Volume 45 Number 176,
January-March 2014

Crossroads, Prospects and Proposals for Social Security in Mexico, Berenice P. Ramírez and Roberto Ham Chande (coordinators), Mexico, unam-El Colef, 2012.

This book introduces some central aspects of the state of social security and an evaluation of pensions and health, making it a necessary read for anyone looking to gain perspective on these topics. It provides a tour through the origins of the social state, up through changes in the paradigm that have occurred in recent years, analyzing the effects on labor markets, demographics and social dimensions. This separates external factors from internal elements related to the concept of social security, forms of financing and implementation. Up until now, these factors have yet to be expressed in Mexico, in its attempt to build universal and adequate social security oriented towards reducing social inequalities.

The social security system in Mexico, primarily based on the imss, created in 1943, and the issste, in 1959, has excluded nearly 40 percent of the population. This is due “not only to the crisis of a social security system based on contributions related to the labor market that has led to reduced coverage, but also to the diverse concepts behind the formulation of public policy. What is the objective? To build social security as a mechanism of income redistribution or merely to overcome poverty?”

Including the excluded will require solving various difficulties, mainly by recognizing that social security in Mexico is granted on the basis of corporate profits, without considering future costs, changes in the labor market, income levels and population aging. This has led to a heterogeneous, disorderly and limited system that fails to protect the population as a whole. The pension system is facing diverse problems, especially in financial terms, as it is dependent upon contributions from workers, business owners and the State, which are very low.

These issues have led to crises in the system, and greater fiscal resources will be required in the near future to face these problems, which may put the nation's public finances at risk. The solution given to this financial pension problem was to reform the institutions involved. The imss was reformed in 1997 and the issste in 2007, going from systems based on defined benefits with public administration to defined contributions with private administration. The objective of this shift was to reduce the actuarial liabilitiesof the institutions, increase internal savings and support economic growth by providing good pensions. This last goal is not currently being met.

In 2011, an International Workshop was held to address the crossroads, prospects and proposals of the country's pension system, which gave rise to this book, focusing the discussion on: a) updating and evaluating social security in Mexico in terms of pensions and financing health care, b) proposing medium and long-term scenarios for pension costs, considering demographic dynamics, economic variables, the social context and changes in the labor market and c) identifying strategies to strengthen social security and social protection. A group of national and international experts invited by the unam, the wto, the eclac and El Colef gathered for the discussion, presented here in eight sections.

In the first topic, “The Basis of Social Security,” José Tortuero, Ana Sojo and Ángel Guillermo Ruiz respond to the questions: Has social security helped to improve the welfare and cohesion of society? Are the classic principles of social security still relevant or are new ideas necessary? What are the key ideas and arguments to strengthen social security?

In the second section, "How Far Mexico Has Come in Building Social Security," Carlos Soto, Carlos Barba and Guillermo Farfán address aspects that recount the consequences of a social security model with restricted universalism and limited coverage. They review how political interests have taken precedence over meeting social needs, describing social security contributions and the direction of reforms that institutions have faced since the 1990s.

The third topic, “The Economic, Demographic, Labor and Social Context,” with Juan Carlos Moreno, Jesús Davila, Roberto Ham Chande and Berenice Ramírez, analyzes the implications of reforms in an environment of low economic growth, the dismantling of the domestic market, population aging and labor market dynamics, which in large part determine the poor results of pension systems based on contributions.

For the fourth subject, “The Outcome of Pension Reforms,” Francisco Aguirre takes into account coverage, contribution densities, replacement rates and fiscal costs to precisely describe the diverse classes of Mexicans depending on the types of pensions they receive, as compared to those that receive no pension at all, and how this highlights the need to revise and adjust the current system. Pedro Ordorica, then-president of the Consar, believes that privately managed individual capitalization is the only and best system possible for Mexicans, which Alberto Valencia refutes, showing how profitability trends together with low contribution densities foretell a lack of pensions. José Luis Salas, Arturo Cásares and Francisco Gutiérrez look at the effect of social security on fiscal costs due to poor practices or ambiguous laws, and Enrique del Val reflects on the ways in which pensions should be comprehensive and universal, proposing the implementation of a basic citizen income.

The fifth section, in light of reforms in Mexico, develops the following topic: “What Happened in Similar Scenarios?" Francisca Moreno, Andras Uthoff, Marcelo Abi-Ramia Caetano and Fabio Bertranou analyze the effect of reforms to the welfare state, health and pensions in other situations. They believe that individual capitalization as the only pension system is inefficient for protecting the elderly and does not solve the financial problems of social security institutions.

Topic six, “The Health System in Mexico and Changes Towards Universalization,” by Assa Cristina Laurell, Luis Miguel Gutiérrez, Mariana López and Jairo Restrepo, analyzes the two models implemented in Mexico to make health care universal: one is voluntary and the other is based on contributions. They are affected when the variable of aging is introduced, which greatly exacerbates the problems of the health system. The authors introduce modifications made to the Colombian health system to provide a better idea of what has been done in other places.

The two chapters that follow relate to the challenges of social security. The questions they pose include: What is strengthened? Social security or social protection? Social security based on contributions or social security of citizen rights? What model of financing? Various perspectives contribute here: Fausto Hernández, Andras Uttoff, Javier Moreno Padilla and Pedro Vásquez Colemnares. The text ends by considering a different social pact that would lead to solid and widespread social security, with contributions from Rolando Cordera and Francisco Juárez, closing with a comprehensive perspective and proposals from José Narro Robles, Rector of the unam.

Cruz Álvarez
Institute of Economic Research – unam

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Published in Mexico, 2012-2018 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 194 July-September 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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