"The Great Pension Reform": AFOREs and the Future of Privatized Retirement in Mexico

In 1997, a new privatized, government-mandated retirement system came into existence in Mexico. Within this system, private companies called Administradoras de Fondos de Retiro (AFORE) manage pension funds for workers who joined the labor force on or after July 1, 1997. Each worker chooses an AFORE to receive the 6.5% of wages paid by his/her employer and the government contributes another 5.5% of the indexed minimum salary on the behalf of each worker. Funds are generated by accumulation of contributions by the individual and by the yield from investment by the AFORE. This article analyzes the contribution and impact AFORE will make on Mexico.