PensionReforms' summary and comments
Mexico City is one of only a few cities in the world that have a retirement income policy that differs from the country's: Baoji City in China is another - see here.  PensionReforms has already noted one look at the Mexico City arrangements - see here.

This report looks at the background to Mexico City's 2001 decision to 'go it alone'.  It's a master's thesis that deserves wider circulation than it has received to date (only one Google result for a search on the report's title). The report attempts to explain why the 2001 change happened and also why it didn't happen earlier.

The city's decision was against the backdrop of a national, Chilean-based, compulsory savings scheme at Tier 2, that started in Mexico in 1997, as described here.  As explained there, only 30% of workers were covered by Tier 2 in 2000.

"After the mid-term elections, in late 2003 [2001?], the universal pension was passed into law, and since then, it has provided almost all residents 70 years of age and older a monthly pension (going from 76.4% coverage in 2001 to 95.5% by 2006), of half the minimum wage indexed to inflation, through the equivalent of an ATM card."

The main reason for starting the non-contributory, universal old-age pension (Pensiòn Alimentaria Ciudadana para Adultos Mayores or PACAM) in 2001 seemed to be political or, as the report puts it "because local state actors furthered their interests with it."  However, there was some background here: the reducing power of the state and the "slow but constant process of political and administrative decentralization".  That manifested itself in the establishment of Mexico City's own representative government in 1997.  That began what the report describes as "territorial political competition in Mexico".

However, there remains a political mystery about the reasons for starting PACAM:

"One of the striking aspects of the PACAM is that there were very few, if any, non-state actors [that] promoted such policy.  Previous to the establishment of the pension, there were no NGOs that promoted, no indication that labor unions, or other organized interest groups apart from party politicians, were involved in a discussion about establishing a non-contributory pension.  The only institution, which seemed to discuss a non-contributory universal pension was the Consejo Nacional de Población (CONAPO) a government institution dedicated to demographic forecasts and studies..."

The report suggests that the political actors had to appeal to a broad part of the electorate (in this case Mexico City) to gain general political support.  In this situation, the universal pension dovetailed neatly with the universal right to vote.  PACAM, as the report notes, has had "permanent political success".  And the relative economic strength of the city, by comparison with the problems endured by the country, helped to cement the closer relationship between the city and its residents.

"The PACAM is not a poor relief program since it has never been argued as a program aimed uniquely at poverty reduction, but as a citizenship right, linked to old age and not to income or employment."

The report suggests an international relevance for Mexico City's experience:
"The international element affecting the future transformation of the Mexican nation-state is what makes the lessons from the experience in Mexico City relevant for other countries and other global cities.  The changes in relative capacity between nation-states and local states make cities a more relevant global actor now than ever.  The universal pension in Mexico City may just be the tip of an iceberg formed by other city level adaptations to international and national changes regarding social policy, the state and citizenship."

PensionReforms wonders about that.  The local pension initiatives in Mexico City and Baoji City in China seem very particular as to their detail and at least partly similar as to outcomes.  In Mexico City, that was perhaps a function of the changed democratic environment described in the report.  But that wouldn't explain the case of Baoji City where the diversions of democracy aren't an issue.

What goes unexplained in the report is why other local Mexican administrations have not repeated the Mexico City experiment. Perhaps democracy is less well established in other parts of Mexico. (File size 9.8 MB; 117 pp) 382

The file is an imaged document.