Mexico Congress approves first key economic reform
MEXICO CITY (Reuters) - Mexico's Congress easily passed a bill to overhaul the government pension system on Thursday despite protests from leftists, fueling optimism for conservative President Felipe Calderon's reform agenda.
Calderon's National Action Party, or PAN, and three other parties voted 313 in favor of the bill, which introduces individual retirement accounts for public-sector workers. There were 146 votes against.
"This is important, Mexico will benefit from the reform, we will grow and public debt will be resolved," said head of the house finance commission Dep. Jorge Estefan of the Institutional Revolutionary Party, or PRI, which supported the bill.
Investors are keeping a close eye on the bill because Mexico's troubled public pension system could force growing deficits unless fixed.
Mexico's public-sector work force is aging, and pension contributions by new workers are not keeping up with obligations owed to new retirees.
Economists say the new pension plan would initially push the government to take on more debt to cover a funding gap, with a negative impact for up to 15 years before public finances improve.
Calderon's government says without the reform Mexico could run a budget deficit equivalent to 3 percent of gross domestic product by 2012. The government ran a small surplus in 2006 and has a balanced budget for 2007.
Leftists, who say the reform is bad for workers, took to the Congress podium during the debate brandishing placards and shouting slogans.
Outside the legislature, riot police used tear gas to break up a rowdy protest by thousands of trade unionists after a small group set fire to barricades and pelted police with stones.
The bill will go to the Senate for approval after further discussion in the lower house over individual articles.
The large margin the bill was passed by is good news for Calderon, who is determined to pass a package of economic reforms he says are necessary to boost growth and competitiveness in Mexico.
Calderon has at least for now won the support of the PRI, the third force in Congress. Combined, the PAN and the PRI have a majority in the lower house.
The main left-wing Party of the Democratic Revolution is the second largest voting bloc in Congress and expected to oppose most of the president's reforms, but has limited power while the PAN - PRI alliance holds.
A divided Congress blocked similar reforms, including labor and energy overhauls, proposed by Calderon's predecessor Vicente Fox.
