The private system, however, has several structural flaws that should be corrected in the near future if it is to provide workers with the right incentives. Chief among those flaws is the requirement to invest a minimum of 65 percent of workers’ savings in government instruments, a rule that is not consistent with the notion of pension privatization. Other flaws include prohibiting investment in equities or abroad; allowing the government agency that administered the old pay‐as‐you‐go system to establish a pension fund company while retaining some regulatory functions; prohibiting public‐sector workers from joining the new private system; and having the government subsidize every worker’s retirement account, a measure that politicizes the private pension system and weakens the link between individual efforts and rewards.
President Zedillo should use his remaining time in office to strengthen the new pension system so that Mexican workers can enjoy financial security and other benefits in their old age.
