Investment method in the Mexican pension system: consequences for economic growth and social inequalities
DOI:
https://doi.org/10.15584/nsawg.2025.1.7Keywords:
pension system, investment method, AFORE, Mexico, financial stabilityAbstract
The aim of the article is to present and analyze the application of the investment method in Mexico’s pension system and to assess its impact on economic growth, financial stability, social inequalities, and the level of pension benefits. Specifically, the article discusses how the diversity and efficiency of investment strategies implemented within the investment method by AFORE pension funds influence economic outcomes and social disparities. By comparing the investment performance of Mexican pension funds with international benchmarks, the study explores how effective asset management contributes to economic growth through capital accumulation and impacts inequalities by affecting retirement income distribution. The pension reform in Mexico, introduced in 1997, shifted the system from a pay-as-you-go to a defined contribution model managed by private funds (AFORE). While high investment returns can promote economic growth and reduce social inequalities by enhancing pension adequacy, poor investment decisions pose risks of financial instability, potentially exacerbating income disparities among retirees. Using empirical data, the article evaluates the effectiveness of the investment method used by AFORE in achieving balanced economic and social outcomes.
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