Pensions, an unviable promise

Mexican President Claudia Sheinbaum and the teachers of the National Coordinator of Education Workers (CNTE) appear to be stuck in a dead end, despite the Mexican government's concessions to some of the teachers' demands.

As the days passed and dialogue between the parties broke down, their positions became polar opposites.

The Mexican president has clearly stated that repealing the 2007 ISSSTE Law would affect public finances.

It would affect social programs and public works, he said.

For its part, the teachers' union has not let up on its demands and has escalated its demonstrations and blockades.

The CNTE's most important demand is a return to the pension system that existed prior to 2007, based on years of service for retirement: 28 for women and 30 for men, rather than age.

The teachers' request stems from a campaign promise made by Sheinbaum.

He publicly offered to reverse the pension reforms of 1997 and 2007, which, he said, at the time condemned state workers and Social Security affiliates to miserable pensions.

In his speech, he asserted that "that was left behind, with neoliberalism."

"We are going to roll back," he reiterated, "the pension system approved by the Zedillo and Calderón regimes."

The origin of the demand for teaching positions is the presidential offer.

The teachers are asking me to comply.

Additionally, it should be remembered that former President Andrés Manuel López Obrador severely stigmatized the Afore system.

The political discourse, in the current government, has not changed.

Despite his political rhetoric, in practice, Lopez Obrador did not eliminate the private pension system. On the contrary, he strengthened it.

Under the 2020 reform, changes were introduced to improve the pensions of IMSS and ISSSTE workers under the individual account system.

This reform, plus the one from 2024, includes:

Increase in employer contributions (from 6.5% to 15% by 2030).

Reduction in contribution weeks (from 1,250 to 750). Cap on Afore commissions (from 0.92% to 0.57%).

Increase in the guaranteed minimum pension (up to 4,345 pesos on average).

Creation of the Pension Fund for Well-being to supplement pensions up to 100% of salary (capped at 17,364 pesos in 2025).

Use of the FPB to finance specific benefits, such as the forgiveness of FOVISSSTE loans and the freezing of the retirement age for teachers.

The Mexican president acknowledged yesterday in her morning press conference that the FPB partially returns to the solidarity pension scheme.

And that's precisely the issue behind the confrontation between teachers and governments. Teachers want a solidarity-based program, that is, one subsidized by the government.

But as the Chief Executive herself has acknowledged, repealing the 2007 ISSSTE Law would affect public finances.

In any case, the concessions the government has granted to teachers are already very expensive for public finances.

Sheinbaum said yesterday that freezing the retirement age for teachers costs 72 billion pesos!

The president did not elaborate, but to that amount would have to be added the costs of the other concessions she has given to teachers.

No official figure is known, but unofficial estimates calculate that the 9% increase in teachers' salaries, with an additional 1% starting in September, could be between 23 billion pesos and 36 billion pesos.

It's the largest salary increase in at least the last 40 years, reported Education Secretary Mario Delgado.

The cost of freezing Fovissste loans, whose figures are also unknown, would have to be added. Additionally, on March 18 of this year, the government withdrew the proposed ISSSTE Law, which it itself introduced, due to strong opposition from the CNTE.

Among other arguments, teachers opposed the reform because, in their view, it failed to fulfill the promise of returning to the pre-2007 pension system.

Ultimately, the source of the conflict is the political rhetoric against the Afores system and the promise to repeal the individual pension system. This political rhetoric is having a boomerang effect.

The demand for teachers is not economically viable, experts in the field have warned, and the president of Mexico has stated this publicly.

There will surely be political negotiations, but it seems very difficult for the Mexican government to give in to a request that would jeopardize the fulfillment of numerous and costly social programs.

In time.