Mexico: Financial Sector Assessment Program Update: Technical Note: Industrial Organization and Competition: Pension System in Mexico
IMF Staff Country Reports, May 15, 2007
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- Mexico: Financial Sector Assessment Program Update: Technical Note: Industrial Organization and Competition: Pension System in Mexico
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Bibliographic details
- Published: May 15, 2007
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451825725.002
Summary
- The technical note analyzes Mexico’s private pension system and notes that the private pension system’s regulator in Mexico has introduced innovate rules.
- Mexico has adopted an individual capitalization pension system, similar to many other countries in Latin America.
- The pension reform design confers administration of pension funds to private companies (AFOREs).
- Under these schemes, competition plays a key role in keeping prices low, ensuring good quality of service, and achieving efficient investment allocation.
Key findings
- Competition among private pension fund administrators is central to:
- Keeping prices low.
- Delivering a good quality of service.
- Promoting efficient investment allocation.
- The regulator has implemented innovative rules (described as “innovate rules” in the source) to govern the private pension system.
- The individual capitalization model delegates pension fund administration to private companies, making market structure and competition policy decisive for outcomes.
Policy implications and considerations
- Regulatory design should preserve and strengthen competitive forces among AFOREs to achieve low fees, high service quality, and efficient portfolio management.
- Oversight of commission structures, marketing costs, and firm-level cost factors (keywords referenced: commissions income, commissions income share, company marketing costs, cost AFOREs, cost firm, D. commission structure, equivalent commission, fee structure, marketing cost) is relevant for consumer protection and market functioning.
- Attention to demand elasticity and price controls may be important given the subjects listed (Demand elasticity; Price controls; Prices).
Subjects and keywords (as provided)
- Subjects: Aging, Competition, Demand elasticity, Economic theory, Expenditure, Financial markets, Pension spending, Population and demographics, Price controls, Prices
- Keywords: Aging, commissions income, commissions income share, company marketing costs, Competition, cost AFOREs, cost firm, CR, D. commission structure, Demand elasticity, equivalent commission, fee structure, high quality Afores, incumbent Afores, ISCR, marketing cost, Pension spending, Price controls, price escalation, prices low