Mexico

March 22, 2007

Mexico's lower house of Congress passed a pension reform bill for state workers amid protests and catcalls by leftist lawmakers Thursday, the first major reform approved under conservative President Felipe Calderon.

The bill has been welcomed by investors, who see in it as a positive sign that Calderon, who took office Dec. 1, 2006 , is able to build agreements in Congress where his National Action Party is the biggest party but lacks a majority.

However, it has been opposed by some state workers and the leftist Democratic Revolution Party or PRD , who say it amounts to a privatization of the pension scheme.

About 500 protesters gathered outside Congress and some threw stones at federal police and burned a wooden fence. Police responded by firing tear gas and the crowd dispersed.

Inside the house, PRD lawmakers shouted catcalls and climbed onto the main stage holding banners with slogans against the law.

The 500-member lower house voted 313-146 with two abstentions in favor of the bill, which also has to be passed by the Senate.

The reform, which has the support of the ruling National Action Party, or PAN, the Institutional Revolutionary Party, the Green Party and the New Alliance party.

The pension bill calls for government workers to switch from the current system of defined benefits to one of individual accounts with defined contributions, and to gradually raise the retirement age to 60 from 50.

A new pension fund manager called Pension ISSSTE (Institute of Social Security for Government Employees) would be set up, similar to the Afores which handle pension funds under a reform carried out 10 years ago for private sector workers. Pension ISSSTE would be a public sector institution, with union representation on the board.

The changes in the system are aimed at confronting growing liabilities at the institute, which will require increasing amounts of budget funds to meet its pension and health service requirements.

ISSSTE covers 2.8 million workers and retirees, and provides health services for 10 million beneficiaries.