AMLO's pension reform will cost up to 2% of GDP: Citibanmex

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AMLO's pension reform will cost up to 2% of GDP: Citibanmex

The pension reform that the Mexican President carried out, Andres Manuel Lopez Obrador, Costs presented on Monday can be up to 2% per year Gross domestic product (GDP) of the country, according to a report from the bank this Friday warned Citybanamex.

“Loss tax cost In addition to those already projected in the current situation, they could represent 430 billion pesos (about $25,161 million) in 2025 (1.3% of GDP), and that leads to 2% of GDP in less than 10 years. Will grow rapidly., Citibanamex noted in a report.

Although he has not yet given details, López Obrador will present the reforms next Monday, Constitution Day So that the employees retire with the same salary as they received while remaining active with the help of public resources.

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Wants to counter the President’s government reforms Ernesto Zedillo (1994–2000), who created in 1997 Retirement Fund Administrator (earlier), Private system inspired by the model of Chile.

But the Citibanmex report deemed the proposal unfeasible, citing differences between countries Organization for Economic Co-operation and Development (OECD)As it relates to Mexico, the average replacement rate is 60%, that is, retirees receive that percentage of their active salary.

The Bank’s Economic Studies Department said, “We consider it excessive to call for pensions to reach a level equal to 100% of a retiree’s final salary, as this is too costly financially and outweighs other pressing needs for social spending. ” ,

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CitiBanamex also warned about rising costs because Mexico’s population is still young, with a median age of 29, according to National Institute of Statistics and Geography (INEGI).

“The fiscal cost of the new measures, already anticipated from previous measures, will be explosive due to demographics,” the report warns.

Because it is constitutional, López Obrador’s proposal requires a two-thirds majority in Congress, where a coalition of opposition parties would be broad front for mexico has already announced its support for the reform, although without knowing the details yet.

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