49.86 million accounts valued at $152.24 billion, or 12.7 percent of Mexico’s GDP.

Although Mexican pensions are required to make minimum payments of 2000 pesos per month, or about $150, the AFORES accounts disappear when the money in them, which is dependent on worker contributions, is spent, Flores cautioned.

“With the salaries we earn, nobody can contribute,” Flores said. “The problem here is that nobody can save.”

Similar to some state programs, a proposal by the Pena Nieto administration to create a universal pension of about $84 per month for anyone over 65 years of age is currently awaiting final action in the Mexican Congress.  Flores likened such initiatives to charity,  adding that in cities like Ciudad Juarez a retiree needs at least quadruple the pension proposed by President Pena Nieto just to cover basic necessities.

Another big deficiency, she said, is with widows and survivors’ pensions.  Flores cited the October 24 explosion at the Blueberry candy factory in Ciudad Juarez that left eight male workers dead. The plant, which has a history of safety and environmental violations, makes candy for large U.S. retail chains.

According to the labor rights advocate, widows of the dead workers are only eligible for 40 percent of 70 percent of each deceased worker’s salary.  Additionally, up to three children are eligible for additional payments in the 20 percent range, as long as the total amount paid out does not exceed the sum total of the dead worker’s salary.

“What are the families going to do? How are they going to live?” Flores asked. “All the children are going to have to work.” Unless the families find lawyers willing to sue Blueberry, the survivors are basically on their own, the director of Ciudad Juarez’s Pastoral Obrera said.

“I think we’ve arrived to the situation of the Greeks, when the children of the slaves were slaves,” she added.

Read the rest at CIP Americas Program

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