MEXICO: Social Security on the Verge of Collapse

By IPS Correspondents Reprint | | Print |

Diego Cevallos

MEXICO CITY, Oct 12 2005 (IPS) - The union of Mexico’s Social Security Institute (IMSS) employees is involved in a battle with the government, legislators and business, defending the workers’ labour benefits and right to early retirement with attractive pensions, even though these privileges are dragging the social security system down.

The union of IMSS employees, which formed part of the corporatist social pact built up by the Institutional Revolutionary Party (PRI) in its 71 years in power (from 1929 to 2000), is threatening to go on strike if its labour and retirement benefits are touched.

The more than 360,000 workers and 122,000 pensioners are opposed to any modifications of the system whatsoever, arguing that they would usher in privatisation.

Spearheading the attempt to reform the social security system is the government of conservative President Vicente Fox, who in the first five years of his six-year term has failed to live up to his campaign pledge of modifying the IMSS.

He is supported in his determination by legislators who passed a law last year that would introduce changes in the IMSS with the aim of making it financially viable in the long term.

But the union warns that it will block the implementation of the reforms with a strike if necessary.

Oct. 14 is the deadline for the government to negotiate a new collective contract with the IMSS workers, who are demanding a 10 percent raise, and to put into practice the social security reforms approved by Congress last year.

“The government is going to find a way to back down in the face of the pressure from the union, because it is at the end of its term, and sparking social unrest is not in its best interest,” said financial analyst Sergio Palacios.

In an interview with IPS, he argued that the Fox administration has been timid when it comes to facing social or political pressure.

He recalled the case of a project to build an airport, which was defeated by social protests, as well as plans for structural legislative reforms proposed by the government, which were allowed to die when they came up against resistance or lack of support.. “The same thing will happen with social security,” said Palacios.

The IMSS workers, who contribute three percent of their wages to their pensions, can currently retire after 28 years of service regardless of their age, and draw pensions that are higher than their last paycheck.

No other worker in Mexico enjoys similar conditions, which are made possible by a subsidy paid by the state.

When the wages of IMSS workers increase, pensions rise accordingly. The average age of retirement among workers in the institute is 53 and the average monthly pension is over 1,000 dollars.

Conditions are very different for the majority of pensioners who never worked in the IMSS but paid part of their wages to obtain health services and a retirement pension. None of them can retire before the age of 65, and they receive a monthly pension of no more than 200 dollars.

If the reforms go into effect, new IMSS workers will only be hired after strict evaluations of their capacity and skills, and they will not enjoy the same pensions and early retirement benefits as the current workers and pensioners. Their payments towards the pension plan will also be higher.

But the IMSS employees are opposed to these changes, even though they will only affect new hires.

Roberto Vega, an IMSS union leader and a PRI legislator, argued that it would mark the start of privatisation.

Caught in the middle of the conflict are 16 million Mexicans and their families who use IMSS medical services, and the state coffers, which provided just over two billion dollars in 2004 to finance the costly pensions of retired IMSS workers.

That amount, which goes up every year, exceeds state spending on infrastructure and purchases of equipment and medicines for the IMSS itself. The authorities, meanwhile, point out that the institute is bankrupt.

It is true that retirement conditions in the IMSS are better than others, but that is not an argument to dismantle them, said Vega.

In an attempt to overcome the deadlock in negotiations with the union, the government appointed a new IMSS director early this month to replace Santiago Levy, who the workers had publicly rejected when he tried to eliminate some of their benefits.

Early this month, trade unionists painted “Levy, Jewish pig” and “If Hitler were living Levy wouldn’t exist” on the walls of an IMSS building in the capital.

The anti-Semitic incident and the aggressive stance taken by IMSS trade unionists, as well as their intransigent opposition to any changes in the social security system drew harsh criticism from analysts, business leaders and some legislators.

Business associations have suggested that the government requisition the IMSS installations and force the workers to accept the reforms.

But the government said it would continue seeking a negotiated solution.

“The Fox administration is going to retreat,” said Palacios. “We believe he is going to approve some kind of transitional arrangement that would stand in the way of changes in the IMSS, in order to avoid a huge labour conflict.”

The threatened strike would affect some 140,000 children who attend IMSS child care centres while their parents work. It would also have an impact on the services provided by 1,521 family medical clinics, 217 local hospitals and 10 national medical centres.

Activities would also come to a halt in 442 sports centres, 101 theatres, 2,606 stores and 260 funeral homes, among other services.

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