The Federal Electricity Commission (CFE) has offered to reinstate generous retirement conditions for workers as long as their union agrees not to interfere in the management of the state-run company.
During negotiations to reach a new collective agreement, CFE director Manuel Bartlett presented an offer to bring back the retirement scheme that existed prior to 2016, under which male workers could retire with full pensions at the age of 55 if they had completed 25 years of service and at any age if they had completed 30 years.
Male workers currently have to complete 30 years of service and reach the age of 65, or 40 years of service without any age limit, in order to retire with full benefits.
Women could previously retire at any age with full benefits as long as they had completed 25 years of service whereas they now have to reach 30 years of service to retire at 60, or 35 years of service to retire at any age.
If the Electrical Workers Union of the Mexican Republic, or SUTERM, accepts Bartlett’s offer it will have to give up its spot on the CFE board, effectively allowing the federal government to have full control of the company.
In a letter to SUTERM general secretary Víctor Fuente del Villar, the CFE director made it clear that the “fundamental premise” of the offer is that the union must not intervene in the management of the public utility.
“[The CFE] must have an organization, management and structure that guarantee its technical and administrative autonomy in order to obtain the best results,” Bartlett wrote, adding that its internal decision-making bodies must have the freedom to act independently.
While having complete control of the CFE may look very attractive to the government, two experts warn that changing retirement conditions will come at a significant financial cost.
Carlos Ramírez, a consultant who formerly headed up the National Commission for the Pension System, told the newspaper El Economista that retirement reform at the CFE allowed the company to reduce its pension liabilities.
He said that returning to the scheme that existed before 2016 will increase costs for the federal government, which is responsible for paying the pensions of former CFE and Pemex workers.
If SUTERM takes up Bartlett’s offer and the retirement scheme reverts to what is was pre-2016, ratings agencies and CFE bondholders won’t be at all happy because the company will be financially weakened, Ramírez added.
Gerardo López, a pensions expert at the Panamerican University, said that going back to the old retirement scheme would not only hurt public finances but represent a “step backward” for the government.
“It’s a bad precedent that’s being set because when the decision was taken to modify the CFE pensions system, it was achieved through agreements with the workers and their unions in order to fix the faults of the previous system,” he said.
At the end of 2019, the CFE had pension liabilities of just under 159 billion pesos (US $8.2 billion), 56% higher than Pemex’s liabilities of 101.5 billion pesos.