July 2, 2018 / 4:06 PM / 4 months ago

Exclusive - Pensions and Pemex to figure in Lopez Obrador's Mexico plans

MEXICO CITY (Reuters) - Mexico’s next president, Andres Manuel Lopez Obrador, supports ideas such as creating a fiscal committee for prudent economic management, reforms of pensions and cost-cutting at state-owned oil firm Pemex, a senior aide told Reuters.

The leftist Lopez Obrador won a landslide victory on Sunday, besting a four-candidate field with more than 53 percent of the vote in preliminary results. In the elections for Congress, his MORENA party and its allies could win majorities in both chambers, according to projections based on results still trickling in.

Carlos Urzua, Lopez Obrador’s pick to be his finance minister when he takes office on Dec. 1, told Reuters on Monday that the new government will aim to reform the pension system and to reduce costs at Pemex during its six-year term.

Mexico introduced an individually funded, private pension system in the 1990s, but it still retains a significant public pension scheme that has mounting liabilities.

“The pension problem accelerates with time,” Urzua said, citing deep pension troubles in Brazil. He declined to detail the kind of pension reform the future government was contemplating.

“We have to be very responsible and try to resolve the situation in Mexico,” said Urzua, who describes himself, and Lopez Obrador, as fiscal conservatives.

Urzua, a 62-year-old University of Wisconsin-trained economist, spoke to Reuters along with two other advisers to Lopez Obrador, fellow economist Gerardo Esquivel and World Bank governance official Arturo Herrera.

Tapen Sinha, a professor at Mexico’s ITAM University who specializes in risk management and pension funds, said the current government spends between 20 percent and 25 percent of the federal budget on social security, and that under his calculations, that will double by 2032 if nothing is done.

“There are just two ways of dealing with this, one is to increase taxes, the other is to reduce benefits,” he said.

Lopez Obrador promised after his victory on Sunday to increase a welfare programme for the elderly, a move likely to increase liabilities.

FISCAL COUNCIL

Urzua, who served as Lopez Obrador’s finance secretary during the first few years of his 2000-2005 term as mayor of Mexico City, said another priority was to reduce costs at Pemex. The goal is to make it a world class company, he said.

Lopez Obrador’s team will study labour costs as well as clamping down on corruption in Mexico’s largest company.

Urzua said the new government was open to proposals that Mexico create a fiscal council to help control deficits and budget spending.

Globally, there has been a trend towards independent fiscal councils in recent years, to constrain policymakers’ discretion and curb the bias towards excessive deficits.

Urzua cited the U.S. Congressional Budget Office as a potential model to follow, pointing out that it was a non-partisan body.

Mexico's next President Andres Manuel Lopez Obrador addresses supporters, in Mexico City, Mexico July 1, 2018. Picture taken July 1, 2018. REUTERS/Edgard Garrido

“We would not want this organism to be any way partisan,” he said.

Urzua suggested the fiscal council could be run by Congress and be called a budget office.

Mexican business group Coparmex called last year for the creation of a strongly independent body to counter the tendency of Congress to approve expansive budgets.

Reporting by Ana Isabel Martinez and Stefanie Eschenbacher; Additional reporting by Christine Murray; Writing by David Alire Garcia; Editing by Frances Kerry; Editing by Frank Jack Daniel and Frances Kerry

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