From the Pay-as-you-go System to the Contributory Pension System and IMSS Bienestar in Mexico: A Long Journey, a Dubious Long-term Solution

Abstract

This article provides a brief overview of Mexico's pension system, both contributory and non-contributory, from its inception to the present day. It notes that pension funding has become more urgent as the population pyramid flips, and that Mexico's reforms have not been long-lasting, at times even reversing progress for certain groups of retirees. The article traces the origins of social security in the Bismarck scheme in Germany and the Beveridge Plan in Great Britain, and follows the Mexican path from Article 123 of the 1917 Constitution and the 1925 Law of Civil and Retirement Pensions to the creation of the Mexican Institute of Social Security (IMSS) in 1943 and the ISSSTE in 1959, alongside separate systems for the armed forces, PEMEX, the electricity companies, some state universities and state and municipal governments. It then examines the pension reforms of 1995-1997 and 2007 and the reforms up to 2024, which established the non-contributory pension system in the Constitution together with government contributions in less affluent areas managed by Retirement Fund Administrators (AFORE), leading to an increasing use of fiscal resources. The hypothesis is that the current reforms are not definitive and that further progress is needed to ensure adequate pension levels from the AFOREs, balanced with investment in education, training, unemployment insurance and a robust public health system.

Abstract prepared by the editorial office from the full text of the article; the authors did not supply one.