MEXICO CITY (Reuters) – The finance committee of Mexico’s lower house of Congress on Wednesday approved a draft law by the ruling National Regeneration Movement (MORENA) that it says will give pension funds more flexibility in how to invest their portfolios.
The first proposal to reform Mexico’s pension system since President Andres Manuel Lopez Obrador took office on Dec. 1 could offer foreign investors more opportunities to tap into nearly $175 billion worth of pension savings.
However, critics cautioned the reform could also make it easier for Lopez Obrador’s leftist government to use savings to finance its planned infrastructure projects.
Marco Antonio Medina, a senior MORENA member of the lower house finance committee, said under the new law Mexican pension funds would have greater flexibility in their investment choices and be able to generate greater returns.
Most lawmakers in the committee backed the draft law on Wednesday, but some from the opposition said it needed modifications to ensure savings were properly protected.
Fernando Galindo, a lawmaker for the opposition Institutional Revolutionary Party (PRI), said clear rules needed to be established on what pension funds could invest in, especially when it came to infrastructure projects.
“They need to be profitable infrastructure projects and there must be an analysis of costs and returns,” in order to avoid “workers’ savings being used politically,” he said.
The centrist PRI and the center-right National Action Party (PAN), the biggest opposition group in Congress, want to amend the bill so that the Finance Ministry and the Bank of Mexico are consulted on the legislation and give their approval to it.
Financial inclusion is still low in Mexico. Only 31.3 million people, or 40 percent of the adult population, have formal retirement savings, a government survey in 2018 showed.
The bill now moves to the full lower house, where it can still be modified. If the measure passes, it goes to the senate.
Reporting by Stefanie Eschenbacher; Editing by Cynthia Osterman