Thursday, July 07, 2005

I tried to warn them

Social security tensions are heating up again in Mexico. Over the last two months, I have been interviewing folks to update my book manuscript on social security policy in Mexico. Those interviews have been with IMSS (the equivalent of the U.S. SSA) representatives, leaders of the IMSS union and other unions, and business representatives. (Here are earlier posts on the issue.)

A central point of contention during the last three years has been the labor contract between the IMSS and its unionized workers (including doctors and nurses). Because the union failed to approve a revision to its pension scheme, the IMSS administration (with the support of other unions and employer organizations) sought a reform in 2004 to the social security law to modify the pension system for new workers and enable the IMSS administration to freeze hiring, if deemed necessary. Since the reform, the union sought an injunction against the law and the IMSS has stopped hiring new personnel until the dispute is resolved.

What was my warning? Well, based upon what I had learned from interviews, reading the news, and the history of privatizations in Mexico, I suggested to several of my interviewees that the August 2004 laid the ground work for the IMSS to harden its negotiations with the union and threaten bankruptcy of the IMSS if the union did not concede reforms to its labor contract. Social security union leaders suggested that I was exaggerating. We'll see.

Essentially, the IMSS administration with the support of unions and employers organizations have frozen hiring. This creates hardships for beneficiaries that have to wait longer for service, and the IMSS can blame the union for such delays. They point to delays in service and ask beneficiaries why the union should have such good benefits for such poor service. It's a campaign to move public opinion against the union.

Then, as part of its annual report to the Executive, last week the IMSS issued a report detailing the financial woes of the Institute. The major culprit, according to the report? The retirement scheme of the IMSS labor contract. The labor contract threatens the entire financial viability of social security, according to the report. [Nevermind decades of fiscal mismanagement under the PRI and a reform in 1995 that further weakened the financial resources of the IMSS.]

This fall, the labor contract between the Institute and its workers is set to be revised again. The union leadership is trying to convince its rank-and-file to accept a revision to their pensions, but the rank-and-file is fairly radicalized. In the press, the union leadership is criticizing the new financial report and the threats that IMSS will be bankrupt. Other unions have voiced their criticisms as well.

If we think about what Francisco Zapata has taught us about the process of privatization in Mexico, the IMSS case seems to share many characteristics with the government strategy to privatize state-owned enterprises during the Salinas regime. First, you try to reduce costs by negotiating new labor contracts. If the union resists, you threaten them with bankruptcy. In the end, the union often gives in. And if not, you bankrupt the enterprise, fire all the workers, and then sell the assets.

posted by Michelle @ 3:02 PM,

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