Workers and Welfare : Comparative Institutional Change in Twentieth-Century Mexico [1 ed.] 9780822973638, 9780822960454

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P I T T L AT I N A M E R I C A N S E R I E S John Charles Chasteen and Catherine M. Conaghan, Editors

C O M PA R AT I V E I N S T I T U T I O N A L C H A N G E IN T WENTIETH-CENTURY MEXICO

Michelle L. Dion

UNIVERSITY OF PITTSBURGH PRESS

Published by the University of Pittsburgh Press, Pittsburgh, Pa.,  Copyright © , University of Pittsburgh Press All rights reserved Manufactured in the United States of America Printed on acid-free paper          

Library of Congress Cataloging-in-Publication Data Dion, Michelle L. Workers and welfare : comparative institutional change in twentieth-century Mexico / Michelle L. Dion. p. cm. — (Pitt Latin American series) Includes bibliographical references and index. ISBN ---- (pbk. : alk. paper) . Public welfare—Mexico—History—th century. . Labor unions—Mexico— History—th century. . Mexico—Social conditions. I. Title. HV.D  .'—dc 

Parts of chapter  were previously published as “The Political Origins of Social Security in Mexico during the Cárdenas and Avila Camacho Administrations,” Mexican Studies , no.  (winter ): –.

CONTENTS

List of Abbreviations

vii

Preface and Acknowledgments

xiii

 Introduction: The Rise and Reform of Welfare



 The Building Blocks of Welfare Regimes: Class Coalitions and Institutions



 The Early Struggle for Welfare: From the Revolution through the World Wars



 The Expansion of Welfare: The Mid-Century Efforts of Organized Labor and Professionals



 Retrenchment and Reform: Late-Century Effects of Globalization and Democratization



 Modeling Welfare Development: A Time-Series Analysis



 Paradigm Shift: Welfare Reform after Democratization



 Targeted Assistance: Two Decades of Welfare Expansion



 Mexico in Comparative Perspective: Welfare Development in Chile, Argentina, and Brazil



Notes



References



Index



ABBREVIATIONS

Spanish acronyms for organizations in this list refer to entities in Mexico unless otherwise indicated. ADEBA (Argentina): Asociación de Bancos Argentinos (Association of Argentine Banks) Afores: Administradoras de Fondos para el Retiro (retirement funds administrators) AGN: Archivo General de la Nación AHIMSS: Archivo Histórico del Instituto Mexicano del Seguro Social ANEIT: Asociación Nacional de Empresarios de la Industria Textil (National Association of Textile Industry Entrepreneurs) AOTE: Alianza de Organizaciones de Trabajadores del Estado (Alliance of State Worker Organizations) ARCH: autoregressive conditional heteroscedasticity AUGE (Chile): Acceso Universal de Garantías Explícitas [Plan of ] Explicit Guarantees of Universal Access BNSE (Argentina): Bono Nacional Solidario de Emergencia (National Emergency Solidarity Bonds) BUO: Bloque de Unidad Obrera (Worker Unity Block) CAE: Country Assistance Evaluation CANACINE: Cámara Nacional Cinematográfica (National Chamber of Cinematography) CANACINTRA: Cámara Nacional de la Industria de Transformación (National Chamber of Manufacturing Industry) CAP (Brazil): Caixa de Aposentadoria e Pensões (Pension and Retirement Funds) CCE: Consejo Coordinador Empresarial (Business Coordinating Council) CEDESS: Centro de Desarrollo Estratégico para la Seguridad Social (Center for the Strategic Development of Social Security) CGOCM: Confederación General de Obreros y Campesinos de México (General Confederation of Mexican Workers and Peasants) CGT: Confederación General de Trabajadores (General Confederation of Workers) CGT (Argentina): Confederación General del Trabajo de la República Argentina (General Confederation of Labor)

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CM (Chile): Colegio Médico de Chile (College of Physicians of Chile) CMHN: Consejo Mexicano de Hombres de Negocios (Mexican Council of Businessmen) CMM: Cámara Minera de México (Mexican Mining Chamber) CNC: Confederación Nacional Campesina (National Peasant Confederation) CNE: Cámara Nacional de Electricistas (National Chamber of Electricians) CNOP: Confederación Nacional de Organizaciones Populares (National Confederation of Popular Organizations) CNTC: Cámara Nacional de Transportes y Comunicaciones (National Chamber of Transportation and Communication) CNTE: Coordinadora Nacional de Trabajadores de la Educación (National Coordinator of Education Workers) COCM: Confederación de Obreros y Campesinos de México (Mexican Confederation of Workers and Peasants) CONAGO: Conferencia Nacional de Gobernadores (National Conference of Governors) CONCAMIN: Confederación de Cámaras Industriales (Confederation of Chambers of Industry) CONCANACO: Confederación de Cámaras Nacionales de Comercio e Industria (Confederation of National Chambers of Commerce and Industry) CONSAR: Comisión Nacional del Sistema de Ahorro para el Retiro (National Commission of the Retirement Savings System) COPARMEX: Confederación Patronal de la República Mexicana (Mexican Employers’ Confederation) CPN: Confederación Proletaria Nacional (National Proletariat Confederation) CROC: Confederación Revolucionaria de Obreros y Campesinos (Revolutionary Confederation of Workers and Peasants) CROM: Confederación Regional Obrera Mexicana (Regional Confederation of Mexican Workers) CT: Congreso del Trabajo (Labor Congress) CTA (Argentina): Central de los Trabajadores Argentinos (Argentine Workers’ Center) CTM: Confederación de Trabajadores de México (Confederation of Mexican Workers) EAP: economically active population EZLN: Ejército Zapatista de Liberación Nacional (Zapatista Army of National Liberation)

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FAIS: Fondo de Aportaciones para la Infraestructura Social (Fund for Contribution for Social Infrastructure) FCE: Fondo de Cultura Económica FDI: foreign direct investment FDSM: Fondo de Desarrollo Social Municipal (Fund for Municipal Social Infrastructure) FEDESSP: Federación Democrática de Sindicatos de Servidores Públicos (Democratic Federation of Unions of Public Servants) FIEL: Fundación de Investigaciones Económicas Latinoamericanas (Foundation of Latin American Economic Research) FISM: Fondo para la Infraestructura Municipal (Fund for Municipal Infrastructure) FNP: Frente Nacional Proletario (National Proletarian Front) FNTE: Federación Nacional de Trabajadores del Estado (National Federation of State Workers) FOBAPROA: Fondo Bancario de Protección al Ahorro (Banking Fund for the Protection of Savings) FORA (Argentina): Federación Obrera Regional Argentina (Argentine Regional Workers’ Federation) FOSIS (Chile): Fondo de Solidaridad e Inversión Social (Solidarity and Social Investment Fund) FRHCB (Argentina): Fondo de Reparación Histórica del Conurbano Bonaerense (Buenos Aires Province Historic Repair Fund) FSROC: Federación de Obreros y Campesinos de México (Federation of Workers and Peasants of Mexico) FSTSE: Federación de Sindicatos de Trabajadores al Servicio del Estado (Federation of Government Workers’ Unions) FTDF: Federación de Trabajadores del Distrito Federal (Federation of Federal District Workers) FUNSALUD: Fundación Mexicano para la Salud (Mexican Foundation for Health) FUPDM: Frente Único Pro Derechos de la Mujer (United Front for Women’s Rights) IADB: Inter-American Development Bank IAP (Brazil): Institutos de Aposentadoria e Pensões (Pension and Retirement Institutes) IAPB (Brazil): Instituto de Aposentadoria e Pensões dos Bancários (Pension and Retirement Institute for Bank Employees)

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IMF: International Monetary Fund IMSS: Instituto Mexicano del Seguro Social (Mexican Institute of Social Insurance) IMSS-COPLAMAR: Coordinación General del Plan Nacional de Zonas Deprimidas y Grupos Marginados (IMSS Social Solidarity Program) INEGI: Instituto Nacional de Estadística, Geografía e Informática (National Institute of Statistics and Geography) INFONAVIT: Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Institute of the National Fund for Workers’ Housing) ILO: International Labor Organization IMF: International Monetary Fund INPS (Brazil): Instituto Nacional da Previdência Social (National Institute of Social Insurance) IO: international organization ISAPREs (Chile): Instituciones de Salud Previsional (private health-care funds) ISI: import substitution industrialization ISSSTE: Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (Government Workers’ Social Security and Services Institute) LOPS (Brazil): Lei Orgânica da Previdência Social (social security law) MRM: Movimiento Revolucionario de Maestros (Revolutionary Teachers’ Movement) MUNJP: Movimiento Unificador Nacional de Jubilados y Pensionados (National Unified Movement of Retirees and Pensioners) NAFTA: North American Free Trade Agreement OECD: Organization for Economic Co-Operation and Development PAN: Partido Acción Nacional (National Action Party) PAN (Argentina): Programa Alimentario Nacional (National Nutrition Program) PANAL: Partido Nueva Alianza (New Alliance Party) PAP (Argentina): prestación adicional por permanencia (defined-benefit public pension) PBU (Argentina): prestación básica universal (universal basic pension) PC (Argentina): prestación compensatoria (compensatory pension) PMDB (Brazil): Partido do Movimento Democratico Brasileiro (Brazilian Democratic Movement Party) PNR: Partido Nacional Revolucionario (National Revolutionary Party) PRD: Partido de la Revolución Democrática (Party of the Democratic Revolution) PRI: Partido Revolucionario Institucional (Institutional Revolutionary Party) PRM: Partido de la Revolución Mexicana (Party of the Mexican Revolution) x \            

PROGRESA: Programa de Educación, Salud y Alimentación (Program of Education, Health, and Nutrition) PRONASOL: Programa Nacional de Solidaridad (National Solidarity Program) PT: Partido del Trabajo (Labor Party) SAI: Servicios de Investigaciones y Análisis (Service for Investigation and Analysis) SAM: Sociedad Agronómica Mexicana (Mexican Association of Agronomists) SAR, Ley del: Ley del Sistema de Ahorro para el Retiro (Retirement Savings System Law) SECAL: Sector Adjustment Loan SEDESOL: Secretaría de Desarrollo Social (Secretariat for Social Development) SERMENA (Chile): Servicio Médico Nacional para Empleados (National Medical Service for Employees) SHCP: Secretaría de Hacienda y Crédito Público (Secretariat of Finance and Public Credit) SITS: Sindicato de la Industria Textil y Similares (Textile Industry Union) SITTFD: Sindicato Independiente de Trabajadores Textiles de Fibras Duras (Independent Union of Hard Fiber Textile Workers) SME: Sindicato Mexicano de Electricistas (Mexican Electricians’ Union) SNS (Chile): Servicio Nacional de Salud (National Health Services) SNTE: Sindicato Nacional de Trabajadores de la Educación (National Union of Education Workers) SNTISSSTE: Sindicato Nacional de Trabajadores del ISSSTE (National Union of ISSSTE Workers) SNTSS: Sindicato Nacional de Trabajadores del Seguro Social (National Union of Social Insurance Workers) STFRM: Sindicato de Trabajadores Ferrocarrileros de la República Mexicana

(Mexican Railroad Workers’ Union) STMMSRM: Sindicato de Trabajadores Mineros y Metalúrgicos y Similares de la República Mexicana (Mexican Union of Miners and Metal Workers) STP: Sindicato de Trabajadores Petroleros (Petroleum Workers’ Union) STPS: Secretaría de Trabajo y Previsión Social (Secretariat of Labor and Social Welfare) STRM: Sindicato Telefonistas de la República de México (Telephone Workers’ Union of Mexico) STUNAM: Sindicato de Trabajadores de la Universidad Nacional Autónoma de México (National Autonomous University of Mexico Workers Union) UAN: Unión Agrícola Nacional (National Agricultural Association)

            / xi

UCR (Argentina): Unión Cívica Radical (Radical Civic Union or Radical Party) UGOCM: Unión General de Obreros y Campesinos de México (General Union of Mexican Workers and Peasants) UGT (Argentina): Unión General de Trabajadores (General Union of Workers) UI: unemployment insurance UNAM: Universidad Nacional Autónoma de México (National Autonomous University of Mexico) UNS: Unión Nacional Sinarquista (National Synarchist Union) UNT: Unión Nacional de Trabajo (National Labor Union)

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PREFACE AND ACKNOWLEDGMENTS

I   of Latin America, where regime instability and military interventions in government are common, Mexico is usually set aside as a special case because one party remained dominant and thus provided stability during most of the twentieth century. Despite the particularities of the Mexican regime, the origins and development of Mexico’s welfare policies are similar to the origins and development of welfare regimes elsewhere in Latin America and even in some advanced industrialized democracies. Welfare policy is a window through which we can both better understand the dynamic development of class coalitions that undergird regime legitimacy in Mexico and highlight the ways in which the Mexican experience is not idiosyncratic. To both explain the development of welfare policies in twentieth-century Mexico and provide insight into the coalition of class support for the state, this book combines qualitative historical comparisons with a quantitative analysis of welfare coverage in Mexico to evaluate competing theoretical explanations of welfare state development. The final chapter compares Mexico to Chile, Argentina, and Brazil to illustrate the portability of the theoretical insights of the study. This combination of various analytical and methodological approaches requires a variety of sources for empirical data. The qualitative analysis goes beyond Mexican historiography in English and Spanish and includes a variety of primary documents as sources. Primary materials from the Mexican National Archives (Archivo General de la Nación, or AGN) supplemented documents from the historical archives of Ignacio García Téllez at El Colegio de México and of the Mexican Institute of Social Insurance (Instituto Mexicano del Seguro Social, or IMSS), all in Mexico City. Additional primary documents, newspapers, and magazines were accessed at libraries or archives of the Confederation of Mexican Workers (Confederación de Trabajadores de México, or CTM), the Secretariat of Labor and Social Welfare (STPS), Vicente Lombardo Toledano, the National Action Party (Partido Acción Nacional, or PAN), and the Party of the Democratic Revolution (Partido le la Revolución Democrática, or PRD) in Mexico City, as well as the Benson Latin American Collection at the University of Texas at Austin. For the recent period, key informants provided copies of several primary documents. The documentary data were supplemented with open-ended, face-to-face interviews conducted in

xiii

– and – with a wide range of key informants, including current and former labor and business leaders, bureaucrats, and politicians from the main political parties. The author was fortunate enough to interview several individuals, including a former finance minister of the s, who were central to the development of welfare policies as far back as the s. As with all large projects, this one would not have been possible without considerable guidance, support, and help from many people along the way. First and foremost, Evelyne Huber guided the early development and execution of the project and has continued to be a generous mentor. Perhaps most important, Evelyne, through her high standards, meticulous and rigorous research, professionalism, and generosity, continues to be an important professional and personal role model. John Stephens spent more than his fair share of effort and time reading my work and offering precise suggestions. Jonathan Hartlyn shaped my training by asking rigorous and sometimes pointed questions, often forcing me to be more precise than I might otherwise have been. While I dreaded those questions then, I am grateful now for having been asked them. Francisco Zapata facilitated access to the personal archives of Ignacio García Téllez, maintained by El Colegio de México, and also provided crucial guidance and encouragement. Vicki Birchfield, Sarah Brooks, Christina Ewig, Mark Hallerburg, Nate Kelly, Scott Morgenstern, Steve Kay, and Steve Wuhs provided feedback or commented on chapters at different stages of this book’s development. Rodolfo Stavenhagen, Alejandro Villagómez, and Guillermo Rosas introduced me to distinct Mexican academic enclaves. Numerous secretaries, librarians, politicians, bureaucrats, and academics in Mexico (some of whom are not in the list of interviews) were gracious with their time, patience, and information. Raúl Madrid and Sarah Brooks offered contact information for some interviewees. Some of the data used for the statistical analyses in chapter  were provided by Matthew Cleary. In , Chrístal Rosales provided research assistance in Mexico City. Rose Spalding (unwittingly) provided an excellent example in her dissertation on roughly the same topic, which she completed in the late s at the University of North Carolina. This project would not have been completed without the financial support of a number of agencies and institutions: an International Predissertation Fellowship from the Social Science Research Council, with the support of the Andrew Mellon Foundation; a Off-campus Dissertation Grant from the University of North Carolina Graduate School; an International Dissertation Research Fellowship from the Social Science Research Council, with the support of the Ford

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Foundation; and a García Robles–Fulbright Faculty Scholar Award. The Centro de Estudios Sociológicos at El Colegio de México (–) and the División de Estudios Políticos at the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City (–, –) both provided invaluable affiliations while I conducted fieldwork in Mexico City. Francisco Zapata (El Colegio de México), Benito Nacif (CIDE), and Andreas Schedler (CIDE) deserve special thanks for arranging my affiliation and being gracious hosts. For their friendship during various periods of fieldwork in Mexico, I thank Estela Arredondo, Allyson Benton, Liz García Hernández, Joy Langston, Benjamin Nieto, and Allison Rowland. At Georgia Tech, my colleagues in the Sam Nunn School of International Affairs have been a source of great support and friendship —particularly Vicki Birchfield, Kirk Bowman, Molly Cochran, Sylvia Meier, and Katja Weber. For her superb editing skills, I thank Nancy Condon. For their support, encouragement, and sometimes impatience with all the time I spend working, I am grateful to the Griffin family, Mike Dion, and Dar Rice. My mom, Willi Dion, deserves special recognition for doing everything possible to help me follow my dreams—including babysitting a rather large dog and three cats during our various stints in Mexico. Her generosity and love always exceed my expectations. Finally, I cannot thank my partner, Brian Griffin, enough for all of his support. He’s given up a lot to see this book finished and has been cheering me on for the duration. Though it is in no way equal to either the love and support he has given me or my devotion to him, this book is dedicated to him.

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INTRODUC T IO N The Rise and Reform of Welfare

I   half of the twentieth century, the most economically advanced Latin American countries established extensive welfare institutions for government and industrial workers. By mid-century, social insurance, including extensive pension, health, and workers’ compensation programs, protected formal sector workers, or those in the regulated labor market, in most Latin American countries. These welfare institutions are often central to the fabric of political life. The debt crisis of the s ushered in a new economic orthodoxy, however. Most countries began making substantial efforts to reform their social insurance institutions, with varying degrees of success. Public pension reform, including privatization, was the most notable trend, though public health insurance was also targeted for reform. Given the political significance of these welfare institutions, their reform was—and is, where reform efforts are ongoing—highly contentious. Few studies have systematically examined the political origins and historical development of these welfare institutions, despite their centrality in Latin American politics.₁ This lacuna is conspicuous compared to the extensive comparative literature on similar welfare institutions in the advanced industrialized economies 

of Western Europe and North America. Because the political and economic trajectories of Latin American countries differ from those of the advanced industrialized democracies, it is important to understand the ways in which the politics of welfare are similar to and different from the experiences of the developed world. This book begins to fill this gap in our understanding of the dynamics of welfare policy in Latin America through a comparative historical analysis of social insurance institutions in Mexico since the Mexican Revolution (–). The study of welfare in Mexico provides a good opportunity to deepen our understanding of the politics of welfare throughout Latin America because the Mexican case suggests a number of interesting theoretical puzzles. For instance, why would a country that was predominantly agrarian in the s opt to invest considerable political and economic resources in welfare institutions that benefited a small, but growing, number of primarily urban industrial workers? If the creation and expansion of welfare in Europe is associated with the expansion of worker suffrage and the consolidation of democracy at the turn of the twentieth century, why were welfare institutions created in Mexico during the consolidation of authoritarianism? If the popular classes were co-opted and controlled from above during the height of Mexican authoritarianism in the s through the s, as is commonly suggested, why did this period see the greatest expansion of welfare coverage and benefits? Finally, if the regime that dominated Mexican politics for most of the twentieth century had so completely established control of organized labor, why was the regime unable to institute all of the pension and health insurance reforms it favored during the s? The answers to these questions can be found in the cross-class coalitions that provide political support to the state. The role of organized labor is particularly important in those coalitions, as well as in the processes of institutional change. The explanation presented here does not stress Mexican exceptionalism, though Mexican history does reveal certain particularities. Because the explanation is theoretically grounded in the literature on welfare and institutional change, it emphasizes the theoretical affinities between the Mexican experience and those in other countries where an organized working class is active in national politics.

Defining Welfare Institutions Although much of recent welfare research is framed in terms of welfare regimes, or the “combined, interdependent way in which welfare is produced and allocated between state, market, and family” (Esping-Andersen , –), the

 \ 

central focus of study in the literature is on the ways in which the state intervenes in the production or allocation of welfare in response to market and family failures, such as unemployment, disability, aging, and widowhood. The level of income support and the range of policies considered appropriate can vary considerably and are often the subject of fierce debate. Although a wide range of public policies, collectively called welfare, can be used to enhance public welfare, the focus of this book is on policies for social protection. A country’s welfare regime is the collective representation of a country’s social protection policies.² Social protection can be further disaggregated into social insurance and social assistance. Social insurance is usually funded with employer, worker, and state contributions and covers risks associated with participation in the labor market, such as work-related accidents and illness, old age and disability, and unemployment.³ Social assistance is usually noncontributory and may be either universal or targeted to particular groups, such as the poor. Since an expansive definition of social assistance could include nearly any public good provided by the state, this book defines social assistance as noncontributory, excludable government income subsidies and welfare programs with the primary aim of reducing poverty, such as noncontributory pensions, health care, and targeted income subsidies.⁴ This inclusive but not exhaustive definition of welfare encompasses the majority of public policies usually considered welfare and excludes some social policies, such as public health and education, that have important welfare elements. Given the structure of the Mexican labor market and the welfare institutions that have developed, this means that social insurance is mostly restricted to the large minority employed in the formal labor market, while social assistance is intended to protect poor rural producers and urban informal sector workers. Three organizations have been the primary providers of social protection in Mexico and are the focus of this book: the Mexican Institute of Social Insurance (Instituto Mexicano del Seguro Social, or IMSS), the Government Workers’ Social Security and Services Institute (Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado, or ISSSTE), and the Secretariat for Social Development (Secretaría de Desarrollo Social, or SEDESOL). The IMSS has provided old-age and disability pensions, medical and maternity benefits, workers’ compensation insurance, and a variety of other benefits for private sector workers since . Since , the ISSSTE has provided similar benefits, and more, for federal public sector workers and some state government workers. Although military personnel and petroleum and railroad workers have had separate social insurance systems, the IMSS and the ISSSTE are the largest organizations providing social  / 

insurance for formal sector workers. Beginning in the early s, an IMSS-run program, the IMSS-COPLAMAR, was responsible for social assistance. In the late s, the government expanded its social assistance programs, and in the early s, SEDESOL was created to administer programs for the poor. Although previous studies have examined certain social protection policies separately, a fuller understanding and better explanation of the political process that produces social protection requires analyzing the main institutions together.₅ A comparison of the political origins and development of the IMSS and the ISSSTE reveals that organized labor demanded their creation and that political conflict and negotiation between organized labor and the state preceded their creation. Likewise, an explanation of the process of welfare retrenchment in Mexico in the s should consider the variation in retrenchment across these two principal welfare institutions. Although efforts to reform both the IMSS and the ISSSTE gained momentum in the early s, comprehensive reforms to the ISSSTE and some health insurance reforms to the IMSS were delayed by more than a decade due to the public sector unions’ ability to block reform efforts. Targeted social assistance or poverty alleviation programs have also received recent scholarly attention.₆ Most of these studies focus on the proliferation of targeted social spending in the s and assess claims that such spending was politically motivated or manipulated by executives. Nevertheless, these studies often fail to situate targeted social spending in the broader welfare regime and therefore miss an important part of the explanation for its genesis. Targeted social spending is not only a reflection of a new neoliberal economic agenda and of populist tendencies in new democracies with weak accountability but also represents the construction of an alternative welfare model layered alongside decaying traditional social insurance.

Explaining Welfare Institution Development Evidence suggests that the political mobilization of the organized working class during its incorporation into national politics early in the twentieth century led to the creation of Mexico’s welfare institutions. Although organized labor in the most advanced Latin American countries emerged in the early decades of the twentieth century and quickly transformed the political landscape, the way that labor was incorporated into national politics was not uniform across the region (Collier and Collier ). Corporatist institutions, or the legal framework that

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regulated the labor market and worker organization, provided diverse inducements and constraints for organized labor (Collier and Collier ). Unlike some characterizations of political development in Mexico that emphasize labor co-optation and acquiescence, especially after labor’s incorporation into national politics (Collier and Collier ), this study suggests the incorporation of labor into national politics did not preclude the articulation of organized labor’s demands and the mobilization of labor, even within the context of Mexico’s constraining labor laws. Organized labor articulated demands for the creation of public policies to protect workers and their families, and the construction of welfare institutions was the result of a political compromise between labor unions and the state during the establishment of Mexico’s authoritarian regime. This political compromise incorporated organized labor, alongside peasants and industrialists favored by import substitution industrialization (ISI), into a cross-class coalition of support for the ruling party. The power of Mexican organized labor derived not from the market but from its centrality to this cross-class coalition that kept the ruling party in power for more than seven decades. Despite the absence of effective democratic competition, organized labor used its position in the ruling coalition to pressure the state periodically for additional worker benefits throughout the period of state-led industrialization. The demands of labor were influenced not only by the legal institutions of corporatism but also by existing welfare institutions. The early welfare institutions created strong policy legacies, or feedback effects, that shaped future welfare regime development. They did this by creating stratified distinctions among different groups of beneficiaries or potential beneficiaries and by shaping expectations regarding appropriate state benefits and policies. Specifically, institutional change in response to labor demands and shifts in the balance of class power in the cross-class coalition occurred through institutional parametric and structural reform and institutional layering, or the creation of new institutions alongside existing unreformed institutions.⁷ These patterns of institutional change characterize not only the expansion of welfare in Mexico through the late s but also the transformation of Mexico’s welfare regime in the final decades of the twentieth century. Consequently, the argument presented here combines elements of both the class coalition and the historical institutionalist approaches to explain the development of Mexico’s welfare regime in the twentieth century. The historical institutionalist approach used in this study differs from some of the dominant analytical approaches in the literature on institutions and wel-

 / 

fare. Unlike many explanations of institutional development, which view change either as dramatic and short-lived during critical junctures or as marginal and constant, the present approach argues that the development of welfare institutions in Mexico reflects characteristics of both of these types of change. Mexico’s welfare institutions were initially created during a period of industrialization and state-building that caused changes in the relative power of organized interest groups. At that time, welfare institution creation was dramatic and profound, and the institutions that resulted then also shaped the future development of welfare, although change was not entirely pre-determined or path dependent. In contrast to the strong versions of the critical juncture approach (e.g., Collier and Collier ; Mahoney ), this book argues that institutional change continued to be significant after this critical period ended. Indeed, some of the changes were profound, including the creation in  of an entirely new welfare bureaucracy alongside existing institutions. The evidence makes it clear that large-scale institutional change may occur during both critical junctures and the periods that follow them. In addition, we should not assume that policy legacies, or feedback effects, are automatic or predetermined; actors always play important roles in shaping institutional outcomes. Although the argument in this book emphasizes class coalition and historical institutionalist approaches, it is not inconsistent with, and indeed often uses, insights from other theoretical approaches. For example, the argument here can clearly be distinguished from functional explanations of welfare based upon either industrialization or organization of the economy. Industrialization may be necessary for welfare state development, but it is rarely sufficient. Actors must mobilize to demand the creation of new institutions, and those demands are often met with resistance by other actors opposed to their creation. Likewise, Mexico’s welfare regime was clearly embedded in a particular production regime, made up of the interrelated institutions that regulate labor, commercial, and financial markets. The creation and development of welfare were embedded in state-led industrialization, and the welfare system has recently been affected by the reorganization of the economy along neoliberal lines. There are obvious “institutional complementarities” (Hall and Soskice ; Thelen ) between the institutions that regulated economic development and those that provided welfare during ISI. Similarly, there are institutional complementarities between the neoliberal economic model adopted in the s and s and the new, emerging model of welfare in Mexico. These institutional complementarities cannot explain the development or reform of welfare institutions. Indeed, the fact that

 \ 

efforts at wholesale reform of welfare institutions have been unsuccessful belies a functional, conflict-free adjustment of institutions to take advantage of potential complementarities. Chapter  provides a more extensive discussion of the relationship between this study’s theoretical framework and alternatives found in the literature on welfare states.

Contributions to Theoretical and Empirical Understanding Research on welfare institutions has been advanced by a question-driven theoretical and methodological pluralism. Scholars regularly engage a range of theoretical perspectives and often synthesize these into compelling explanations. The application of both qualitative and quantitative methods has provided new answers to old questions and raised new theoretical puzzles. Grounded in this research tradition, this study likewise engages existing theory and employs both qualitative and quantitative methods. The synthesis of class coalition and historical institutionalist approaches is natural, given that class actors are shaped by and shape institutions in a dynamic process, one outcome of which is the development of welfare institutions. Previous applications of class-based approaches acknowledge the importance of political institutions and institutional change (Huber and Stephens ), and previous historical institutionalist analyses emphasize the importance of political conflict in explaining the origin of institutions (Thelen ). This book intends not only to demonstrate the ways in which the two approaches are complementary but also to show that explanations that give primacy to either class coalitions or institutions are less complete and less theoretically compelling than one that combines the two approaches. Class coalitions play a role both in creating new institutions and in shaping the process of institutional change. Once created, institutions do not take on a life of their own characterized by either institutional stability or marginal change. Class actors, the balance of class power, and shifts in class coalitions are the source of institutional stability and change. Likewise, the strategies of class actors are constrained by a complex web of related economic and political institutions, including existing welfare institutions. By situating Mexico’s welfare institutions in a comparative theoretical framework, this book provides a theoretical explanation of those institutions and demonstrates the usefulness of class coalition and historical institutionalist approaches beyond the domain in which they originally developed. Though class-

 / 

based approaches are most often used to explain the development of welfare in the European context (Stephens ; Korpi ; Esping-Anderson , ), they have also been used to explain democratization in Europe, North and South America, and the Caribbean (Rueschemeyer, Stephens, and Stephens ). Historical institutionalism has also been more frequently applied to explain political outcomes in advanced industrialized democracies (Immergut ; Schickler ; Thelen ). In Latin America, historical institutionalism has been used to explain the legacies of labor incorporation (Collier and Collier ), democratization in Central America (Mahoney ), business fragmentation (Schneider ), and party organization (Wuhs ). This study demonstrates the usefulness of combining class coalition and historical institutionalist approaches for understanding the politics of welfare in Mexico. The historical institutionalist aspect of this study also contributes to our understanding of both institutional stability and change. Much of the existing historical institutionalist literature implies a nearly deterministic form of path dependency in which institutional stability is punctuated by exogenous shocks that produce significant institutional change. This characterization of institutional development as institutional stability punctuated by dramatic change during critical junctures underestimates the amount of institutional continuity during critical junctures and of institutional change during other periods. This study moves beyond a punctuated equilibrium model of change to focus instead on the mechanisms and processes that contribute to institutional change and stability. Like other efforts to clarify the processes that produce institutional reproduction and change, this approach focuses on institutional legacies, or feedback effects, and does not imply that institutions suggest outcomes automatically.⁸ Rather, it emphasizes that institutional legacies are the result of the institutions’ effects on the political capacity and power of social actors. In addition, studying the various institutions for social protection together, rather than certain policies in isolation, is critical, especially if the goal is to understand the political and economic circumstances that gave rise to such institutions. Unlike counterpart studies on welfare in advanced industrialized democracies, studies on Latin American welfare seldom address the complex array of institutions that states use to provide social protection. Instead, they often focus on one particular type of policy, pensions being a prime example (e.g., Madrid ; Brooks ) or social assistance (e.g., Cornelius, Craig, and Fox ; Magaloni ; Díaz-Cayeros, Estévez, and Magaloni ). Although these studies tell important stories, their omissions may distort the overall picture. Comparisons

 \ 

across functional policy areas can also help eliminate rival hypotheses and circumscribe theoretical explanations. For example, pension studies may discount the role of organized labor and emphasize instead executive control of the legislature and centralization of decision making as key factors contributing to more extensive pension privatization (Madrid ).⁹ However, these factors were not enough to privatize IMSS health care services in , as proposed at the time of the pension reform. Only a comparison of simultaneous reform proposals in both the pension and health-care contexts highlights the role of the IMSS workers’ union in blocking the privatization of health care. Perhaps more importantly, a narrow focus on one welfare institution, such as the IMSS, or one functional policy, such as pensions or targeted spending, fails to explain adequately the political process that shapes the overall welfare regime and misses the important dynamics of institutional change. The historical comparison of the IMSS and the ISSSTE underscores the policy legacies created by the IMSS and their impact on the creation of the ISSSTE. It also illustrates that institutional change occurs during periods of relative institutional stability and explains how such change is likely to occur (in this case by layering). Similarly, the comparison of the partial retrenchment of social insurance in the s and s to the expansion of targeted social assistance provides a more complete picture of the transformation of Mexico’s welfare regime. A narrow focus on pensions or social assistance overlooks how institutional layering was producing an important transformation of welfare in Mexico; comparing the expansion of new forms of social protection with the retrenchment of traditional insurance underscores the ways in which welfare is being redefined in the region and highlights more nuanced forms of institutional change. This study also provides a window into Mexican politics since the Revolution, particularly the important role of the Mexican labor movement in national politics. Much of the political decision making after the Mexican Revolution has been understood to be an attempt by political elites to prevent or co-opt popular mobilization for democracy or progressive reforms. In particular, many of the most important studies of Mexican politics in the s emphasized the formal relationships that the ruling Institutional Revolutionary Party (Partido Revolucionario Institucional, or PRI) maintained with labor unions, the top-down or state-dominated character of the political process, and, above all, the political stability of the Mexican regime in comparison with other Latin American countries (Hansen ; Purcell ; Reyna and Weinert ).₁₀ More recent analyses of the role of organized labor in Mexican politics are more likely to acknowledge

 / 

that the PRI-dominated authoritarian regime has not always been monolithic and that many different groups in civil society have played a role in Mexican politics during the twentieth century.₁₁ The present study also recognizes the dynamism of the Mexican regime and its relationship with subordinate groups but emphasizes and documents the ability of subordinate classes to articulate policy demands and mobilize independently to demand the renegotiation of their support for the ruling party. By addressing this dynamism and the role of subordinate classes, this book goes beyond those studies that seek only to explain labor-state relationships and instead uses an understanding of the role of organized labor within the ruling cross-class coalition to explain both the development and transformation of Mexico’s welfare regime in the twentieth century.₁₂ Given the effects of the debt crisis and shift toward neoliberalism on Latin American labor markets, several recent studies have revisited Latin American corporatism and labor organization (Murillo ; Levitsky ; Burgess ; and Cook ). These studies tend to focus on the ways that corporatist institutions structure the incentives of union leaders to either respond to rank-andfile demands or maintain alliances with political parties engaged in neoliberal reforms (see Murillo ; Burgess ). While corporatist institutions and internal union and party organization are important in explaining why many Mexican unions stood by the ruling party despite the neoliberal reforms of the s and s, this study illustrates the uneven effects of economic liberalization on the ability of organized labor to assert its independence, a factor that has been neglected in previous studies. Union strategies and the intensity of opposition to social protection reforms have varied across tradable and nontradable sectors, despite similar corporatist institutions and internal forms of organization. Unlike the weakly institutionalized party-union relationship in Argentina (Levitsky ), the relationship between the ruling party in Mexico and official labor unions was well institutionalized and clearly defined. Despite this institutionalization of the relationship, however, it underwent an important change in the early s that reflected the declining influence of official labor unions within the ruling party (Langston ). This institutional change within the ruling party was subsequently reflected in the party’s new reform proposals and emphasis on welfare. In these ways, this study goes beyond recent studies of Latin American corporatism in the context of globalized markets by demonstrating how the decline of corporatism affects welfare institutions. Aside from being one of only a handful of studies that examine the historical development of welfare in Latin America (Malloy ; Mesa-Lago ;

 \            

Borzutzky ), this work is distinguished by its use of comparative historical analysis. According to James Mahoney and Dietrich Rueschemeyer, comparative historical analysis has three core attributes: () a focus on causal explanation, () a study of processes over time, and () the “use of systematic and contextualized comparison” (Mahoney and Rueschemeyer , , ). Comparative historical analyses, like that presented here, are fundamentally about using historical comparisons to evaluate competing theoretical explanations of temporal processes. The competing theoretical explanations are, in this instance, derived from the rich literature on welfare regime development in advanced industrialized economies, which implicitly, if not explicitly, serves to situate the Mexican experience in a broader theoretical landscape. Comparative historical analysis employs both qualitative and quantitative methodologies and also includes the treatment of periods of time or several policies within one country, provided the analysis serves the end of causal explanation of a temporal process (Mahoney and Rueschemeyer , ). The present analysis of Mexican welfare embodies these characteristics of comparative historical work. It explicitly compares different periods of time or different policies during one period of time in order to draw causal inferences. For instance, chapter  combines two paired comparisons: the fate of private and public sector pension proposals in the s and the fate of two private sector pension proposals in  and . Similarly, chapter  contrasts the outcomes of reform proposals for pensions and health-care services for private sector workers versus pensions for public sector workers to illustrate the uneven effect of globalization and economic factors on the ability of labor unions in different sectors to protect welfare from retrenchment proposals. Such comparisons, using John Stuart Mill’s indirect method of difference, help eliminate alternative hypotheses and enhance causal inference.₁₃ Although qualitative studies dominate comparative historical analyses, some studies combine qualitative and quantitative data and methods, as this one does.₁₄ In this study, chapter  supplements the qualitative historical comparisons of the first few chapters with a quantitative analysis of welfare coverage to demonstrate the robustness and internal validity of the qualitative historical analysis. In the final chapter, a comparison of Mexico’s experiences to those of Chile, Argentina, and Brazil serves to illustrate the external validity of the argument. Chapter  further elaborates the theoretical argument, including concepts of class and class coalitions, and describes how class coalitions influence policy outcomes. It also explains the theoretical conception of institutional change and

            / 

distinguishes it from existing tendencies to suggest that change is either dramatic and rare or marginal and ongoing. The chapter also addresses alternative theories and hypotheses, with a particular focus on their usefulness for explaining the development of Mexico’s welfare regime. Chapters  through  explain the creation, expansion, and reform of Mexico’s welfare regime during the period of authoritarian rule. Chapter  discusses the antecedents of social insurance in Mexico and the adoption of pensions for central government workers in . The core of this chapter is a comparison of two attempts to establish national social insurance for private sector workers: one that failed during the progressive administration of President Lázaro Cárdenas del Río (–) and one that succeeded in creating the IMSS during the conservative administration of President Manuel Ávila Camacho (–). This comparison situates the bargain between labor and the state within the broader economic and political institutional context that shaped labor-state relations. The chapter concludes with an overview of Mexican welfare institutions at the end of the s, since these shaped future institutional changes. Chapter  examines the creation of the ISSSTE in  as an instance where labor mobilization and policy legacies led to the creation of a new social insurance bureaucracy alongside the existing IMSS. The expansion of IMSS coverage and the reform of IMSS in  also highlight the role of organized labor and ongoing institutional change. Chapter  explains how the sequencing of economic and political liberalization led to only partial retrenchment of welfare and why organized labor in tradable sectors was better able to protect the benefits and livelihoods of its members. This chapter, in particular, highlights the poverty of studying only one type of policy reform, such as pensions, in isolation. Chapter  provides statistical evidence to further support the theoretical argument. The statistical analysis confirms that welfare expansion prior to the s followed labor mobilization and protest, but it also points out that labor protests have had little effect since the s. In fact, the pace of social insurance coverage expansion has slowed since the s, despite significant labor protest. The final three chapters extend the theoretical argument to social insurance reforms during the Vicente Fox Quesada (–) and Felipe Calderón Hinojosa (–) administrations (chapter ), the creation of new targeted, means-tested welfare institutions since the Carlos Salinas de Gortari administration (–) (chapter ), and the cases of Chile, Argentina, and Brazil (chapter ). The Fox administration sought to further privatize the public pension system, for both IMSS workers and those pensioned by ISSSTE. The former reform was

 \            

adopted, but the latter was abandoned in the final year of the administration in the face of significant labor opposition. President Calderón privatized the ISSSTE pension system, a reform pending since Salinas’s presidency, within the first four months of his administration. Presidents Fox and Calderón, like presidents Salinas and Ernesto Zedillo Ponce de León (–), also expanded means-tested poverty alleviation programs for the urban and rural poor. I argue that the expansion of targeted poverty alleviation programs is consistent with changes in the labor market due to globalization and neoliberal reforms and with increasing political competition due to democratization. Politicians have abandoned traditional social insurance in favor of targeted poverty spending, which is more consistent with the new economic and political context. The layering of these new welfare institutions alongside partly reformed social insurance institutions also highlights the strength of policy legacies, even during periods of extensive economic and political transformation. The comparisons with Chile, Argentina, and Brazil in the final chapter suggest that the welfare regimes in these countries can also be understood using a theoretical framework that combines a focus on the mobilization and incorporation of organized labor with an understanding of policy legacies and the process of institutional change.

            / 

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THE BUILDING BLO C KS O F WELFARE R E G IM E S Class Coalitions and Institutions

T   used here to explain the development of Mexico’s welfare regime draws on elements of class coalition and historical institutionalist approaches. As chapter  suggests, some alternative approaches offer explanations that are supported by evidence from Mexico. Nonetheless, the explanations offered by these alternative approaches fail to provide a better analysis of the political process that generated numerous Mexican welfare institutions and institutional change over time than does the theoretical framework proposed here.

The Worlds of Welfare Capitalism and Mexico Research on social protection in advanced industrialized democracies has suggested that the welfare regimes in these countries cluster around one of three “ideal” types of welfare regimes, according to characteristics of social protection



scored along four dimensions: decommodification, stratification, public versus private provision, and defamilialization (Esping-Andersen , ). Decommodification refers to the ability of workers to subsist independently of the market, especially when welfare benefits are generous and provided as a right of citizenship (Esping-Andersen , –). Decommodifying welfare regimes provide more generous benefits with lower contribution requirements. Stratification acknowledges that welfare policies may reinforce differences between classes, industries, or sectors (Esping-Andersen , ). Sector-specific policies and meanstesting of benefits are two ways that welfare policies may create dual systems and stratify social classes. Private versus public provision refers to the degree to which the government legislates or mandates and provides welfare benefits. In response to feminist criticisms of the original welfare regime typology, Gøsta EspingAndersen later proposed an additional dimension—defamilialization, which refers to “the extent to which households’ welfare and caring responsibilities are relaxed—either via welfare state provision, or market provision” (Esping-Andersen , ). By scoring social protection policies of advanced industrialized democracies on each of these dimensions, Esping-Andersen () identified three ideal welfare regimes: liberal, Christian democratic (also known as conservative-corporatist), and social democratic. Liberal welfare states—including the United States, Canada, Australia, and Britain—provide for little decommodification, create social stratification, and frequently rely on private service provision. Christian democratic welfare states—including Austria, France, Germany, Italy, and the Netherlands— are more decommodifying and rely less on private welfare provision than do liberal welfare states, but highly segmented benefits and the use of transfers still create social stratification. They also provide little defamilialization. Social democratic welfare states, like those of the Scandinavian countries, are the most decommodifying, are least stratifying (most universal in providing benefits), and rely on direct provision of benefits and services by the state. They also provide more defamilialization. Subsequent studies proposed that the Australian and New Zealand welfare regimes constitute a fourth “wage-earner” ideal type (Castles and Mitchell ; Huber and Stephens ). Typically, wage-earner regimes provide means-tested, flat-rate, noncontributory benefits and little defamilialization (Huber and Stephens ). Although these ideal types were developed as a theoretical classification system for welfare regimes in industrialized economies, they provide a useful starting point for situating Mexico’s welfare regime in a broader comparative context.₁

                              / 

Like many Latin American countries, Mexico maintained a welfare regime through the early s that closely resembled the Christian democratic or corporatist welfare regime type, due to its reliance on a male breadwinner model to extend benefits to family members and stratified benefits between formal private and public sector workers.² However, Mexico’s welfare regime was still very underdeveloped, owing to the relatively weak formal labor markets resulting from rural subsistence production and the urban informal sector. Reforms in the early s inclined toward the social democratic ideal type, and these included important changes to replacement rates, a noncontributory minimum benefit for rural workers, and day care for the children of working mothers. However, wholesale reform of the various welfare institutions, and thus a change in the welfare regime type, never materialized. The institutional changes of the s, however, including institutional reform and layering, have been significant enough to indicate the beginning of a shift in Mexico’s welfare regime toward the liberal ideal type.

Explaining Welfare Regime Development One of the strengths of the research tradition on welfare is the tendency toward theoretical inclusiveness; studies often draw upon theoretical insights from a variety of approaches (Pierson ; Amenta ). Because few studies have examined welfare regimes in Latin America, the theoretical literature is filled with studies of advanced Western industrialized democracies.³ Yet, with few exceptions, the reach of these theoretical approaches should not be restricted to the domain of advanced industrialized democracies. Most existing explanations of welfare regime development are not intrinsically tied to the particularities of Western Europe or the experiences of advanced industrialized democracies.⁴ Among studies that explain the development of welfare regime institutions, three theoretical approaches dominate the literature: economic functionalism, institutionalism, and class-based analyses.₅ Economic explanations of the variation and development of welfare regimes take a variety of forms. Most have a degree of implicit, and sometimes more sophisticated, economic functionalism. The early research of the s offers a “logic of industrialism,” arguing as it does that welfare regimes were an extension of the industrialization process (Cutright ; Wilensky ). These studies suggest that as economies industrialized, the demand for risk-pooling institutions

 \                              

would lead to the establishment of institutions to serve that function. In a more sophisticated but still implicitly functional manner, recent critics of globalization speculate that economic integration would lead to smaller welfare regimes, but they do not address the intervening political process. The earliest globalization arguments implied that globalization would lead to a convergence of all countries toward one model of capitalism best suited for a global economy (Cerny ; Strange ). Recent research has rejected a simple version of the convergence hypothesis. Moreover, recent studies have gone beyond functional explanations to highlight the mechanisms by which economic integration affects the political process that produces welfare institutions (Rodrik ; Hicks ; Huber and Stephens ; Kaufman and Segura-Ubiergo ; Swank ; Rudra ). Recent research also suggests that welfare institutions are embedded in a complex set of institutions that regulate modern capitalism (Hall and Soskice ). While the “varieties of capitalism” approach is supposedly firm-centered, too often the approach carries the assumption that existing economic institutions, including welfare institutions, exist to serve the economic interests of firms without adequately demonstrating that firms have explicitly sought the creation of these institutions to further their own economic interests. To avoid being nothing but a more sophisticated argument of economic functionalism or, even worse, merely a descriptive tool to categorize “institutional complementarities” in different forms of capitalism, the varieties of capitalism approach should establish empirical evidence to support the assumption regarding the institutional preferences of firms and should demonstrate the role of firms in establishing existing institutional arrangements.₆ Although a firm-centered approach is not adequate to explain the pattern of welfare development in Mexico (see below), welfare institutions are certainly embedded in a system of complementary institutional arrangements or production regimes.⁷ These institutions did not develop because of the economic functions they serve but from the political conflict among economic actors as well as from a historical process of institutional development. Like economic explanations of welfare, institutional approaches cover a wide range of hypotheses and arguments. Among these, institutions are sometimes the cause and other times the outcome. In political science, rational choice and historical institutionalism are the most common explanations for institutions as outcomes, and these theoretical approaches are frequently presented as competing alternatives.⁸ In welfare research, only a handful of studies, mostly outside of political science, use the theoretical and empirical tools of rational choice in-

                              / 

stitutionalism.⁹ These studies often impute actor preferences and assume that welfare institutions serve functions fitting these preferences. Given its focus on long-term welfare development, historical institutionalism is the more common approach, especially given its methodological tendency toward comparative historical studies. Even among historical institutionalist studies of welfare, different emphases and hypotheses abound. Some analyses focus on the centralization or autonomy of the state and its impact on welfare state development (e.g., Skocpol ). Another strand of research focuses on the effects of political institutions on welfare, though not all of this literature should be considered historical institutionalism. Studies in this area suggest that political institutions affect welfare by shaping the political decision-making process—centralizing or decentralizing the decision-making authority. Some of these researchers suggest conflicting hypotheses (Immergut ; Huber, Ragin, and Stephens ; Swank ; Birchfield and Crepaz ; Huber and Stephens ; Crepaz and Moser ). Some explanations of the ways that political institutions affect welfare draw indirectly from rational choice models of institutional determinants of welfare. What unites these institutional approaches is an understanding that political and welfare institutions constrain policy making in ways that affect the creation of or change in welfare. On the other hand, what institutionalist approaches sometimes lack is an explicit discussion of the interests and political power of the actors who engage in the political bargaining over welfare. Rational choice arguments and some of the institutionalist literature do not adequately address the power of political actors. Instead, they imply that welfare outcomes can be easily predicted on the basis of existing institutional arrangements. In addition, historical institutionalist accounts of welfare, which emphasize the feedback effects of welfare institutions, can overemphasize path dependency after institutions are established, to the neglect of political actors and conflict. What is needed is an approach that acknowledges the importance of political institutions and policy legacies but does not ignore the political conflicts that generate welfare institutions and contribute to their persistence and change over time. While economic and institutionalist approaches sometimes neglect the issue of political actors and political power, the latter is central to class-based approaches to welfare.₁₀ Early class-based analyses argued that working-class power organized into labor unions, which aligned themselves with social democratic political parties, which produced the most generous welfare states (Stephens ; Korpi ). Recent elaborations stress not only working-class mobilization in support of wel-

 \                              

fare but also the construction of coalitions between the organized working class and other economic classes (Esping-Andersen ; ; Huber and Stephens ). Although cross-class coalitions have appeared mostly in democratically elected governments, class-based approaches need not apply only to political democracies. To the extent that authoritarian regimes can also represent class interests, and even cross-class coalitions, as in Mexico, authoritarian regimes can promote welfare in response to demands from class constituencies that are essential to the ruling coalition. The difference is that, in authoritarian regimes, the influence of class interests will not be as obvious; they will not be announced with a reshuffling of the executive cabinet. In Mexico, shifts in the balance of class power within the ruling authoritarian regime often occurred during changes in government, when class actors were most likely to position themselves or mobilize their power to influence the choice of the new executive. These new executives, reliant upon certain class constituencies for their rise to power within the cross-class coalition, were those most likely to reform existing welfare institutions to reward supporters. In this way, social welfare programs repeatedly reflected the renegotiation and renewal of the cross-class coalition. In such instances, subordinate classes need not force the state’s hand or be the most powerful member of the ruling coalition; to renegotiate the terms of regime support, they need only threaten to destabilize the coalition or its legitimacy through public mobilization or private withdrawals of support. At times, the demands of subordinate classes can be broad and extensive, and political elites may concede to only some of those demands. This is part of class bargaining, but the fact that political elites have conceded to any demands reveals that a bargain took place. It then is important to consider which demands were met and which were not. The theoretical claims of this book are that the shifting composition of the class coalitions that sustained the authoritarian regime in Mexico explains welfare development and that changes in the class coalition continued to influence electoral politics both during and after the democratic transition. These changes explain welfare reform outcomes. With its emphasis on class power and negotiated coalitions, however, a class coalition approach, on a theoretical level, neglects the ways in which both political and welfare institutions can shape class interests and constrain welfare development. As argued below, a synthesis of institutional and class coalition approaches provides a theoretical framework that can account for both change and stability in welfare institutions and resorts to neither economic functionalism nor institutional determinism.

                              / 

Class Interests, Organization, and Coalitions The processes of economic development and industrialization have important consequences for society, including the formation of differentiated class interests. Both positive political economy and Marxist approaches define objective classes in terms of either assets or endowments for capitalist production and the capacity for collective action and identity. For positive political economists, economic classes consist of individuals with similar productive assets who are equally affected by changes in relative prices (see Frieden , –; for discussion, see Hall and Taylor , –). Whether these common economic interests will translate into collective action depends on both the size of the group and its ability to supply selective benefits for the group (see Olson , Frieden , and Rogowski ). However, the cohesiveness of class interests hinges upon asset or factor mobility, that is, an asset’s capacity to be used in production across industries or sectors. When factor mobility is high, class identity within classes should be stronger. When factor mobility is low, or assets are specific to certain industries or sectors, class identity may become secondary to industry or sectors.₁₁ During the early years of industrialization, factor mobility is often very high and labor is easily transferred between industries (e.g., food processing to light manufacturing) or sectors (e.g., agriculture to manufacturing). Although factor specificity is likely to increase as industrialization progresses (Hiscox ), formal labor organization and mobilization often occur early in the industrialization process. For positive political economists, then, class interests are commonly assumed to be defined according to productive assets or factors and relative factor specificity or mobility. Likewise, Marxist definitions of class are based on both assets and their associated roles in capitalist production (see Rueschemeyer, Stephens, and Stephens , –). Marxists, however, assume that classes are naturally antagonistic and that class distinctions are primary. Recent work in this tradition defines assets or endowments more broadly, to include their roles as not only a factor of production but also as “tangible property, intangible skills, and more subtle cultural traits” (Huber and Stephens , ). Unlike positive political economy, which imputes class interests from production roles, recent applications in the Marxist tradition recognize that, though objective class interests may be assumed, collective class identity is socially constructed. Organization for the purposes of collective action helps transform objective class interests based on roles in economic production into socially constructed class identities. Further, organization

 \                              

of subordinate classes is a primary source of power in their opposition to dominant classes (Rueschemeyer, Stephens, and Stephens , –).₁₂ This study defines class as the collective identity originating in a common position in capitalist production and serving as the basis of collective action in defense of perceived shared interests. Whereas some positive political economists would define class narrowly, on the basis of productive assets or factors of production (e.g., labor, land, capital), this study further differentiates classes according to common economic interests defined by both asset mobility and the structure of the domestic economy. For example, this approach divides labor in late-nineteenth- and early-twentieth-century Mexico into rural agricultural workers or peasants and urban industrial workers, and it divides capitalists into the internationally oriented bourgeoisie, heavily concentrated in the mining industry, and a weak but growing industrialist class. A further division would be between large, internationally oriented producers and smaller, domestic-oriented firms. As the Mexican economy developed in the twentieth century, changes in production led to changes in the class structure. The most notable example of a growing economic class in late-twentieth- and early-twenty-first-century Mexico is that of workers in the urban, informal sector, particularly services, and although this class is not organized nor does it usually have a unified political voice, it has been courted as a source of political support by recent administrations. Therefore, broad generalizations about the bourgeoisie or the working class should be eschewed in favor of more precise class distinctions based on shared economic interests, which usually vary by factor, mobility, sector, or industry. Class-based analysis is one of the predominant modes for producing theoretical explanations of welfare regime development and reform. The earliest applications focused on the political power of the organized working class to explain the development of broad, universalistic welfare states in northern Europe (Stephens ; Korpi ). According to these interpretations, organized labor’s relationship with social democratic political parties and those parties’ electoral success in gaining control of the government enabled the state to enact social welfare policies. Overall, sustained social democratic control of government produced the most redistributive welfare regimes in Europe (Huber, Ragin, and Stephens ; Huber and Stephens ). Recent work in this tradition emphasizes working class power but within broader cross-class coalitions, often with rural interests, as a source of welfare institutions (Esping-Andersen ; Huber and Stephens ). The role of capital, or at least segments of the capitalist class, has also been invoked to explain the cross-class alliances that create welfare. In particular,

                              / 

Peter Swenson () suggests that the “red-green” alliances of social democrats and farmers in northern Europe were a consequence of a cross-class alliance between segments of the organized working class and industrialist class in tradedgoods sectors.₁₃ Although class-based or class coalition analyses have most often been used to explain the development of welfare in advanced industrialized democracies, such approaches have also been used to explain political regime change more generally (Rueschemeyer, Stephens, and Stephens ).₁₄ Working class alliances with political parties and cross-class coalitions are also clearly present under authoritarian regimes. Class coalitions sometimes underlie “authoritarian bargains,” which are often premised in part on the benefits of sustained economic growth (Haggard and Kaufman ).₁₅ For example, Guillermo O’Donnell () uses the shifts in class coalitions to explain both economic outcomes and regime change in Argentina in the s through s. Similarly, when the organized working class forms the basis of a cross-class coalition of support for an authoritarian regime, as it did in twentieth-century Mexico, the working class can use its position in the coalition to demand welfare benefits in exchange for its support of the regime. In such instances, the organized working class uses the leverage it gains by being both a member of the coalition and even the source of regime legitimacy to renegotiate periodically the terms of its support, within the limitations of the authoritarian bargain. Naturally, the real autonomy of the subordinate classes may be questioned when democratic institutions are absent, but to the extent that an authoritarian regime builds its legitimacy and base of support through the incorporation of subordinate classes, those classes gain some leverage vis-à-vis their relationship with the regime. The key to isolating instances of subordinate classes mobilizing their power or trying to leverage their influence within the constraints of their participation in the ruling coalition rests upon being able to correlate demands for reform, mobilization or threats to withdraw support (which would challenge regime legitimacy), and a policy outcome consistent with the reform demands and following the mobilization or threat to withdraw support. Even when authoritarian politicians are likely to be responding to demands from below, they may prefer to present their actions as if they were inspired from above in order to protect the outward appearance of power and control. In this light, the goal here is not to demonstrate that labor is more powerful than the state, which would be, to some degree, antithetical to an authoritarian regime. Instead, to substantiate the claim that a subordinate class is able to influence policy outcomes in an authoritarian regime, the empirical evi-

 \                              

dence should show that the state is dependent on labor for support and that organized labor intentionally uses its relationship with the state to augment its relative power and therefore its ability to articulate demands for policy reforms. One of the goals of this study is to illustrate the usefulness of a class-coalition approach for understanding the politics of welfare in an authoritarian regime. Unlike many Marxist explanations, this study does not assume that the state, in its role as the guarantor of private property and capitalist growth, lacks autonomy from dominant classes. Nor does it assume that any particular class actor will automatically or naturally prefer particular welfare policies. Instead, evidence of class preferences with regard to welfare is revealed and documented through the public statements and policy positions adopted by class actors. In this way, this study is careful to avoid the tendency to assume that workers always favor more welfare and that employers are always opposed to it. Still, the record in Mexico suggests that workers generally articulate demands for expanded welfare benefits funded by employers and the state and that employers usually oppose the expansion of welfare. In Mexico, employers supported social insurance only when they were assured that it would serve as a ceiling rather than a floor for benefit negotiations with unions. Employer and industry organizations (and sometimes the National Action Party [Partido Acción Nacional, or PAN]) would indicate that they supported social insurance but only if it would lead to “social peace”—or the elimination of benefit negotiations from collective contracts. This attitude partly explains initial employer acquiescence to the adoption of social insurance for private sector workers in the early s and the mobilization against the new benefits after they were implemented (see chapter ). Further, the creation or expansion of social insurance in Mexico has often been an impetus for business organization. The largest employer organization, the Mexican Employers’ Confederation (Confederación Patronal de la República Mexicana, or COPARMEX), was organized in  in response to proposed labor legislation, and business elites formed new organizations in the early s (e.g., the Mexican Council of Businessmen [Consejo Mexicano de Hombres de Negocios, or CMHN]) and early s (the Business Coordinating Council [Consejo Coordinador Empresarial, or CCE]) as responses to a leftist shift in government policy and perceived threats from the state (Schneider ). Notably, those shifts to the left included significant expansions in social insurance— the creation of the ISSSTE in  and the expansion of IMSS benefits in the  reform. In the s, business elites largely promoted welfare retrenchment and were active in efforts to privatize pensions and health care.

                              / 

The only partial exception to this pattern has been an organization of small and medium-sized firms, the National Chamber of Manufacturing Industry (Cámara Nacional de la Industria de Transformación, or CANACINTRA), concentrated in sectors largely protected by import substitution industrialization or ISI policies. The CANACINTRA was formed in  partly in response to its members’ perception that other business organizations opposed to the government’s economic policies were not representing their particular interests. Because of its dependence on ISI and government support, the CANACINTRA seldom openly dissented from policies of the PRI regime, instead choosing to express its dissent privately to party officials (Shadlen ). Initially, the organization lent support to the new social insurance legislation and even included the promotion of social insurance in its statutes. However, the CANACINTRA changed its position after the adoption of social insurance in . By the late s, the CANACINTRA opposed the further expansion of social insurance on the grounds that it would hurt industry competitiveness. Consequently, even the most progressive of employers’ organizations came to oppose the development of social insurance.₁₆ Therefore, the empirical evidence, not theoretical assumptions, prescribes an emphasis on the role of organized labor in promoting and shaping the development of welfare in Mexico. At the same time, the power of Mexico’s working class, like that in many Latin American countries, has not been entirely autonomous and self-determined. Instead, it has often been constrained by corporatist institutions established in the early twentieth century (Collier and Collier ). In Latin America, latenineteenth- and early-twentieth-century economic development, particularly industrialization, created a growing labor movement, especially in large cities, enclave industries, and countries with labor shortages. During this period of change, Mexico developed one of the largest and strongest labor movements in the region (Collier and Collier ). After the Mexican Revolution, organized labor was an important source of political power, as reflected in the Constitution of . The formal incorporation of the organized working class into national politics can be traced to national corporatist legislation—the Federal Labor Law (Ley Federal de Trabajo) of  and the Government Workers’ Federal Law (Ley Federal de los Trabajadores al Servicio del Estado) of —both of which nationally established the rights of and restrictions on organized labor. As David Collier and Ruth Berins Collier argue (; ), formal corporatist institutions entail both inducements for and constraints on organized labor. Inducements include formal recognition and subsidies; constraints include re-

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strictions on organizing and the right to strike. Corporatist institutions are the legal framework within which the organized working class can exercise its power, and several aspects of Mexican corporatism are worth mentioning in this regard.₁₇ The Federal Labor Law of , the first national labor legislation in Mexico, included fairly generous inducements (such as legal recognition and a separation exclusion clause) for labor to cooperate with the state and had less restrictive constraints (monitoring of member lists and finances) than labor laws in other Latin American countries (Collier and Collier ). The inducements reduced collective action costs and increased the capacity of unions to provide selective benefits for workers. They also gave union leadership leverage over rank-and-file members. This law, with the Government Workers’ Federal Law of , segmented the formal labor market into public and private sectors, which affected labor unity and later the development of welfare institutions. Notably, provisions for public sector workers required that all government employee unions belong to only one national confederation.₁₈ The laws also limited the length of labor contracts (to two years) and regulated the requirements for strikes, giving the state the right to declare illegal any strike not meeting the requirements. These regulations also gave the state control over the exercise of class power and gave labor leaders autonomy from rank-and-file union members. Although corporatist institutions provided the legal framework within which working class power was exercised, it was the relationship between organized labor and PRI that most influenced the exercise of labor power within the constraints of the cross-class coalition.₁₉ In , President Cárdenas (–) reorganized the National Revolutionary Party (Partido Nacional Revolucionario, or PNR), recreating it as the Party of the Mexican Revolution (Partido de la Revolución Mexicana, or PRM).²⁰ He did this in part to establish his political independence from former president Plutarco Elías Calles (–) and the landed aristocracy and northern bourgeoisie (Collier and Collier ). The reorganization institutionalized a cross-class coalition of workers and peasants in support of President Cárdenas and the reformed party and incorporated the new National Peasants’ Confederation (Confederación Nacional Campesina, or CNC); the Confederation of Mexican Workers (Confederación de Trabajadores de México, or CTM), formed in ; the military; and the popular sector, which included mainly government employees. Not all labor unions affiliated with the PRM or, later, the PRI, but for those that did, the dominant party offered selective benefits, such as access to party and government posts and representation on government bodies. Nonaffiliated unions were often repressed or otherwise excluded from political participation.

                              / 

Despite the ability of the party-state to use corporatist institutions and state power to exert control over the organized labor movement, corporatism and cooptation did not preclude the mobilization of the working class but they did institutionalize it. Most accounts of Mexican corporatism acknowledge working class power during the s, especially during the Cárdenas administration, but emphasize labor acquiescence and top-down control of the labor movement after the s (see Stepan  and Collier and Collier ). The relationship between the organized working class and the ruling party limited the autonomy of the working class. Nevertheless, working class organizations were able to articulate demands for welfare benefits and use their position in the ruling cross-class coalition to pressure the PRI regime to create and maintain welfare institutions. The institutionalization of the relationship between the organized working class and the ruling party enabled the working class to demand and receive more from welfare institutions than what labor would have been able to demand through its market power alone (see also Middlebrook ). In this sense, the interpretation of the relationship between organized labor and the Mexican state adopted in this study differs from that of Philippe Schmitter’s () “state corporatism” and Alfred Stepan’s () “inclusionary corporatism” by emphasizing the ability of organized labor to use its legitimizing role within the cross-class coalition to periodically create spaces of relative autonomy in which it could articulate policy demands. It is worth reiterating that in this study corporatism refers to formal legal institutions that regulate the labor market and labor organization; the term is not used to describe the formal—through union rather than government statutes—relationship between labor unions and the ruling party or the authoritarian regime. That relationship was never codified in law, despite aspects of the labor code that facilitated such a relationship. While Collier and Collier () claim that the Cárdenas administration signaled the end of the working class’s incorporation into national politics, evidence suggests that incorporation actually continued through the administration of Ávila Camacho (–), especially with the labor law reforms of  and the creation in  of the IMSS. As chapter  argues, the IMSS was created in response to labor demands and the withdrawal of labor from the cross-class coalition prior to the presidential election of . Its creation consolidated the support of organized labor for the cross-class ruling coalition. During the next several decades, the organized working class periodically withdrew or threatened to withdraw its support from the regime, which would have threatened the viability of the crossclass coalition and the regime’s political legitimacy. Although the authoritarian

 \                              

regime maintained the capacity for repression, the ability of the regime to deliver sustained economic growth rested upon also ensuring political stability. Such episodes were often followed by new welfare benefits for workers. Organized labor also used its political influence and access to welfare institutions to convey demands for the expansion of benefits to workers in new industries or geographic areas (see chapter ). Welfare was thus a state response to demands from workers, demands that carried considerable weight given the central importance of workers in the ruling coalition. The exhaustion of import substitution industrialization, the debt crisis, and the transformation of the economic development model in the s had important consequences for both the class structure and political system. Structural adjustment ushered in the neoliberal economic development model and, with it, changes to the structure of production. The formal labor market stagnated while the informal labor market grew. Likewise, manufacturing grew more slowly than the services sector. These labor market changes ushered in by the debt crisis and economic restructuring undermined the cross-class coalition of peasants, organized labor, and small and medium-sized industry that had supported the ruling party. Meanwhile, the authoritarian regime’s failure to deliver economic growth further eroded its hegemony and aggravated demands for political liberalization. These factors contributed to the electoral crisis of  and the reorganization of the PRI coalition during the Salinas administration (–). Although segments of the organized working class remained allied with the PRI, the unorganized urban informal sector became an important potential source of political support, which the PRI sought to earn by providing targeted social assistance. In this way, the changes in both the class structure and the composition of the ruling coalition—particularly the role of organized labor within it—also explain the politics of social assistance. The declining market size and political power of organized labor explains why, beginning in the s, governments focused on retrenching social insurance while expanding social assistance (see chapters  and ). Thus, prior to the debt crisis and subsequent economic and political liberalization, the organized working class played a central role in conveying demands for welfare and used its influence as part of the ruling cross-class coalition to support the expansion of welfare, even within the constraints of Mexican labor law and one-party dominance. In the s and s, the attenuated economic and political importance of the organized working class, the growth of unorganized rural and urban informal sectors, and increased electoral competition produced shifts in the class basis of regime support, which contributed to changes

                              / 

in welfare policy. However, class power and mobilization alone provide only a partial explanation of the development of welfare in Mexico. Welfare institutions, once established, have also affected further welfare development.

Institutions as Causes and Outcomes A cursory survey of the literature reveals the wide range of arguments and theoretical approaches labeled “institutional.” For the purpose of explaining welfare regime development, it is important to distinguish between arguments that treat political institutions as independent variables with regard to welfare regime outcomes and those that explain the creation and evolution of welfare institutions as dependent variables. This distinction is useful for presentation purposes, though in practice the line between the two is often blurred. Arguments that use political institutions as independent variables contend that institutions such as regime type or electoral system shape the political process that produces welfare. These types of arguments employ a variety of theoretical and methodological approaches. Approaches that focus on institutions, including welfare institutions, as dependent variables also come in several varieties. This second group is concerned with explaining both the origins of institutions and the processes of institutional stability and change. These latter approaches are usually divided into sociological, rational choice, and historical institutionalism, each with different theoretical assumptions.

Political Institutions as Explanation As independent variables, political institutions can have several different effects on welfare. Some researchers have focused on political regime type as a predictor of welfare state development, noting that social insurance is associated with politically representative institutions, the expansion of suffrage, and competitive elections (Cutright ; Flora and Alber ; Skocpol ). However, not only was social insurance first adopted in a nondemocratic context in Germany, but it was also part of the consolidation of the authoritarian regime in Mexico in the s. To the extent that social insurance solidified labor’s support for the ruling regime, it contributed to the PRI’s consolidation of authoritarian power. The democratization hypothesis, as originally conceived for advanced industrialized countries, assumes that democratization occurs through the gradual expansion of

 \                              

suffrage to lower income or working class voters who are more likely to demand social welfare (Cutright ; Flora and Alber ). However, democratization in Mexico has not followed that path. In the s and s, democratization grew as a result of increased political competition rather than increased participation, as reflected in two processes: increased electoral competition and increased influence of veto players in the policy-making process.₂₁ This increased political competition has in turn increased the incentives for political parties to respond to citizens and thus attract voters and build a new coalition of support. Because competition occurred first at the local and state level during the s and s, the ruling party faced new electoral incentives and different regional competitors. In terms of the supply of social welfare offered by the PRI-led government, local and state-level political competition meant that the PRI had to offer policies to attract the median voter in diverse localities and states. From an electoral perspective, national social insurance policy became an ineffective instrument for maintaining political support. In contrast, noncontributory, means-tested social assistance was recognized as a flexible tool for attracting political support and building a new coalition of supporters across states and municipalities. In general, as organized political parties face heightened electoral competition, they seek to redefine their relationships with interest groups, such as business or labor organizations, in order to maximize electoral support. The increased electoral competition and weak support from official organizations at the polls help explain why the PRI reorganized its structure in the early s (Langston ). This reorganization signaled a shift in the class composition of the ruling coalition, in which the support of organized labor was partly offset with votes from the informal sector and the poor sectors, and welfare policy came to reflect the shifts in the coalition. In addition, the PRI government in the late s began using the clientelistic manipulation of targeted social assistance as a means to attract this growing party constituent. However, once opposition parties held veto power in Congress in the late s, the PRI had to improve transparency in social assistance and transform such noncontributory programs, making a programmatic appeal to these key voters and potential supporters. This pattern suggests that competition may initially increase incentives for clientelistic distribution of goods but that, past a particular threshold, electoral competition promotes greater transparency and programmatic appeals (see Kitschelt ). Although Mexico’s Constitution of  has always included a statutory division of powers between the Congress and presidency, the PRI hegemony meant that there was little de facto division until the s. The increased political com-

                              / 

petition in Mexico since then has also multiplied the number of partisan veto players and increased the importance of institutional veto points. The number of partisan veto players is linked to the number of and ideological diversity of the political parties represented in the executive or legislative branches. Institutional veto points are linked to the structure or formal division of decision-making powers among branches of government (Tsebelis ). The literature on welfare regimes is not consistent on what effects these “veto” factors have on welfare. Some argue that the decentralization of decision making by legislative or electoral institutions slows both the growth and retrenchment of welfare (Immergut ; Huber, Ragin, and Stephens ; Huber and Stephens ). Studies of pension and health-care reform in Latin American and Eastern Europe in the s suggest that where decision-making authority in democracies is dispersed among many veto players or institutional veto points, welfare retrenchment is less likely (Kay ; Haggard and Kaufman ; Madrid ; Huber ; Orenstein n.d.). In contrast, others suggest that, as the number of political parties in the government or legislature increases, the likelihood of higher social and redistributive spending also increases (Birchfield and Crepaz ; Swank ; Crepaz and Moser ). The logic of this argument suggests that, as the number of parties in government and the legislature increases, policy making necessarily entails a degree of bargaining or logrolling, leading to higher expenditures on social programs. There are also a variety of beliefs regarding the effects of federalism on welfare. Decentralization due to federalism can hamper welfare state development. Social policy in the United States in the late nineteenth and early twentieth century reflected the decentralization and weak state capacity of the national government (Skocpol ). That historic feature of the U.S. government’s capacity for change parallels Mexico’s experience with labor legislation, which, before , was adopted only at the state level. Furthermore, the nationalization of that labor law was in part an effort to consolidate and centralize the Mexican state (Brachet de Márquez ). Authoritarian tendencies also overpowered federalism when Bismarck adopted social insurance in the late nineteenth century (Hicks ). Federalism’s effects on welfare retrenchment are also ambiguous. Some scholars view federalism as providing additional veto points that can help prevent welfare retrenchment (Huber, Ragin, and Stephens ; Hicks ; Huber and Stephens ). Conversely, Duane Swank () suggests that federalism can fragment interest groups or beneficiaries that might otherwise defend welfare from retrenchment pressures. In Mexico, federalism has been historically weak

 \                              

and of little importance in the politics of social insurance, which has been concentrated at the national level of government. Although federalism played only a small role in the politics of social insurance in Mexico due to the centralization of power, victories won by the political opposition at the local and state level in the s contributed to the expansion of geographically targeted social assistance programs. Thus, political competition and the resulting demands for meaningful federalism may have contributed to the expansion of social assistance in the s. These institutionalist approaches all stress the ways in which the constitutional structure of the state, or its political institutions, may affect the ability of actors to block either the expansion or retrenchment of welfare policies. Although social insurance legislation may be interpreted as part of the PRI’s project of nationalizing political power, centralization was not the primary motivation for such policies. Given the intense centralization of decision-making authority during the period of PRI hegemony, the constitutional structure of political institutions had little to do with the growth of social insurance beyond preventing potential veto players, like big business, from blocking the expansion of benefits and programs. The process of political liberalization that accelerated in the s and s contributed to the decentralization of decision making, increasing the importance of veto points and players. Since the s, political institutions and their effects on the decision-making process have had important consequences for welfare in Mexico. In particular, decentralization has slowed the retrenchment of social insurance and facilitated the expansion of social assistance, as later chapters explain.

Institutions as Outcome In another group of institutionalist approaches, institutions, including welfare institutions, are the dependent variables. These approaches focus on explaining the origins of, changes in, and stability of institutions. As indicated above, the relevant theoretical approaches to institutional outcomes are rational choice institutionalism and historical institutionalism.²² Until recently, rational choice institutionalism has been relied on less often than historical institutionalism to explain welfare, at least in political science. The concept of rational choice institutionalism begins with the assumption that rational actors seek the institutional outcomes that will best maximize their utility (e.g., income or power). In this approach, institutions are the result of strategic interaction between actors with different institutional preferences, and

                              / 

they represent the equilibrium outcome of the strategic interaction or cooperation (see, e.g., Knight ). The rational choice assumption that institutions were created to serve particular functions envisioned by actors has led critics to point out that institutions often serve functions unintended by their creators (Pierson ). Until recently, rational choice approaches to welfare were primarily the domain of economists, and most adherents of the rational choice school of economics viewed welfare as an equilibrium outcome reflecting the policy preferences of the median voter under different political institutional arrangements.²³ Working backward from the institutional outcomes to infer the function of institutions and impute actor preferences has other limitations, which can be illustrated with an extended example. Karl Ove Moene and Michael Wallerstein () examine several different social insurance expenditures in Organization for Economic Co-Operation and Development (OECD) countries.²⁴ Their argument derives from the insight of Allan Meltzer and Scott Richard (), which suggests that demand for redistributive state spending should increase when the income of the median voter is lower, due to greater income inequality. This line of reasoning assumes that the poor prefer more redistributive policies than do the rich. Moene and Wallerstein argue that some social insurance is more like actual insurance than like redistribution, and therefore the demand for nonredistributive social insurance should be normal. In other words, the demand for nonredistributive social insurance decreases when the income of the median voter is lower, due to income inequality. To test their argument, Moene and Wallerstein analyze spending on several different types of social insurance programs in OECD member countries. They find that increased inequality (i.e., when the median voter has a relatively low income) is associated with lower government spending on unemployment, sickness, and accident insurance and has no statistically significant relationship to spending on pensions, health insurance, family benefits, or meanstested poverty alleviation. They conclude that the former programs serve insurance functions, while the latter programs suggest neither insurance nor redistributive functions.₂₅ In other words, whether social spending serves an insurance or a redistributive function may be inferred from empirical analysis rather than identified a priori.₂₆ The problem with such rational choice analyses, as Paul Pierson () points out, is the assumption that institutions are always designed for the function they serve, thereby leaving no room for unintended but common institutional consequences. Rational choice institutionalism has also been criticized for its treatment of institutional change. Since institutions represent equilibrium in this approach,

 \                              

change occurs when actors defect from the cooperative agreement that produced the equilibrium. Such defections are often created by exogenous changes in the relative power or preference ordering of actors. This approach tends to address inadequately the effects of institutions on the distribution of power in future negotiations regarding cooperation or institutional outcomes. For instance, new institutions that result from defections are not explicitly linked to the previous institutional equilibrium. The new equilibrium lacks residue of the old equilibrium.²⁷ At least, most applications of the rational choice approach provide no explanation for such stickiness of institutions consistent with the equilibrium model of institution creation.²⁸ If the new institutions resemble those that preceded them, it is because the power of actors or their preference ordering did not change drastically. Institutional change comes from changes in actors rather than the effects of institutions themselves. In contrast, historical institutionalism places the legacies of existing institutions at the center of institutional stability or change. Institutions result from political conflict and have distributional consequences that influence future conflict. Early versions of historical institutionalism emphasized critical junctures followed by strong and persistent path dependence (e.g., Lipset and Rokkan ; Krasner ; Collier and Collier ). As noted by Kathleen Thelen (, ), path dependence implies short periods of dramatic change generated by exogenous shocks followed by longer periods of institutional stability—characteristics associated with punctuated equilibrium. In these earlier views of path dependence, initial institutional choice was highly sensitive to idiosyncratic factors, and future institutional change was severely constrained by early institutions, essentially precluding certain paths of development. The analogy often used is that of the adoption of certain technologies (such as the QWERTY keyboard), with increasing returns and strong path dependence even after superior technologies become available (Thelen ; Pierson ). Although scholars who have recently elaborated the critical juncture and path dependence framework (e.g., Collier and Collier ; Mahoney ) have been very careful about identifying the endpoints of both the critical juncture and the institutional legacy, path dependency, or punctuated equilibrium, arguments do not neatly distinguish between the minor or marginal changes associated with periods of relative stability and the dramatic changes associated with critical junctures. For instance, James Mahoney explains that critical junctures have more voluntarism and “structural indeterminism” compared to the periods of institutional stasis that come between critical junctures (Mahoney , ).

                              / 

However, the only real way to identify the end of a legacy and the beginning of a new critical juncture is to identify “new periods of discontinuity . . . [that] signal the end of the legacy of a given critical juncture and perhaps the beginning of a new critical juncture” (Mahoney , ). Although Collier and Collier suggest that the political and economic transitions in Latin America in the s may constitute a new critical juncture in Latin American politics, they also argue that many of the institutional legacies of the earlier period are likely to persist (Collier and Collier , –). Both analyses suggest that a new critical juncture would be characterized by dramatic change and that a critical juncture could meaningfully be identified only after the fact and then only according to the amount of “structural indeterminacy,” “voluntarism,” and change (see Hall and Taylor ). Although they suggest that the s may have been a new critical juncture in Latin American politics, Collier and Collier also imply that the institutional persistence during the period belies the theory that a new critical juncture existed. Though they are willing to reject a diagnosis of a critical juncture on the basis of evidence of institutional persistence, such persistence—even during exogenous shocks or dramatic changes in the context or environment—is consistent with the original understanding of a punctuated equilibrium developed in evolutionary biology; that is, species remain stable despite dramatic climate cycles or environmental change (Gould and Eldredge , ). Thelen () provides similar evidence for institutional persistence in vocational training in Germany despite dramatic disruptions (two world wars) and changes in political regime (from fascism to democracy). These examples highlight the difficulties in identifying or isolating new critical junctures as measured according to the amount of institutional change. Even while institutions can persist despite exogenous shocks in the economic or political context, significant institutional change often occurs during periods that might otherwise be characterized by institutional stability. For example, Italy and New Zealand have both implemented significant electoral reforms since the early s, though neither case clearly amounts to a new critical juncture. In Mexico, significant changes to the welfare regime occurred in –, a period normally characterized for its political and economic continuity and stability. These examples, which also exhibit significant institutional persistence, only reinforce the problematic nature of a punctuated equilibrium model of institutional change. Although sometimes institutional change may be characterized by short periods of intense change followed by long periods of stability, the periods

 \                              

of relative stability may also feature significant institutional innovation (see Thelen , ). These examples of little change occurring during periods of economic and political upheaval and meaningful change taking place during periods of economic and political stability demonstrate an important limitation to borrowing the punctuated equilibrium model from the biological sciences to explain institutional change. Evolutionary biologists have a clearer definition of a significant change—speciation, or the creation of a new species. In the social sciences, we lack a clear definition of what constitutes a significant institutional change, or at least one worthy of establishing what a new critical juncture or equilibrium would look like. We do not have the criteria to establish the difference between minor and major institutional reforms, a point that will be addressed later. Furthermore, we would have to identify such a definition and categorization of the changes independently of the exogenous factors likely to produce a new critical juncture, something that early discussions failed to do. This discussion is not intended to dismiss the critical juncture approach altogether. Rather, it suggests that the focus of discussion be directed toward more carefully classifying the types of institutional stability and change likely to be observed, as well as identifying the mechanisms that produce them, rather than categorizing periods of change and stability as such.²⁹ This study illustrates how the interaction between institutions and actors’ political capacity can explain patterns and types of institutional stability and change in Mexico’s welfare regime. This is not meant to imply that prior studies in the historical institutionalism tradition have ignored the mechanisms of institutional stability and change, because they have not. Indeed, this is an important focus of both Collier and Collier  and Mahoney . Subsequent works have further elaborated how institutions themselves can contribute to both institutional stability and change. Central to an understanding of stability and change in welfare is the notion of policy legacies, or feedback effects (Skocpol ; Pierson ). Although not often explicitly stated, feedback effects are not automatic or deterministic. If they were, we could predict the paths of institutional development from the original institutional configuration. Feedback effects occur because, once in place, institutions shape the incentives, capacity, and power of collective actors either to protect existing institutions or to seek institutional change. Institutions may even create opportunities for new collective interest groups that had not previously existed. Once established, welfare institutions shape the incentives for collective action and can affect the capacity or power of existing and new collective actors.

                              / 

Institutions may, by design or by accident, create new collective identities. They may also become targets of future collective action. Welfare institutions may distribute resources such that collective actors have more or fewer resources with which to pursue future institutional change. Institutions may also lend legitimacy to existing demands, giving actors another source of political power. The important task of historical institutionalism is to identify the ways in which the distributional consequences of institutions contribute to either institutional stability or change. Established institutions can contribute to institutional stability, or reproduction, through one of two mechanisms: increasing returns (Pierson ; Thelen ) or reinterpretation (Thelen ; Hall and Thelen ). With either mechanism, actors that benefit (or receive resources or more political capacity) from institutional arrangements are hypothesized to mobilize to protect and sustain the institutions that benefit them. With increasing returns, institutions are reproduced or persist because the winners of the distributional struggle mobilize around institutions to sustain or protect the existing institutional arrangement. However, it is often assumed that the winners were those who originally designed the institutions. Sometimes winning actors are not explicitly mentioned, and instead it is the winning institutions that gain an advantage over time, as implied by references to the QWERTY keyboard (Pierson ; Thelen ). In reference to welfare institutions, the winners, or policy beneficiaries, are assumed to mobilize in support of the institutions that benefit them. Not only should program beneficiaries have an interest in protecting the welfare institutions, but the increasing returns argument also implies that the welfare institutions themselves somehow increase the capacity or power of beneficiaries to protect the institutions that benefit them. Such capacity may come from the material benefits provided by welfare (for example, income support or better health), but it most likely derives from the collective identity reinforced by the welfare institutions, which in turn improves the likelihood of collective action in defense of the institutional outcome. In this way, actors that benefit from institutions promote institutional stability. Reinterpretation, the second mechanism of institutional stability (Hall and Thelen ), was previously called institutional conversion (Thelen ). Reinterpretation is usually categorized as a form of institutional change, but it is better understood as a mechanism of institutional reproduction, one that produces stability in institutions. It is usually an unintended consequence of institutions, whereby the institutions inadvertently benefit new or existing collective actors (Thelen , ). For example, as Thelen explains (Thelen , –),  \                              

firms in the skill-intensive industries were not the target of Germany’s Handwerk system, which certified skilled labor in the apprentice system at the end of the nineteenth century. Nonetheless, such firms became politically invested in certification for vocational training as a means to attract more workers. Thus, an unintended consequence of the Handwerk system was the mobilization of skillintensive firms in support of vocational certification. Rather than indicating a change in the institutions, reinterpretation implies that new or unexpected actors become invested in existing institutions and mobilize their resources to support the institutions. In Mexico, the best example of institutional stability due to reinterpretation occurred in the s when IMSS doctors, who in the s and s had fiercely resisted becoming employees of the IMSS, staunchly defended IMSS medical services against privatization (see chapters  and ). A central concern of historical institutionalism is explaining institutional change. Two modes of institutional change are relevant for understanding the effects of policy legacies on change: institutional reform and institutional layering (Schickler ; Thelen , ). Institutional reform refers to any of a variety of changes to existing institutions. To measure pension reform, for example, one of several categorizations of reforms could be used. Karl Hinrichs and Olli Kangas () suggest that, although reforms can be measured in the short term as changes in the levels of contributions or benefits, the calculation of benefits, or the goal or orientation of the benefits, in the long term the accumulation of changes in levels or calculation can result in changes in overall orientation, or regime shift. Pension reforms in Latin America have been classified according to the ways in which reforms introducing private accounts create substitutive, parallel, or mixed pension regimes (Mesa-Lago ). In her work on pensions, Sarah Brooks () defines significant, or structural, changes as those that impact the degree of risk pooling and redistribution versus individualization and market provision, which can be boiled down to changes in the mix of defined benefit and defined contribution pensions. The common thread in these different classification systems is the distinction between major reforms that shift the underlying risk pooling or goal of the pension system and smaller adjustments to benefit calculations or contribution or benefit levels. The distinction between significant, or structural, reforms and more minor, or parametric, reforms can be extended to the overall configuration of welfare regimes. Parametric reforms do not change the underlying philosophy of a welfare institution or alter the role of the state in welfare provision, while structural reforms can do either. A parametric reform could be a change to the contribution requirements or replacement rates for a welfare benefit, for example, or it could                               / 

be a change in regulatory practice by the organization administering benefits. These types of parametric reforms to Mexico’s welfare institutions have been common, coming at least once or twice a decade. A structural reform, on the other hand, could be, for example, a shift from universal to means-tested benefits or the privatization of services. Reforms that essentially replace old institutions with significantly different ones are structural. Structural reforms change both the goals and the risk-pooling and redistributive profile of welfare institutions. Structural reforms in Mexico have been less common than parametric reforms; structural reforms appeared on the political agenda only in the s, when proposals to privatize pensions and health-care services were raised. At the same time, structural reforms need not necessarily signal a critical juncture. Endogenous sources of reform come from the distributional consequences of the institutions themselves. Institutional reform is more likely to occur when new institutions or changes to institutions produce small changes in the distribution of power among collective actors, including winners who seek to improve their advantage or losers who seek to regain ground.³⁰ Losers who have lost ground may seek allies in their push for future reforms. Presumably, such change is most likely when the existing institutions fail to satisfy the demands of collective actors involved in creating those institutions. Additionally, new collective actors experiencing an unintended impact of existing institutions may mobilize in support of reform. Reform as a mode of change is perhaps the most common form of change and is characteristic of change not associated with critical junctures. The evolution of the U.S. Constitution through legal interpretation is an example of such change (Thelen ). The oscillations in the rules of the U.S. House of Representatives regarding centralization of power in – and the concentration of party power in the s and s is another example (Schickler ). When congressional institutions were perceived to privilege certain interests at the expense of others, the underprivileged interests would organize to change the institutions, although Eric Schickler () is careful to point out that this does not imply that institutions return to an equilibrium in institutional outcomes.₃₁ Institutional layering, the second source of institutional change, occurs when new institutions are created alongside old ones (Schickler ; Thelen ). Layering is most likely to take place when beneficiaries of particular institutions block changes and when collective actors create new institutions alongside old to serve their interests. For Schickler (), institutional layering occurs because congressional actors have several types of collective interests, and seldom is a single collective interest dominant. His account of the development of the appropria \                              

tion and budget committee structure in the U.S. Congress provides additional insight into layering by emphasizing the innovation of congressional institutions in  by new members who were unwilling or unable to restructure existing institutions in which other members were invested. In the development of Mexico’s welfare regime, institutional layering has been common. It occurred with the creation of the ISSSTE in the s, when the proposal to incorporate public sector workers (with their generous labor contracts and benefits) into the IMSS system was deemed politically difficult. Layering has also characterized the transformation of Mexico’s welfare regime since the s; the obstacles in this case were resistance to both integral health sector reform and the extension of noncontributory social insurance protections to the informal sector. The discussion to this point has focused on the endogenous sources of institutional stability and change. However, exogenous shifts in the relative power of actors may also contribute to stability or change. Though exogenous shifts in power or structure are associated with critical junctures in the critical juncture framework of change, even small exogenous shifts in power may induce stability or change. For example, a financial crisis brought on by the withdrawal of foreign capital might increase the leverage of domestic capitalists who would like particular reforms adopted. Shifts in power can also constrain the ability of actors to demand reforms, leading to institutional stability. For instance, trade liberalization may constrain the ability of welfare beneficiaries to demand further increases in replacement rates. The sources of exogenous changes in power need not be economic; other institutional changes, such as new labor laws, may also affect the ability of class actors to defend welfare institutions or demand changes to them. Although historical institutionalism usually acknowledges that power constellations give rise to the creation of institutions, the role of power in the mechanisms of exogenous or endogenous institutional stability or change is often treated as auxiliary. However, class coalition approaches should take into account the distribution of power by the institutions in question, and historical institutionalism should be more explicit about the role of power in institutional stability and change.

Bringing Together Class Coalitions and Historical Institutionalism To some extent, combining the class coalition and historical institutionalist approaches is not new, since each tradition regularly draws on archetypal examples from the other in their explanations. Evelyne Huber and John D. Stephens                               / 

(), prominent advocates of class coalition analysis, incorporate insights from historical institutionalism into their analysis of welfare regimes in advanced industrialized democracies in the late twentieth century. In particular, they introduce the notion of a policy ratchet effect, whereby retrenchment becomes more difficult once policies with solid constituencies are established. However, the policy ratchet effect is secondary to class alliances and political conflict. Thelen (), a leading proponent of historical institutionalism, acknowledges that when institutions are initially created, they reflect the balance of class power. The role of power is also obliquely referenced in discussions of institutional stability and change, though it is treated as subsequent to the importance of institutions. The approach here differs in its argument that class coalitions and historical institutionalism should be treated as equally important in explaining the development of welfare institutions. Class power and the potential for cross-class coalitions are shaped by economic development and integration into the world economy, but they are also embedded in various domestic institutional arrangements, including corporatist and political institutions. Class power and class-based coalitions are thus to a certain extent enabled or constrained by those institutions, even before the creation of welfare institutions. Once welfare institutions are established, welfare also promotes or constrains via policy legacies or feedback effects both the power or capacity for collective action of class actors and the availability of class allies. The policy legacies of welfare institutions do not automatically reproduce themselves. Instead, the mechanisms of stability are intrinsically related to the distributional consequences of welfare institutions for winners and losers. Likewise, policy legacies can alter the capacity for collective action in ways that increase the likelihood that class actors will seek institutional change and may even leverage their influence within the existing political coalitions to do so. The strict version of path dependency, with its emphasis on critical junctures, does not provide a satisfactory explanation for change. Although some periods may experience more institutional change than others as a result of shifts in class power, defining critical junctures is an empirically difficult proposition. Further, as shown above, critical junctures can exhibit significant institutional stability, and periods of stability may involve significant institutional change. The focus should instead be placed on both identifying more precisely how power and institutions interact to produce either stability or change and discerning between exogenous shifts in class power and shifts stemming from institutional constraints. The analysis of Mexico’s welfare regime in the twentieth century reveals the importance of class coalitions and institutions for institutional, or policy, devel \                              

opment. The origins of Mexico’s welfare regime can be found in the government’s response to demands from organized labor and the ruling party’s effort in the s to solidify labor support for a cross-class coalition. Over the next several decades, organized labor used its access to the state through corporatist institutions and its central role in the coalition supporting the ruling party to promote the expansion of welfare for workers. Through periodic mobilization and renegotiation of its role in the cross-class coalition that kept the PRI in power, labor organizations played a central role in the expansion and improvement of social insurance provision. However, existing welfare institutions also shaped the expansion of welfare. Some of the growth took the form of layering alongside institutional reform. This pattern of steady welfare expansion, with layering and reform, continued until the debt crisis and subsequent political crisis of the s. Economic and political liberalization had significant effects on the cross-class coalition that sustained the PRI’s dominance for seven decades; it had an important impact on the ability of organized labor, especially in tradable sectors, to defend existing welfare institutions from reform efforts. The economic and political changes also contributed to the expansion—again, through institutional layering —of new means-tested social assistance in an effort to consolidate a new coalition of support for the ruling party among the unorganized urban and rural poor.

Alternative Explanations of Mexican Welfare As suggested earlier, a variety of alternative explanations to that presented here have populated the research on the development of welfare, especially research on welfare in advanced industrialized democracies. While this study emphasizes the role of organized labor in the cross-class coalition and the role of institutional dynamics, it does not ignore the possibility that other factors have shaped Mexico’s welfare regime. These factors were usually secondary to the relationship between organized labor and its position in the cross-class coalition formed by the ruling party and the constraints of existing institutions.

Economic Arguments and Economic Functionalism In their purest form, most economic explanations of the development of modern welfare institutions assume that welfare serves the economic functions of modern capitalism. The earliest economic explanation, or the “logic of industrialism,” posits that industrialization leads to the concentration of workers in urban centers                               / 

where they are without the benefit of their traditional familial safety networks in times of work-related disability, ill health, or old age and that industrialization generates the wealth necessary to support state welfare policies. Thus, countries with higher levels of industrialization or economic development tend to have higher levels of state-provided welfare and adopt similar social security provisions at similar levels of development (Cutright ; Wilensky ; Williamson and Fleming ). However, later studies failed to find a strong relationship between the timing or level of industrialization and the initial adoption of social protection policies (Collier and Messick ; Flora and Alber ). In some respects, industrialization, or at least some economic development leading to formal labor markets, may be one of several necessary conditions for the adoption of social protection institutions, but it is not enough on its own to yield a system of welfare. In Mexico, the most rapid growth in industrial employment and urbanization occurred during and immediately after the Revolution. It actually declined slightly between  and , only to rebound before  (Instituto Nacional de Estadística, Geografía e Informática [INEGI] ). The adoption of the first national social protections for private sector workers in Mexico coincided with the beginning of a state-led push for economic development via ISI. For this reason, the creation of the IMSS in  has been associated with the growth of industrialization (Spalding ). Although the legislation was national in scope, the low level of industrialization in the s initially limited implementation of the new policy to major metropolitan areas, where enough workers with sufficient wages to contribute to social insurance were concentrated. From the s through s, the concentration of workers and level of wages determined, in part, the geographic expansion of IMSS coverage. At the same time, however, unions in particular localities lobbied through their labor confederation to get access to IMSS benefits even when their locality did not meet the bureaucratic criteria for inclusion (see chapter ). This pattern of expansion reinforces the likelihood that industrialization may be a necessary, though not sufficient, source of pressure for social protection. As additional evidence against the “logic of industrialism” thesis, several advanced industrialized democracies at similar levels of economic development have very different types of welfare regimes. Although the fit is not perfect, the welfare regime types identified by Esping-Andersen () tend to cluster around different types of production regimes (Huber and Stephens ). Welfare regimes are likely to share institutional complementarities with varieties of capitalism, but it would be premature to assume that the shape of welfare regimes emerges as a

 \                              

functional response to the dominant production regime. Welfare regimes are embedded in the broader institutional landscape that shapes capitalism, but the production regime does not create welfare. The production regime and the welfare institutions in place are likely the result of political struggle between actors with differing power resources in a particular historical-institutional context. Since different economic development strategies in developing countries reflect different production regimes, or different institutional alignments for organizing market production, institutional complementarities are likely to exist between different economic development strategies and forms of welfare in the developing world (see also Haggard and Kaufman ). The most relevant economic development strategies in Mexico for welfare regime development were import substitution industrialization prior to the debt crisis and economic neoliberalism thereafter. ISI was a state-led development model premised on state intervention in the economy to promote industrial production for the domestic market. A variety of policies were used to promote domestic production, including subsidies, tariffs, an overvalued exchange rate, and nationalization of failing firms. In that context, to the extent that social insurance policies satisfied and even moderated labor demands, social insurance shared institutional complementarities with the ISI development model. By providing workers’ compensation, old age and disability pensions, health insurance, and other benefits to workers, social insurance satisfied the demands of many industrial unions. The notable exceptions were national industries, including railroads, petroleum, electricity, health care, and the government (before the creation of the ISSSTE), all of which had either their own social security systems or labor contracts with substantially more generous benefits. Because social insurance in Mexico is based on tripartite funding, the state’s contribution would serve as a subsidy for the provision of workers’ benefits, although in practice the state often failed to contribute its full share as required by law. Further, social insurance in Mexico notably covers only the formal sector, which tends to consist of industrial and government workers, a factor that is consistent with the urban, industrial bias of ISI development (see also Haggard and Kaufman ). As might be expected, the abandonment of ISI development in favor of economic neoliberalism following the debt crisis has coincided with a shift in the dominant welfare model as well. Economic neoliberalism in Mexico has significantly restructured the state’s role in the economy. Beginning in the mid-s and accelerating in the early s, the state eliminated subsidies, reduced tariffs, stabilized the currency (usually at a lower value), and began privatization. After

                              / 

privatizing minor and major national industries, from milk distribution to airline and telephone companies, second-generation reform efforts targeted privatization of social insurance pensions and health care. At the same time that retrenchment of social insurance was pursued on the grounds of improving economic efficiency, the state expanded targeted social assistance for the rural and urban poor beginning in the late s. Although initially funded with the proceeds of privatization and justified as necessary to ameliorate the adverse effects of structural adjustment during the Salinas administration (–), targeted social assistance continued to grow in subsequent administrations (see chapter ). Unlike the principles of social insurance, those of targeted social assistance for the poor are consistent with neoliberalism. Such targeted spending is considered less expensive, more efficient, and more effective in correcting market failures. Since targeted social assistance also includes investment in human capital, such as educational scholarships and health services, this shift in welfare emphasis was consistent with neoliberal conceptions of appropriate state intervention in the economy.³² Perhaps more importantly, targeted social assistance was crucial to the PRI’s efforts to build a new cross-class coalition that sought the support of the unorganized poor in the new liberalized economy and labor market. Both the retrenchment of social insurance and expansion of targeted social assistance are consistent with the new economic development model, but they are not the functional result of institutional complementarities, as a simplistic interpretation of a “varieties of capitalism” approach might suggest. The retrenchment of social insurance and the expansion of social assistance were the result of changes in the underlying governing coalition, and they reflect shifts in the power resources of political actors. Of course, this political process was complicated by the dual economic and political transitions that occurred during the s and s. The important point is that the changes to Mexico’s welfare regime have been neither automatic nor free of political conflict. The economic liberalization of the s and s in Latin America should also be viewed in the context of the overall process of economic globalization that had accelerated elsewhere in the s as a result of technological change. In many countries in Latin America, trade integration occurred earlier and faster than did financial integration in the s. Financial liberalization, including the elimination of restrictions on foreign direct investment (FDI) and capital controls, began in earnest in many countries in the s (Morley, Machado, and Pettinato ). However, FDI integration in Latin America at the end of the century was still far behind levels seen in OECD countries (Hirst and

 \                              

Thompson ). On the whole, increased trade openness, growing though modest levels of FDI, and significant reductions in capital controls signaled the expansion of economic globalization in Latin America in the s and s. A simplified view of globalization pressures on the modern welfare state implies a similar functional logic—that states will need to transform their welfare regimes to meet the functional needs of a global economy. Other views of globalization stress that economic competition leads to the deterioration of state authority or capacity to fulfill its usual roles (Cerny ; Strange ; Friedman ). Recent evidence suggests that the effects of globalization on social spending in the developing world are not uniform. Different types of economic integration have various effects (Rodrik ; Garrett ; Kaufman and Segura-Ubiergo ; Rudra ). How economic integration can, in theory, affect the balance of power between class actors and within cross-class coalitions and thus welfare institutions requires further explanation. Increased trade creates incentives for domestic producers to reduce costs so they can compete with new imports in the domestic market or maintain their competitiveness in foreign markets. Because labor is abundant in Latin America, exports consist of labor-intensive goods, so keeping labor costs low is particularly important for maintaining competitive exports. Moreover, many middle-income countries in Latin America, including Mexico, are beginning to feel wage competition from low-income countries in Asia, which increases the pressure on governments to keep wages low. Due to these new competitiveness concerns, both domestic and FDI producers, who have added political power due to the changes in the development model and economic liberalization, demand a reduction of the labor taxes that are used to fund social insurance. Increased trade should lead to reductions in employer contributions to social insurance and possibly a shift from employers as the source of insurance funding to either workers or the state. The reduction in contributions will create pressure to reduce benefits, toughen eligibility requirements, and shift more responsibility for income loss protection to the private sector. Foreign direct investors will share the concerns of domestic producers for price competitiveness in domestic and foreign markets and will pressure governments by threatening to withhold investment, thereby encouraging governments to reduce labor taxes and welfare benefits in competition with one another. Portfolio investment is also likely to pressure domestic governments in Latin America, since a large proportion of portfolio investment is in government debt. Portfolio investors seek secure investments with profitable returns. Such investors

                              / 

care less about human capital and more about the overall economic output of the economy and fiscal deficits that determine interest rate premiums and profit outlooks (Mosley ). Capital mobility has also been associated with a reduction in labor tax rates in industrialized economies (Swank and Steinmo ). Therefore, as portfolio investment in Latin America increases, governments will feel constrained to keep overall government expenditures low and budget deficits small, while maintaining a minimum level of economic output. An increase in portfolio investment will lead governments to reform their social insurance systems in line with the liberal model by reducing state contributions, labor taxes, benefit levels, and coverage and by shifting more responsibility for welfare to the private insurance market. In Mexico, trade and foreign direct and portfolio investment have constrained labor taxes and have affected production and labor markets. The introduction of flexibility into the labor market has contributed to the expansion of the informal sector, in small and medium-sized enterprises and in the increasing use of parttime and own-account work. This level of growth in the informal sector both erodes the constituent base of social insurance and creates new constituents for noncontributory social spending. Meanwhile, investor concerns regarding budget deficits constrain the social policy options available to address the demand created by market liberalization. In this economic context, means-tested or targeted social assistance is more cost efficient than universal social insurance and often satisfies the demand for social assistance generated by changes in the labor market that result from globalization. The net effect of globalization therefore promotes the retrenchment of social insurance for formal sector workers and expansion of targeted social assistance to informal sector workers and the poor. Based on the experience of small, developed countries throughout the post– World War II era (Cameron ; Katzenstein ), some scholars have argued that globalization creates demands for social insurance, or “compensation,” to protect workers from the risks associated with heightened economic integration, or an expansion of welfare rather than retrenchment (Rodrik ; Garrett ; Kaufman and Segura-Ubiergo ; Rudra ). However, support for this “compensation” thesis in the Latin American context has been weak. Qualitative and quantitative studies of social insurance in the region have emphasized the tendency toward welfare retrenchment in economies with the greatest economic openness (Dion ; Kaufman and Segura-Ubiergo ). The tendency in Latin America for economic globalization to result in social insurance retrenchment rather than expansion is likely to reflect globalization’s effects on both the

 \                              

capacity of traditional social insurance beneficiaries to prevent welfare retrenchment and the growth of the informal sector, which has traditionally not been covered by social insurance. Thus, globalization has not led to the traditional types of “compensation” via social insurance found in the developed world. This is not to suggest that globalization has not generated social costs. It has. However, the social costs and labor market changes that result from globalization and the reduced role of the state do not translate into the expansion of traditional formal sector social insurance. Rather, it has created demand for welfare policies to address the needs of the growing informal urban sector and rural sectors excluded from formal labor markets. Therefore, compensation in Mexico has taken the form of the expansion of means-tested, noncontributory social assistance. In addition, although globalization creates pressures for reforms, its effects are not evenly distributed across sectors. The comparison of health-care and pension reform proposals across tradable and nontradable industries in Mexico illustrates how organized labor in nontradable industries, such as health care and public service, is able to block retrenchment efforts that would adversely affect its interests, in part because they are protected from global competition. The comparison illustrates the limitations of a functional interpretation of the effects of globalization on social policy and highlights the role of political conflict and domestic class actors.

Policy Diffusion Late-developing nations like Mexico adopted welfare state policies at an earlier stage of their development than did developed nations. This fact has led some researchers to argue that these late developers experienced policy diffusion from Europe, policy diffusion being the tendency for policy innovations to be adopted in waves across geographic units. While Peter Flora and Jens Alber () found no evidence for the diffusion of policies among European nations, David Collier and Richard Messick () found evidence of diffusion of social security policies from Europe to other regions. The diffusion explanation suggests that lesserdeveloped countries imitate the policies adopted by more advanced countries. Chikako Usui () has identified the causal mechanism by linking the adoption of social security protections to contact with international organizations (IOs) and participation in International Labor Organization (ILO) conventions. Recognition of the profound effects of globalization has prompted renewed interest in policy diffusion, which has led to identification of a number of mech-

                              / 

anisms for the spread of innovations, not all of them involving the direct participation of international organizations (see Simmons, Dobbin, and Garrett ). Given its genesis in globalization, much of the literature focuses on horizontal processes of diffusion. For instance, some approaches emphasize diffusion through economic competition (Simmons and Elkins ), something of a functional convergence toward the best policy in a globalized economy. Some approaches focus on the ways in which domestic policy makers learn from their peers, via either a rational learning process (e.g., Simmons and Elkins ) or a learning process shaped by bounded rationality or cognitive heuristics (e.g., Weyland ). Other explanations either invoke the use of hard or soft power by IOs for coercion (e.g., Hunter and Brown ; Brooks ) or suggest that IOs establish standards that countries emulate (e.g., Strang and Chang ). This book takes the position that policy diffusion and IOs do influence social policy, though not in ways likely to be measured by simple cross-national comparisons of IO program lending and policy outcomes. International financial institutions may have used the blunt instrument of loan conditionality and one-size-fits-all structural adjustment recommendations during the debt crisis of the s, but few would characterize the social policy approach of IOs during the s as such. Seldom is IO influence on social policy a gross display of influence, and it has been more nuanced than that suggested in many characterizations. The role of diffusion in Mexican policy making has been greatest during periods of intense institutional change, especially in the s and s. During both periods, when significant institutional reforms were under consideration, Mexican officials looked beyond their borders for inspiration—sometimes to neighbors but other times toward more distant models. In the s, those models were European. In the s, Mexico, like many Latin American countries, looked to Chile’s pension privatization for inspiration.³³ During periods of intense reform efforts, IOs also contributed technical expertise and resources to the policy design or implementation process. In the s, Mexican officials sought advice and approval from the ILO. For example, the ILO recommended actuaries to help design the IMSS system, and Mexico presented its proposed legislation to an ILO-sponsored conference on social security in  in Chile. In the s, however, Mexican officials turned to international financial institutions like the World Bank and the Inter-American Development Bank (IADB), which have nearly replaced the ILO as the main source of social policy recommendations and technical advice for developing economies (Deacon ). The extent of this influence is debatable, since international financial in-

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stitutions often have no formal mechanisms to force Latin American countries to adopt specific social policies even when they might offer financial incentives to do so. The role of international organizations in Mexico highlights an important difference between welfare in the developing versus the developed world, where it is rarely acknowledged that IOs participate in policy formation. Ultimately, however, the policy outcome was determined by domestic political and institutional considerations. Thus, while international diffusion may not cause welfare regime change, it may influence the types of changes that are likely to be made.

State Capacity and Bureaucratic Initiative Two lines of reasoning regarding the role of the state and welfare policy are worth mentioning: state capacity and bureaucratic initiative. As for capacity, states that lack a professional or Weberian bureaucracy are less likely to have the capacity to administer a broad range of social policies (Huber ; Grindle ). State capacity is more of a concern in the developing than in the developed world. Indeed, it had some impact on the early implementation of welfare in Mexico. Before Mexico developed its IMSS health-care infrastructure, governmentprovided medical services were handled through contracts with private doctors. More recently, problems of state capacity have left targeted social assistance programs, including PROGRESA and Oportunidades, open to pressure from politicians (see chapter ). Even when the targeted social assistance programs are politically neutral, the bureaucracy has at times been unable to resist pressure from local politicians (Green ). Regarding bureaucratic initiative, it has been hypothesized that the bureaucracy has on its own taken the initiative to create or expand welfare (Heclo ). Rose Spalding’s analysis (, ) of the creation of the IMSS in  most closely parallels this type of top-down, state-centric reasoning by crediting the president and a core group of bureaucrats with having the foresight to enact Mexico’s first social security legislation. However, the timing of the legislation can be best explained in the context of the rebuilding of the cross-class support for the PRI regime following the  petroleum expropriation and  presidential succession (see chapter ). Following the creation of the IMSS bureaucracy, from the s through the s, while IMSS bureaucrats had some autonomy in determining when and where benefits were extended to new localities (Spalding ), organized labor also used its position in the ruling coalition to influence

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the extension of benefits to localities that did not meet bureaucratic criteria (see chapter ).

Interest Groups and Political Pluralism Interest group approaches suggest that welfare results from the political demands of organized interest groups, such as the elderly, in democracies (Pampel and Williamson ). Unlike class-based approaches, however, pluralist approaches to welfare do not identify interest groups according to their economic assets or their position in capitalist production. Unlike specifically Marxist approaches, pluralist theorists assert that the state is a neutral arbiter among various competing interests. Despite the lack of extensive democracy throughout Latin America in the early twentieth century, the earliest work on social insurance in the region adopted an interest group approach. Carmelo Mesa-Lago’s () pioneering work on the origins of social insurance in Latin America emphasized that certain groups, such as the military and civil servants, tended to be the first to demand social insurance (see also Borzutzky ). While the pattern of social insurance expansion in the various Latin American countries is consistent with pressure from segmented interest groups, Mesa-Lago’s work does not explain why certain groups were able to extract benefits in some countries and not in others. The approach fails to address the role of the political process and why and how interest groups have access to policy making in democracies and authoritarian regimes. In Mexico, beyond organized labor and business organizations, interest groups like pensioners’ organizations have not played a significant role in lobbying the government on either side of most welfare debates. In the s, private insurance companies studied the pension and health-care reforms, but given the small market share of these firms, their role was not significant. An organization of IMSS pensioners does exist in Mexico, but it lacks the numerical and economic strength necessary to make it a significant political player (Madrid ).

Gender Another type of pluralist explanation for the development of welfare suggests that in democracies, women’s movements from within and from outside the state promote the writing of welfare policies (Skocpol ; O’Connor, Orloff, and Shaver ).³⁴ In Latin America, Chilean women were associated with popular governments and their commitment to social programs from the s through

 \                              

the s (Rosemblatt ). While women have historically been important proponents of social programs in general, they have often pushed for policies that focus on the family as a unit or on the welfare of children and women.₃₅ While female workers are likely to be strong supporters of social insurance legislation (see Brickner ), this does not necessarily imply that women’s movements, in general, will be strong advocates for social insurance policies. Groups representing women’s interests have seldom played a key role in Mexican welfare policy. In the late s and s, for example, women’s organizations largely mobilized around the issue of suffrage. However, their national congresses suffered from the strong differences between Catholic, middle-class women and leftist, working class women.₃₆ Although some of the leftist feminists in the women’s movement supported the principle of social insurance, they were more likely to favor women’s mobilization within the labor and political organizations to which they belonged as opposed to supporting a broad-based organization for women’s interests in general. The struggle for women’s suffrage dominated the demands of women’s organizations, including those organized by leftist feminists.³⁷ Women’s groups’ lack of formal access to policy makers, divisions within the women’s movement, and women’s preoccupation with suffrage make it unlikely that initial social insurance legislation resulted from demands made by the women’s movement. On the other hand, the inclusion of day-care services for the children of working women in the Social Insurance Law reform of  was a direct response to demands from and mobilization by workers in the textile industry, many of whom were women (see chapter ). In this instance, the demand came from women within the organized labor movement rather than directly from the women’s movement. Women did not have a strong voice during the welfare reforms of the s either. Despite the adverse effects of pension privatization on the ability of women to earn their own pensions, the gender effects of the pension reform proposal were not raised at the time of the reform, and women’s groups did not explicitly oppose the reform on those grounds. When women’s groups did oppose the reform after its adoption, the opposition was couched in class rather than gender terms (Dion ). Interestingly, recent social assistance formulations, such as PROGRESA (–) and Opportunities (or Oportunidades, –), have given income subsidies and other financial benefits directly to women, even when they were not single heads of households. Furthermore, scholarships designed to discourage families from putting their children to work have provided more generous benefits for girls in an effort to improve girls’ school completion

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rates. Again, these gender-sensitive aspects of policy were not a response to demands from women; they were largely based on growing evidence that targeting women is the best way to break the cycle of poverty (see, e.g., Morán ). W this theoretical framework, which integrates class coalition and historical institutionalist analyses, the following qualitative historical analysis highlights the causal role played by class actors within the context of the ruling cross-class coalition and existing institutional constraints. Therefore, the key causal story prior to the democratic transition of the s and s depends on demonstrating several steps in the causal chain. First, the ruling party relied on a crossclass coalition for its political support and popular legitimacy. Second, organized labor and employers were key members of that coalition. Third, labor articulated bottom-up demands for welfare benefits, which employers opposed. Fourth, at times, often around periodic renewals of party leadership, labor mobilized its power resources and/or threatened to publicly withdraw from the coalition, even if it incurred the possibility of a repressive response from the state. And fifth, the state responded to mobilization by conceding at least some of the welfare demands articulated by organized labor, even if other nonwelfare demands were ignored or concessions were paired with selective repression. In the s and s, during the democratic transition, the inability of organized labor to block government reform efforts or leverage its political influence to gain new worker benefits is indicative of the decline of organized labor’s role in the ruling crossclass coalition, while the expansion of social assistance reflects the increasing importance of the unorganized rural and urban poor.

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THE EARLY ST R UG G L E FO R WELFAR E From the Revolution through the World Wars

T   social insurance in Mexico took shape just before and just after the Mexican Revolution. A comparison of efforts in the s to implement social insurance for both private and public sector workers illustrates the role of class alliances in policy adoption. Business community opposition blocked social insurance for private sector employees, while the government used its decree powers to provide pensions for its workers. Although the ruling coalition wanted to respond to both public and private sector worker demands for insurance, doing so for private sector workers would have threatened the balance of support from business leaders for the government, so the decree was used only to extend pension benefits to public sector workers, who were a key constituent of the class coalition for the government of the time. Attempts to pass social insurance legislation for private sector workers continued during the administrations of Cárdenas del Rio (–) and Ávila Camacho (–). Although similar social insurance proposals were developed during both administrations, the otherwise conservative administration of



Ávila Camacho established the foundation for Mexico’s welfare regime with the passage of the Social Insurance Law in . The timing of social insurance adoption had political underpinnings, and the passage of the new law played a role in consolidating labor’s support for the ruling regime’s cross-class coalition after the divisive  presidential succession decisions within the ruling party.

Antecedents of Social Insurance in Mexico Although Mexico did not implement social security provisions until the early twentieth century, religious fraternities and mutual aid societies had performed some social insurance functions during earlier centuries (Sánchez Vargas , ; Chávez Orozco ; Mesa-Lago ; García Flores ; Ávila Espinosa ). In , President Benito Juárez García proposed the first public social security legislation in Mexico not based on charitable or private self-help organizations; his proposal led to the creation of the General Office of Charity Funds (Oficina General de Fondos de Beneficencia) to distribute public assistance to the poor (García Flores ). In addition, at the state level, workers’ compensation legislation predated the Mexican Revolution (Sánchez Vargas , , –, –; García Flores , , ). After calling for armed rebellion and later being elected president, President Francisco I. Madero González (–) reiterated his commitment to the passage of workers’ compensation laws—an issue that had been an integral part of his campaign platform—and created the Department of Labor to address labor issues (García Flores , ). Further, social protections for workers often became part of revolutionary rhetoric. For example, on September , , in Hermosillo, Sonora, Venustiano Carranza Garza, a leader of the Constitutionalist revolutionary forces, invoked the need for social protections for workers and peasants and predicted their adoption after the Revolution, saying, “[W]e lack laws that favor workers and peasants; but these will be passed by them, since it is they who will triumph in this social and vindictive struggle” (quoted in Barragán Rodríguez , ; trans. by author). The commitment to social insurance reflected in this public address was later incorporated into the Constitution of , in Article , section .₁ Along with the Constitutionalists (the supporters of Carranza), many of the revolutionary leaders participating in the Constituent Congress of  had been influenced by the social insurance proposals made by the Liberal Party since its creation in  (García Cruz , –; García Flores , –). The inclusion of Article  \                      

 in the Constitution and its references to social insurance are considered an important milestone for Mexican labor. The three years following the adoption of the progressive Mexican Constitution witnessed a significant increase in labor unrest, including serious strikes in the most important industries of the time: petroleum, railroads, textiles, and mining. The strikes have been attributed to rising expectations sparked by Article  (Matute ). Despite the importance of section  in Mexican labor history, it was not designed for modern social insurance and reflected the Constituent Congress delegates’ poor understanding of social insurance (García Cruz , , ). While it allowed private and public provision of benefits by both state and federal institutions, the adoption of stateadministered, federal social insurance would ultimately require constitutional reform. In November , Article  was one of the more important topics of discussion at the First National Congress of Industrialists, which grew into the Confederation of Chambers of Industry of the United States of Mexico (Confederación de Cámaras Industriales, or CONCAMIN) in  (Alcazar , ). Industrialists at the First National Congress expressed the belief that Article  was “a death blow for industry” (Bensusán Areus , ; trans. by author). This antagonism of industrialists toward worker protections foreshadowed future resistance to worker benefits that would intensify over the next two decades. The CONCAMIN refused to accept social insurance unless it would replace benefits included in labor contracts. This conflict also illustrates a pattern that would repeat itself throughout the twentieth century: in response to the government’s periodic backing of pro-labor policies, business interests would organize in opposition to social insurance (see, e.g., Schneider ).

Social Insurance and Politics in the Early Post-Revolutionary Regime The weakness of the state during the s and s was reflected in general political instability. Political leaders continuously worked to consolidate personal political power and to establish a strong, centralized state (Valdés Ugalde ). During the administrations of Álvaro Obregón Salido (–) and Plutarco Elías Calles (–), Congress was polarized as competing former Revolutionaries sought to consolidate their influence and power. For a time, after the assassination in  of President-elect Obregón, whom voters had selected to succeed Calles, the latter continued to exert significant influence on a series of presidents,                       / 

each of whom remained in office about two years. This six-year period came to be known as the Maximato. Despite the political instability, social insurance policies for both private and public sector workers remained on the political agenda. Though proposals for private sector benefits were abandoned, Calles ultimately used decree powers and his influence to implement limited pension and housing benefits for his supporters in the unions of government employees. The comparison of the two policy outcomes that follows highlights the role of social insurance as a means of consolidating support among workers. It also underscores the way business opposition limited the advance of social insurance and the role business played in the cross-class coalition during the Maximato.

Social Insurance for the Private Sector During and following the labor conflicts of the late s, the governments of Venustiano Carranza (–) and Álvaro Obregón (–) proposed various forms of social insurance, but continued armed rebellion and governmental instability forestalled their adoption (Sánchez Vargas , –; García Flores , –). These executives had little legislative success in general because they faced a legislature that consistently opposed them (Weldon ; , –). Obregón, for example, proposed the creation of a social insurance fund that would be administered by the state and funded by employer contributions of  percent of worker salaries, in lieu of constitutionally mandated profit sharing with workers. The fund would have provided indemnities for work accidents, old-age pensions, and life insurance (Seguro Obrero [] ). While this proposal had the support of the CONCAMIN as long as it replaced negotiation of labor contracts, it did not have the support of organized labor, which felt that workers were entitled to broader benefits (Clark , –).² As Obregón explained in a presidential campaign speech in , the Congress did not cooperate with the presidency in  because of political differences unrelated to social security, and his proposal had been returned without being debated or considered (Conferencia . . . Álvaro Obregón [] , –).³ President Calles faced similar opposition from Obregón’s supporters and business interests in his attempts to pass workers’ compensation legislation. In September , the Joint Congressional Commission for Labor and Social Security proposed labor legislation in the Chamber of Deputies to compensate workers for on-the-job accidents and work-related illnesses (Proyecto de ley sobre accidentes . . . [] , –). A delegation from the Federation of Workers’ Unions of the Federal District, which was a member of the Calles-allied Regional  \                      

Confederation of Mexican Workers (Confederación Regional Obrera Mexicana, or CROM), appeared before the Chamber of Deputies to ask them to implement legislation for Article  (Cámara de Diputados, September , ). Despite labor’s demands for such legislation, Obregón’s supporters blocked it. The debate in the Chamber of Deputies on September , , reflects these divisions. Several deputies proposed a discussion of the implementation of Article  and accused the president of the chamber of stymieing debate. The discussion quickly degenerated into name calling, and the debate was rescheduled for a later date (Cámara de Diputados, September , ). Attempts to pass other labor reforms during Calles’s administration failed as well (Bensusán Areus , –; Weldon ; ). Business interests are also credited with blocking the adoption of social insurance legislation (Spalding , ). Soon after the congressional debates, the Chamber of Industry of the State of Veracruz published a treatise denouncing federal legislation requiring employers to pay both medical expenses and indemnities for work accidents and illnesses. Basing their arguments on their experience with similar legislation in Veracruz, these industrialists contended that if employers were expected to pay the indemnities, workers should pay for medical services with their salaries. Or, if employers were to pay for medical benefits, the state should reduce taxes (Cámara de Industriales de Orizaba [] , –). Although Calles had cultivated the support of organized labor, his administration was not able to overcome employer resistance to the implementation of worker protections stated in Article . Again, this reflects the balancing of opposing class interests within the cross-class coalition supporting the early post-Revolutionary governments. Social insurance became an important campaign issue in the  presidential election. Obregón’s reelection campaign was backed by the Party of Social Welfare, whose primary goal was the establishment of broad social insurance provisions. Even the opposition presidential candidates, General Francisco Rufino Serrano and José Vasconcelos Calderón, supported social security adoption in their campaign discourses (García Cruz , –). Obregón’s assassination shortly after his election led to the inauguration of provisional president-elect Emilio Portes Gil (–). In November and December , President Portes Gil convened the Worker-Employer Convention, which created the Mixed Commission of Workers and Employers to write a labor code. While in theory employers at the convention supported social insurance, they opposed any scheme that would require them to finance such insurance and did not believe the country was sufficiently prepared for such provisions (García                       / 

Cruz , ). The draft proposal was completed in May , and the constitutional reform of Article  necessary to federalize labor and social insurance legislation was passed the following August without congressional discussion.⁴ In September , the labor law draft was submitted to the Congress. The labor law included the first concrete proposal for social insurance that went beyond workers’ compensation for work-related accidents and illnesses and created a state institution for the provision of such benefits. The proposal also included disability, old-age and life insurance, unemployment benefits, and sickness and maternity benefits for workers’ families and survivors, and it specified tripartite funding (Código Federal del Trabajo [] , –). According to President Portes Gil (, ), groups opposed to workers’ rights, who believed that their interests would be injured by the legislation, did everything in their power to prevent its passage. In the same month that the labor law went to Congress, the CONCAMIN held a national congress at which one of its members suggested the formation of an employers’ organization to oppose the proposed labor legislation. They had to create an organization to mobilize employer opposition because the federal legislation regulating the CONCAMIN and similar confederations prohibited their participation in politics or political debates (Alcazar , –). Consequently, the Mexican Employers’ Confederation (Confederación Patronal de la República Mexicana, or COPARMEX) was founded by industrialists who opposed the proposed labor code on the grounds that it was too obrerista, or generous to workers (Alcazar , –; Schneider ). The core founders of COPARMEX were associated with the independent capitalists of the Monterrey Group, a collection of industrialists in the northern city of Monterrey (Niblo , ). When labor legislation resurfaced in  as the Federal Labor Law during the administration of Maximato president Pascual Ortiz Rubio (–), social insurance provisions beyond those for work-related accidents and illnesses had been relegated to transitory articles calling for the adoption of broader social insurance legislation in the future. According to the Federal Labor Law, employers could provide compensation for work-related accidents and illnesses directly, or they could contract with private insurance companies to provide equivalent coverage. However, according to some industrialists, few insurance companies were interested in providing such coverage (Cámara de Industriales de Orizaba [] ). As a result, worker compensation benefits were generally unfunded in practice, and compliance with the law is unknown. With the adoption of the Federal Labor Law, President Ortiz Rubio was given extraordinary powers on January , , to enact social insurance legislation be \                      

fore the end of August of that year, but he was ousted from office before he could do so (García Cruz , ). His successor, President Abelardo L. Rodríguez (–), formed a commission in February  to write yet another social security proposal, which was presented at the First Congress of Industrial Law later that year (Bach and Zamora ; García Cruz , ). The proposal discussed by labor, government, and employer representatives at the First Congress was very similar to later proposals, including those of the Cárdenas and Ávila Camacho administrations.₅ Social insurance was not adopted during Rodríguez’s term. As this brief history suggests, after the adoption of the Constitution of  and the creation of the new regime, social insurance for private sector workers repeatedly appeared on the political agenda, generating explicit support from organized labor and resistance from industrialists. Social insurance was initially integrated into general labor legislation and formed parts of legislative proposals in , , and . However, continued political instability was a contributing factor in the failure of social insurance and other labor legislation to be adopted (Pozas Horcasitas , n; García Flores , –). Unfunded workers’ compensation for work accidents and professional illness were part of the  Federal Labor Law, though remaining social insurance provisions were not. Capitalists opposed these social insurance provisions as well, and these types of social insurance proposals even prompted the organization of two of the earliest groups representing capitalist interests: CONCAMIN and COPARMEX. Organized capitalist opposition delayed the adoption of labor legislation for more than a decade. When the Federal Labor Law was finally adopted in , most of the proposed social insurance provisions, including pensions and health care, had been removed in response to business opposition. This failure of social insurance legislation occurred despite organized labor’s persistent demands for it. According to President Portes Gil, “Workers of all varieties . . . demanded the creation of a Labor Law,” not once but repeatedly between  and  (Portes Gil , –; trans. by author). The compromise that led to the Federal Labor Law and its specific elements shows that lawmakers had to achieve a balance between the demands of workers and business owners, all of whom were key to the ruling party’s coalition of political support.

Pensions for Government Employees Although efforts to pass social insurance for the private sector were successfully blocked by organized capitalists in the s, President Calles responded to the demands of government employees for benefits by implementing pensions for a                       / 

narrowly defined group of government employees. Because of the unstable and unconsolidated nature of the new state throughout the s and early s, government employees were paid infrequently and irregularly. They were also often dismissed at the end of the year and then rehired at lower pay or forced to buy back their posts at the beginning of the new year (Fondo de Cultura Económica [hereafter, FCE] , ). In response to such uncertainty, central government employees, especially teachers, began organizing labor unions to represent their interests. Government employees in the Federal District, in telegraph offices, and in the Treasury were also among the early organizers (ISSSTE , , –). In  federal teachers in the port of Veracruz, led by Vicente Lombardo Toledano, went on strike because they had not been paid for ten months.₆ Meanwhile, teachers’ unions in other regions also went on strike or protested their condition. The Veracruz teachers were affiliated with the CROM, the largest labor confederation of the time, which had close ties to President Calles. The CROM supported the demands of these teachers and those of other teachers’ organizations that had conflicts with the government during this period (FCE , ). In response to this unrest among the largest group of federal government employees, President Calles decreed the Civil Pension Law (Ley de Pensiones Civiles) in  to quell discontent among teachers (FCE , ; ISSSTE , , ). The use of decree powers was probably necessary to overcome the deadlock between supporters of Calles and Obregón in the Congress.⁷ Likewise, Calles relied on the CROM for support of his administration; his decree of government employee pensions helped consolidate that support and solidify the loyalty of the bureaucracy (Tardanico , ). Although the Civil Pension Law was designed to alleviate rising tensions among federal government workers, it only partly achieved this objective (Méndez , ). It excluded many government employees and officials, including state and municipal workers, the military, and federal deputies and senators, and it did not provide coverage for all social risks (Méndez , ; López Cárdenas , ). The benefits provided by the August  government employees’ pension system were relatively modest and required prolonged service for eligibility. To be eligible for an old-age pension, a government employee had to be at least sixty years old with fifteen years of service. The original law was revised in December of that same year to allow employees to retire at age fifty-five with fifteen years of service or with thirty-five years of service regardless of age. The benefits were calculated by taking . percent of the worker’s last salary and multiplying that

 \                      

figure by the number of years of service. Thus, the minimum replacement rate was . percent of the final salary. The law included mandatory retirement at age seventy; thus, the maximum pension, in theory, would have had a replacement rate of approximately  percent of the last salary if a worker began working for the state at age fifteen and did so continuously until age seventy (Diario Oficial , ). In practice, however, few workers at that time lived to be seventy years old, so the average replacement rate was probably much lower. To be eligible for a disability pension, a worker had to have worked for the state for a minimum of ten years, and then he or she received only a  percent replacement rate (Diario Oficial , ; Dirección de Pensiones Civiles, Secretaría de Hacienda y Crédito Público ). The law provided short-term and housing loans, but it did not provide medical benefits or other forms of social protection. Workers paid contributions for these benefits based on their age. Contributions ranged from  percent for the youngest workers (aged eighteen) to . percent for workers up to age fifty-five. Revisions to the law in December  reduced the maximum contribution to . percent at age fifty-five. Overall, the law was a weak concession to government employees because it covered few workers and provided limited benefits that were funded entirely by workers. At the same time, however, the law did play an important role in responding to labor unrest and consolidating the support of organized public sector workers for the Calles coalition.

Private and Public Sector Social Insurance during the Maximato In the s, the state and political processes were still recovering from the Mexican Revolution. Political institutions established by the Constitution of  were still relatively untested, national corporatist institutions had not yet been established to regulate labor organization, political parties had not yet been institutionalized, and the state lacked centralized authority and control of the entire country. After the adoption of the Constitution of , rising expectations among workers contributed to labor unrest and increasing demands for improved working conditions and social insurance benefits. Despite labor groups’ demands for benefits, social insurance for the private sector delayed the adoption of the Federal Labor Law, which included workers’ compensation provisions, and other benefits were never adopted. Modest old-age and retirement pensions were granted to a small number of federal government employees. Given the wide-scale demand

                      / 

for benefits, these asymmetrical outcomes beg explanation. A comparison sheds light on the politics of the period. The Constitution of  created a federal system with a president and bicameral congress. Yet the main characteristics of the system were political instability and polarization throughout the s, with competing factions of the Revolutionary movement and with Congress evenly divided between supporters of Obregón and those of Calles. The even distribution of power between two opposing factions made all forms of policy making in Congress difficult (Weldon ). Political instability was exacerbated by the conflicts between political elites. Calles’s domination during the Maximato only partly calmed the political volatility. Although politicians at the time blamed the divisions in Congress for the government’s failure to adopt social insurance for private sector workers, these divisions did not prevent Calles from implementing pensions for federal government employees by decree. The comparison of public and private sector pension policy outcomes suggests that it was not the impasse in Congress that mattered most but the importance of both responding to worker demands for benefits while not alienating business support for the president’s coalition. Although corporatist institutions would later divide the private and public sectors of the labor movement, the CROM, favored by both the Obregón and Calles administrations, was at this time the most powerful union representing workers in a variety of sectors and industries.⁸ However, toward the end of Obregón’s administration, differences between Obregón and Luis Morones, the CROM’s leader, put some distance between the union and Obregón. When President Calles took office in , he appointed Morones as secretary of industry, commerce, and labor. Calles sought to strengthen his alliance with the CROM in order to resolve class conflict and promote economic development (Trejo Delarbe ). Although Morones’s position provided some benefits for rank-and-file CROM members, it mainly gave Morones the power to discriminate against rival labor confederations and to distribute patronage to some loyalists. Both private and public sector unions demanded social insurance and other protections for workers, but not all unions were able to use their relationship with Calles to negotiate social insurance benefits. The relative effectiveness of public sector demands for social insurance during the Calles administration was related to the need to consolidate state authority and capacity. In fact, in response to the weakness of state capacity, consolidation was one of the main objectives of the Calles administration (Tardanico ). When Calles decreed modest pension benefits for central government employees, including teachers, he sought to “promote the loyalty of what was the only organ \                      

ized force, besides the army, upon which central leadership could directly depend” (Tardanico , ). In this light, government pensions not only cultivated the support of organized workers but also helped consolidate state authority. Another important difference between public and private sector demands for worker benefits was the opposition of the domestic bourgeoisie to any social insurance to which they would have to contribute. For the government pensions, Calles used decree power to bypass Congress. However, because he could not afford to alienate the support of the bourgeoisie, Calles was not able to use this strategy for social insurance for private sector workers. He wanted to increase the state’s regulation of foreign economic interests and its control over economic development, and he needed to concentrate state authority for this purpose. Consequently, Calles sought “accommodation” with the dominant classes, including “landowners, merchants, bankers, and industrialists” (Tardanico , ). Since industrialists opposed social insurance for the private sector and organized the CONCAMIN to formalize their opposition, decreeing social insurance legislation would have been at odds with the bourgeoisie support Calles had been courting. The strategy of enacting pensions for government workers while avoiding a clash with business elites over benefits for private sector unions is indicative of the balance of class power within the dominant coalition. During the Maximato, Calles maintained considerable influence over the government, informally dominating policy as a series of weak presidents held office. He continued to consolidate state capacity and generated support by, among other tactics, co-opting labor leaders representing both private and public sector workers. By the time President Cárdenas was elected in , state capacity had improved. However, the class coalition supporting the Maximato was weak and ineffectively institutionalized. Cárdenas began his presidency in the shadow of Calles but soon built his own base of popular support. He successfully increased state autonomy from the dominant classes and reduced the political influence of Calles by building a new institutionalized class coalition.

Social Insurance in the Cárdenas and Ávila Camacho Administrations During the Maximato, the Federal Labor Law established the basic legal framework for labor organization, or corporatism, though President Cárdenas would be the one to define the relationship between organized labor and the ruling coalition. The political process of redefining the ruling coalition during the Cárdenas                       / 

administration also shaped the fate of social insurance proposals during the Ávila Camacho administration. Comparing the politics of social insurance adoption during both administrations illustrates the theoretical importance of the political capacity of organized labor to demand social insurance as a condition for its participation in the ruling cross-class coalition.

The Cárdenas Administration During the early years of his administration, President Cárdenas built a crossclass coalition consisting of the industrial and financial bourgeoisie and the owners of small and medium-sized enterprises that benefited from his economic policies (Contreras , –; Hamilton ; Valdés Ugalde ). Through his progressive policies, such as agrarian reform and support for organized labor’s wage demands, Cárdenas had cultivated much popular support, which he later organized under the auspices of the reformed PNR, the new Party of the Mexican Revolution (Partido de la Revolución Mexicana, or PRM) in .⁹ Some of Cardenas’s more popular programs, including agrarian reform, wage increases, and the oil expropriation, created conflicts between capitalists and his administration toward the end of his sexenio, or six-year term (Valdés Ugalde , ). In early , capitalists, organized in the Confederation of National Chambers of Commerce and Industry (Confederación de Cámaras Nacionales de Comercio e Industria, or CONCANACO), summarized their perceptions of the Cárdenas sexenio: The general offensive begun against private enterprises produced a true panic among businessmen and capitalists, with the resulting disappearance of capital available for investment. Industrialists, accosted by the ever-growing demands of workers, discouraged by the lack of sympathy of the Boards of [Labor] Conciliation, fearful of indefinitely prolonged strikes with the required payment of lost wages, and obsessed with the expropriation law for which union leaders were constantly agitating, already had more than one worry: sell and save what they could of their capital, while exploiting their immobile investments to the limit of their capacity and resistance in a desperate effort to extract the greatest profit possible from their business. (Confederación de Cámaras Nacionales de Comercio e Industria , ; trans. by author)

Despite widespread popular support for the petroleum nationalization, the industrial and financial bourgeoisie that had matured due to the economic policies of Cárdenas suddenly withdrew their support for the regime. After the national-

 \                      

ization in March , a broad movement developed in opposition to the Cárdenas administration; the movement included groups organized by the northern and central industrial and financial bourgeoisie, landowners, and agents of the expropriated oil companies (Garrido ). The first serious efforts to adopt stand-alone social insurance legislation for private sector workers began during the Cárdenas administration. The Primer Plan Sexenal of the PNR, which was the electoral platform and the six-year plan for the Cárdenas government, included a pledge to pass a social security law (Partido Nacional Revolucionario [] ).₁₀ With regard to labor issues, the Primer Plan Sexenal was similar to the  proposals of the General Confederation of Mexican Workers and Peasants (Confederación General de Obreros y Campesinos de México, or CGOCM), the direct antecedent of the CTM (de Lara Rangel , –).₁₁ According to Francisco Macín, a CTMista, Cárdenas asked for the formulation of a social security proposal in response to the “steps taken [by the CTM] before the President of the Republic, General Don Lázaro Cárdenas, so that Section  of Article  of the Constitution would be implemented” (Macín , ; trans. by author).₁₂ President Cárdenas also mentioned in his  and  state of the union addresses that such a law was being studied (Cárdenas [] , ; Cárdenas [] , ).₁₃ The proposal called for the creation of a unified, autonomous, and decentralized institute with tripartite funding from workers, employers, and the state to oversee the implementation of a variety of social insurance programs for industrial and agricultural workers, including old-age and disability pensions, health and maternity care, and protections for work-related illnesses and injuries. Unemployment insurance was not included, though the Mexican Constitution requires employers to compensate workers in the event of unjustified termination of employment (Secretaría de Gobernación ). Although the drafted law was completed by August , it was never presented to the Congress. According to Ignacio García Téllez, who was secretary of state at the time and later secretary of labor under Ávila Camacho, the law was not passed because of the “grave circumstances derived from the expropriation and nationalization of petroleum and international conflict” (García Téllez ).₁₄ García Téllez claims to have pushed Cárdenas in  to pursue the adoption of the law drafted by the Department of State, but Cárdenas refused to pursue the issue, reportedly telling García Téllez, “No, sir, that would be two horned bulls that we would have to fight at the same time. . . . We will first take petroleum for the good of the nation, and in its time it will be [social] insurance” (Una entrevista muy interesante , ;

                      / 

trans. by author).₁₅ Having already acted against the interests of capital in the petroleum expropriation, Cárdenas decided that proposing additional legislation against those interests, such as the Social Insurance Law, was not politically viable. Social insurance legislation was thus a political casualty of the oil nationalization and the collapse of the cross-class coalition that had previously supported the Cárdenas administration.₁₆ Following the petroleum nationalization, diverse groups on the right, including bankers, industrial capitalists, landowners, religious elements, and even members of the ultra-right-wing National Synarchist Union (Unión Nacional Sinarquista, or UNS) united in  to form the PAN (Garrido , ). The party’s platform was a response to “socialist” public education, agrarian reform, and the petroleum expropriation, and in general it constituted a reaction against the principal tenets of the PRM and Cardenismo. The PAN called for the consolidation of national unity through collaboration among classes (Garrido , ), which later became one of the appeals of the Ávila Camacho–PRM government. The birth of PAN in  and the events surrounding the presidential succession of  are signs that capitalists had been able to assert at least some independence from the state as early as  (Valdés Ugalde , ), contrary to common perceptions. By early , leaders of the northern industrial and financial bourgeoisie had decided that Juan Andreu Almazán would be their presidential candidate in  (Contreras , ; Garrido , ).₁₇ That same year, some segments of the organized working class began to join the capitalists and landowners in the opposition. Dissatisfied with both the undemocratic process of candidate selection within the PRM and the party’s perceived shift away from leftist policies, many of the most important national industrial unions with the most organizing experience (including unions representing electricians, miners, and sections of railroad workers) abandoned the CTM, the main labor organization formally linked to the PRM, and threw their support behind Almazán in the upcoming elections (Contreras , –). Although Almazán was associated with the Right and with bourgeoisie interests, his platform did not differ significantly from that proposed by the PRM and its presidential candidate, Ávila Camacho. Furthermore, Almazán tried to appeal to the popular classes by supporting legislation guaranteeing workers’ access to health care and social security (Contreras , –). In addition, in August , he made conciliatory comments concerning labor, and in the press and at a Mexico City campaign rally, he claimed to support a reformist platform, in order to generate more support among the popular classes (Contreras , –).

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Additional dissent and interest in Almazán’s candidacy surfaced among the rankand-file of some unions that continued to support the PRM candidate.₁₈ Union leadership quickly silenced rank-and-file Almazán supporters, however (Contreras , –). Indeed, criticisms of the PRM regime were common in  and calls for greater democracy, frequent (Contreras ). In , this opposition movement of capital and important segments of organized labor dovetailed with the presidential succession struggles within the PRM. The threat posed by an organized opposition behind the candidacy of Almazán and the loss of support from the financial and industrial bourgeoisie forced the PRM to abandon some of its progressive causes and nominate a more conservative candidate to regain the support of capitalist and moderate interests (Garrido , ). Ultimately, the supporters of Ávila Camacho’s candidacy within the PRM, principally the CTM and the National Peasant Confederation (Confederación Nacional Campesina, or CNC), were able to install him as the PRM candidate, bypassing the usual internal procedures for candidate selection (Garrido ). However, Ávila Camacho’s candidacy only accelerated the exodus of national industrial and other unions from the PRM coalition because it reinforced the party’s move to the center. Finally, in late  and early , the opposition coalition—consisting of diverse labor, capital, and middle-class religious interests that supported Almazán —began to fall apart. Following Almazán’s leftist proclamations in August , many of the northern capitalists began to withdraw their support for his campaign (Contreras , ). Although the PAN officially backed Almazán and many PAN affiliates were active in his campaign, the PAN as an organization remained uninvolved (Contreras , ). Furthermore, key groups began negotiating secret pacts with Miguel Alemán Valdés, Ávila Camacho’s campaign manager who later was president of Mexico himself. The northern capitalists, who were heavily concentrated in Monterrey, Nuevo León, agreed to support the PRM presidential candidate in exchange for the right to designate their state’s future governor and Monterrey’s municipal president (Contreras , ).₁₉ Alemán Valdés signed an agreement with the leader of the UNS, which in  claimed to represent as many as , peasants, offering the organization titles to collective landholdings in exchange for its members not participating in the  elections (Contreras , ). In addition, Ávila Camacho made at least four trips to Monterrey in October , presumably to try to regain the support of northern elites (Niblo , ). Thus, the most powerful capitalists had been brought back into the PRM fold, leaving Almazán with a weakened base of sup-

                      / 

port. In his effort to court workers, Almazán’s withdrawal of support, or his tepid support, for right-leaning groups and capitalists ultimately undermined his candidacy and facilitated the PRM’s fraudulent victory in the  presidential elections. The  presidential elections were the most violent in the recent history of Mexico. On the morning of the elections, the CTM and PRM affiliates occupied the polling sites, and the violence and fraud that ensued went beyond the “traditional” violence that had come to accompany election day in Mexico (Garrido , –; Niblo , –). Before election day was even over, Ávila Camacho was declared the winner, with . percent of the official votes. Opposition candidate Almazán, with only . percent of the official vote, was unable to find any support, either from the Mexican elite or from the United States, and he soon went into exile in Cuba (Garrido , –). Almazán was the first major challenger to the PRM’s hegemony, and the extent to which the PRM resorted to fraud and violence reflects the real threat posed by his candidacy and highlights the authoritarian measures to which the regime’s leaders would resort to maintain control of the state. Meanwhile, the vacillation of both working class and capitalist supporters between the PRM and the candidacy of Almazán highlights the importance of building a cross-class coalition to maintain political power in the late s. Initially, the petroleum nationalization caused capitalists to distance themselves from the PRM and openly challenge the party’s hegemony. In response, the PRM moved to the center and nominated a more conservative politician to follow Cárdenas. This decision alienated some of the key unions in the party’s working class support, which made them leave the PRM briefly in  to throw their weight behind Almazán. As Almazán courted labor, his leftward shift alienated the capitalists who were originally behind his candidacy and opened the door for a negotiated pact between industrialists, particularly in the important northern region, and the PRM just in time for the elections. This rapid realignment within the ruling coalition set the stage for the implementation of ISI policies and social security during the Ávila Camacho administration.

The Ávila Camacho Administration The Segundo Plan Sexenal, or the electoral platform of Ávila Camacho and the PRM in , was originally drafted by the CTM in  and reflected the labor confederation’s commitment to the principles of Cardenismo. According to CTMista Francisco Macín, the CTM participated in the formulation of the

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Segundo Plan Sexenal (Macín , ). Others have suggested that Vicente Lombardo Toledano himself drafted the plan (Niblo , ). The CTM also actively participated in determining the electoral content of Ávila Camacho’s campaign (Acedo Angulo , ). However, some members of the PRM believed that the plan and many of its proposed policies and reforms were too leftist and might further alienate the capital interests that still supported the PRM after the oil nationalization. The CTM had to revise the plan, cutting many of its reform proposals. However, the Segundo Plan’s measure to pass a social security law within the first year of the new administration was not compromised (Garrido , , , ; Pozas Horcasitas , ), suggesting that social security was an important demand of the organized labor sector of the party. With regard to the adoption of social security legislation, the final version of the Segundo Plan Sexenal resembles early demands for social security that were incorporated into the statutes of the CTM in . Article  of the Segundo Plan Sexenal states, “During the first year this plan is in effect, a Social Insurance Law will be issued, which ought to cover the most important social and professional risks, the employer class and the State contributing the necessary capital and in whose organization and administration the organized working class should participate” (quoted in García Cruz , ; trans. by author). During his speech at the Second National Convention of the PRM in November , when the plan was adopted, CTM founder Lombardo Toledano reiterated labor’s demand for social security and claimed that the PRM was the only party that would provide protection for workers (Discurso pronunciado . . . [] , ). Similarly, the original statutes of the CTM stated that the union “will fight for the adoption of social insurance, in all its forms, paid for by employers and the state” (Confederación de Trabajadores de México [] , ; trans. by author). This and Lombardo Toledano’s statement have in common the principle that the state and employers, not workers, should pay for social security. The CTM also wanted organized labor to have a role in the organization and administration of social security (Macín , ). In February , the CTM reiterated its support for a new social security law at its national congress (Confederación de Trabajadores de México [] , ). During his inaugural speech, President Ávila Camacho (–) reaffirmed his party’s pledge to pass social security legislation. On June , , a little more than six months after taking office, Ávila Camacho created the Technical Commission, consisting of representatives of labor, employers, and various state ministries, to formulate a proposal for a social insurance law to be submitted to

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Congress (Acuerdo presidencial . . . [] , –). The commission included seven representatives from each of three sectors: labor, employers, and the state (García Cruz , –). In reality, however, the CTM enjoyed a strong position in the commission because five of the seven labor representatives were from the CTM or unions formally affiliated with the CTM (and a sixth represented a federation, the Federation of Government Workers’ Unions [Federación de Sindicatos de Trabajadores al Servicio del Estado, or FSTSE], which had been previously affiliated with the CTM). Moreover, two of the several government delegates (members of Congress) were in fact also CTM representatives.²⁰ In other words, seven of the twenty-one members were officially affiliated with the CTM, and an eighth was from a sympathetic union. According to one CTM delegate, the commission’s discussions were often long and almost always acaloradas —“heated”—by the different points of view between the labor and employer representatives (Macín , ). Around the same time that Ávila Camacho created the Technical Commission and charged it with drafting the new social insurance legislation, there were other events that directly affected labor’s relationship with the state. In March , the Federal Labor Law was reformed to make official the procedures that unions had to follow before going on strike. The reforms also established sanctions against illegal strikes, that is, those that did not follow proper procedures. Overall, the reforms increased the state’s regulatory control over the labor movement (Medina , ; López Villegas , –; Middlebrook , ). The creation of the Technical Commission to study social insurance a few months after the regulatory reforms to the labor code has been interpreted as a compensatory offer to labor in exchange for the state’s greater regulation of strikes (Medina , , ). A preliminary draft of the Social Insurance Law was presented to employers who, according to Secretary of Labor Ignacio García Téllez, were concerned about the actuarial calculations and how much the legislation would cost them (Una entrevista muy interesante , ; see also García Cruz , –). Passage of the law was further delayed because Mexico lacked actuaries who specialized in public social insurance. García Téllez called Osvald Stein, director of the Social Insurance Section of the International Labor Organization, to ask for his assistance in executing the necessary calculations. Soon after, Stein’s colleagues Paul A. Tixier (ILO vice president) and Emilio Schoenbaum (co-author of several European social insurance systems) joined him in Mexico to help prepare the actuarial calculations (Una entrevista muy interesante , ; Como nació , ). Given

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the need for actuarial studies, the Technical Commission did not finish its study and proposal until late , delaying the passage of the law by more than a year (Pozas Horcasitas , ; Medina , n). Once the document was completed, nearly all of the labor unions and employers and industry organizations that had participated in the Technical Commission formally approved it (López Villegas , ). While business and industry leaders publicly supported the legislation, some business leaders were privately urging President Ávila Camacho to abandon the social security project. According to García Téllez, “all seemed well, but the employers became alarmed, due to ignorance,” and one night in , the president of the Chamber of Deputies, Federico Medrano, called to tell García Téllez that the proposal would fail because there were millions of pesos available to prevent its adoption (Como nació , ; trans. by author). Alarmed by the opposition, García Téllez spoke with President Ávila Camacho, who assured him that the law would be passed. In this discussion, President Ávila Camacho expressed the view that he saw the social insurance legislation as a means to repudiate his reputation as a conservative and to leave a social legacy for his administration (Como nació , ). This interpretation is also consistent with his efforts to satisfy the opposing preferences of both workers and business as part of the ruling coalition. In , at the CTM’s national congress, Fidel Velázquez, the union’s leader, issued a pronouncement in support of the proposed social security legislation. He pledged to fight for its adoption, despite opposition from employers and insurance companies. He also urged Ávila Camacho to use his powers as president to implement the legislation (Macín , ). In late October , the National Worker Council (Consejo Obrero Nacional), a group that had formed earlier that year in order to unite the largest labor confederations, issued a formal statement in support of the proposed Social Insurance Law (García Cruz , –).₂₁ According to García Téllez, the government was at the point of “postponing [the law] and dismembering it, even burying it” had it not been for the “push from the most powerful labor organizations and the decided support of the President[,] Don Manuel Ávila Camacho,” along with guarantees of efficiency from the bureaucrats who would enact the law (García Téllez ; trans. by author). The Technical Commission presented its proposal to the president in October , and conferences were held in November  to introduce the new law to the broader labor and employer community (Secretaría del Trabajo y Previsión Social ; El Popular, November –, ). The law was later passed unanimously by both the Chamber of Deputies (December ) and the Senate (Decem-

                      / 

ber ) (El Popular, December , , ). The final version of the law was published in the Diario Oficial on January , . Two speeches were made in favor of the law in both the Chamber of Deputies and the Senate by labor delegates; no speeches were made in opposition.²² The final law called for the creation of what became the IMSS: an autonomous, nonprofit, decentralized social security institute that would oversee the administration of workers’ social insurance benefits. A commission consisting of representatives of labor, employers, and the state would oversee the IMSS. The benefits provided by the IMSS would be funded by a contribution of  percent of salaries by employers and another  percent each from employees and the state, with the exception of compensation for work-related illness and accident insurance, which would be funded entirely by employers. Fifty percent of the contributions would be used to provide medical care for workers and their families, and the other  percent was earmarked for disability and old-age pensions and compensation for work-related accidents and illnesses. The law did not include unemployment insurance; unfunded severance pay was mandated by the Federal Labor Law. Benefits were originally obligatory for industrial workers, and the president would have the option of extending benefits to new groups or regions as they were deemed suitable. Initially, only industrial workers in Mexico City were to be covered by benefits, which were set to begin on January , . The next year, benefits were extended to Puebla and Monterrey and in , to Guadalajara (Sánchez Vargas , –).

Reactions to the New Legislation Shortly after the law was adopted, several labor organizations expressed their support at their national congresses and in the press. The CTM, CROM, the Confederation of Workers and Peasants of Mexico (Confederación de Obreros y Campesinos de México, or COCM), the General Confederation of Workers (Confederación General de Trabajadores, or CGT), the Revolutionary Confederation of Workers and Peasants (Confederación Revolucionaria de Obreros y Campesinos, or CROC), the Federation of Workers and Peasants of Mexico (Federación de Obreros y Campesinos de México, or FSROC), railroad workers, petroleum workers, electricians, cinematographers, and the Federation of Federal District Workers (Federación de Trabajadores del Distrito Federal, or FTDF) all officially supported the new IMSS (Pozas Horcasitas , n; López Villegas

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, ). Although membership figures for all of these organizations are not available, it should be sufficient to point out that this list includes the major labor organizations of the time.²³ While employers were not publicly outspoken in their opposition to social security prior to its adoption, employer organizations became extremely vocal in their opposition to the law once the collection of contributions began in June . Various employer organizations expressed their dissatisfaction with the law, asking that its implementation be delayed until after the conclusion of World War II due to the economic hardships of wartime (López Villegas , ). According to a confidential memo sent by García Téllez to President Ávila Camacho in November , the CONCAMIN, the CANACINTRA, and the National Chamber of Cinematography (Cámara Nacional Cinematográfica, or CANACINE) had all written to the president to express their opposition to the expansion of coverage to additional regions and workers and to complain about the quality of services and the IMSS’s interpretation of benefits prescribed by collective contracts.²⁴ Furthermore, private insurance companies opposed the state’s monopoly on work injury and illness insurance, but the state argued that it could not allow private companies to insure the profitable cases while leaving the unprofitable risks to the state (Pozas Horcasitas , –). Various physicians’ groups also opposed the implementation of the law because they were not represented in the IMSS’s administration (Pozas Horcasitas , –). Some newspapers, especially La Prensa and Excélsior, were opposed to the new social security law because they were organized as cooperatives and believed that their legal status under the new law was ambiguous.₂₅ In particular, they feared that members of the cooperatives would have to pay both the employer’s and the employee’s contribution to receive benefits; their dispute was later resolved with a private “gentlemen’s agreement” with the IMSS administration (Pozas Horcasitas , –).₂₆ On January , , a working class movement opposing the implementation of the new law formed the National Proletarian Front (Frente Nacional Proletario, or FNP).²⁷ The FNP grew out of the declining National Proletariat Confederation (Confederación Proletaria Nacional, or CPN), which had left the CTM in  because of political differences between its leaders and the leadership of Lombardo Toledano (Niblo , ).²⁸ The CPN was one of the labor organizations that had signed the National Worker Council’s declaration in support of the Social Insurance Law in October . Although the FNP supported

                      / 

the general idea of social security, its main goal was to force a reform of the new social security law. The group’s most pointed complaints about the law were threefold: () employers were acting in their own self-interest, interpreting the law to mean that they did not have to honor labor contracts stipulating higher benefits than those required by the new law, () workers should not have to contribute toward benefits, and () the CTM should not have a privileged position in the IMSS advisory commissions.²⁹ The first two points were policy positions that the CTM had consistently maintained, but recognizing the need to compromise to get the legislation adopted, the CTM had relaxed its position. Still, the FNP went beyond merely stating their concerns to the government: on March , , the FNP attacked an IMSS clinic and, on July , , staged a larger protest that ended in bloodshed. The movement dissipated soon after the July demonstration, when many of its leaders were imprisoned for their participation (Pozas Horcasitas , –). The exact nature of this working class opposition movement against the implementation of the social security law remains unclear. The movement and the FNP in particular are never mentioned in the literature without some cautionary remarks regarding either the motives of the movement’s leadership or its possible ties to capital interests or to the National Synarchist Union. The animosity between the FNP and the CTM is obvious, and it is likely that the conflicts over social security were part of a struggle for power between the dissident labor leaders of the FNP and the dominant CTM that had been simmering since the final years of Cárdenas’s government (Pozas Horcasitas , –).³⁰ The FNP used social security policy merely to demonstrate opposition to the Ávila Camacho government (López Villegas , ).₃₁ This opposition, however, was not to social insurance in principle, which the FNP supported, but to social insurance as adopted in the IMSS law. It could be argued that the increase in strikes during  and  reflected labor expressing its opposition to the social security legislation. Indeed, the official strike data for those years reveal a steep increase in the number of legal strikes compared with the figures for the late s and very early s (see Spalding , app.). However, the strike data for  are likely to be artificially low due to an agreement among the main labor organizations to renounce their right to strike for the duration of World War II.³² The agreement was conditional, asking for employers to submit labor conflicts to arbitration. When employers refused to enter into such an agreement, labor began to demonstrate its power by calling a number of strikes, some of which were politically motivated (Medina , , –).

 \                      

Another factor behind the unrest was that real wages declined during World War II. Workers’ real salaries in  were only  percent of their level in ; real salaries in  and  were  percent and  percent, respectively, of  salaries. In addition, from  through , prices in Mexico City increased by  percent while workers’ salaries increased by only  percent (Semionov , –). Prices in the Federal District (Mexico City) went up another  percent between  and , while the minimum wage was constant from  through  (INEGI ).³³ Given the evidence of economic hardship faced by the working class in the early s, the strikes in  and , including major ones by petroleum and mining workers, are generally interpreted as demands for salary increases (Semionov , –; Roxborough , –). Previous analyses of the IMSS interpreted its creation in  as the product of the “relatively independent and entrepreneurial role played by the state,” guided in particular by President Ávila Camacho and a small group of technocrats (Spalding ). However, that explanation overlooks the role of organized labor in the cross-class coalition of support for the Mexican state as well as the broader political context in which social insurance was adopted. Comparing the failure to adopt social insurance under President Cárdenas with the success of President Ávila Camacho explains why the adoption of social insurance in  should be viewed as the outcome of an implicit bargain between labor and the state, a bargain whereby labor accepted increased control of its activities in exchange for guaranteed social insurance benefits. This bargain further strengthened labor’s support for a cross-class alliance among labor, peasants, and a narrow segment of the industrialist class that would buttress the ruling regime.

Explaining the Creation of the IMSS Generally speaking, economic development contributes to the growth of the working class, but economic development alone is not sufficient to produce social insurance. Although the Mexican economy grew throughout the s and early s (see table .), economic development accelerated once President Ávila Camacho adopted the first phase of a strong state-led push for import substitution industrialization growth (Valdés Ugalde , ). The Manufacturing Industry Law (Ley de Industrias de Transformación), legislation that offered new and dynamic sectors of Mexican industry tax relief and protectionist barriers for a period of five years, was implemented in May  (López Villegas ). The beginning of state-led industrialization did not precede but was coterminous with the adoption of social insurance legislation.                       / 

Year

Table 3.1 Mexico’s gross national product (GNP), 1932–1944 GNP (millions of 1980 pesos) Percent increase

1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944

230,346 257,259 275,040 293,225 317,139 327,320 334,671 351,504 356,659 392,534 412,832 429,075 463,403

11.68 6.91 6.61 8.15 3.21 2.24 5.02 1.46 10.05 5.17 3.93 8.00

Source: Brachet de Márquez 1994, 200.

Other measures of industrialization typically used in studies of welfare state development in advanced industrialized economies, such as the rate of urbanization or the economically active population (EAP) employed in the secondary sector, also do not suggest dynamic changes during the presidencies of either Cárdenas or Ávila Camacho. Primary sector employment declined steadily, from  percent of the EAP in  to  percent in , while secondary sector employment declined from  percent in  to  percent in , only to increase again, to  percent, in  (INEGI ). The spectacular growth of Mexican cities began only after World War II.³⁴ The percentage of the population living in cities did not change dramatically between the late s and early s. Moreover, the percentage of the economically active population employed in the secondary sector actually declined between  and . Mexico’s economic takeoff may have begun with the Ávila Camacho administration, but this growth was not substantial enough or early enough to explain why social insurance legislation was successfully passed in  so soon after the failed attempt in . Mexico adopted national social insurance when it had a lower level of urbanization and industrialization than did any country in Europe, which might suggest that international policy diffusion rather than industrialization led to the

 \                      

creation of the IMSS. The content of the Social Insurance Law was influenced by studies of policies in other countries and standards set by international institutions, such as the ILO, which Mexico had joined in  (Spalding , ). Cárdenas’s secretary of state, García Téllez, researched social insurance legislation in foreign contexts while preparing the draft law (Una entrevista muy interesante , ). Although the CTM had originally wanted social insurance to be the financial responsibility of employers and the state, the organization ultimately had to accept tripartite funding due to international precedents and ILO agreements and recommendations (Macín , ). The design of the IMSS may have been influenced by international policy diffusion, but the implementation of social insurance in  had its roots in domestic politics. There is no evidence of formal contact between Mexican officials and the ILO or other international actors before social insurance appeared on the Mexican national policy agenda. That contact came later in the policymaking process. Foreign actuaries recommended by the ILO were asked to help with actuarial calculations only after the technical commission had completed a first draft of the legislation. Further, formal approval of the proposal did not come from the ILO until August  (Opinion de la Oficina [] , –). The international context may have influenced the content of social insurance legislation in Mexico, but its influence was not enough to lead to the adoption of the legislation without the confluence of several critical domestic political factors. State capacity likely influenced the adoption of social insurance in Mexico. Under Cárdenas’s administration, the state was becoming increasingly centralized, but it remains unclear whether the state could have initiated a policy as ambitious as the IMSS. In terms of medical infrastructure and resources, insufficient state capacity in the s limited the extension of social insurance to workers in Mexico City in  and other industrial centers in  and , even though the law would ultimately cover all formal private sector workers. In the first two decades of the IMSS’s existence, it had to subcontract services and facilities with private physicians and clinics because it did not yet have the staff or infrastructure necessary to provide the legally mandated services. Limited state capacity may have restricted the implementation of social insurance to the urban centers of industrial production initially, but it did not prevent the state from responding to the demands of organized workers (highly concentrated in those urban areas) and providing them with social insurance coverage. Presidential ability to influence the outcome of legislation in Mexico expanded under both Cárdenas and Ávila Camacho due to a confluence of institutional factors. Both presidents enjoyed a unified government, with the PRM                       / 

dominating the legislature. Despite institutional factors that favored Cárdenas’s legislative success—including party control of the legislature, a high level of party discipline, and the unity of the national presidency with the party presidency (Weldon )—the petroleum expropriation made him unwilling to push his social security legislation through Congress in late . This situation highlights the way business opposition to social insurance and its weight within the ruling cross-class coalition affected the timing of social insurance adoption. Like Cárdenas, Ávila Camacho had the benefit of a unified government. The PRM had again gained control of the legislature in the  elections by winning all Senate seats and all but one seat in the Chamber of Deputies.₃₅ Ávila Camacho had the slight advantage of having additional CTM labor representatives in both the Senate and the Chamber of Deputies to support his social security proposal, though this slight difference is not likely to explain the distinct outcomes of social security legislation under the two presidents (see table .). What the composition of the legislature does demonstrate, however, is that, by , the CTM, which clearly favored social security legislation, had almost completely replaced the CROM as the most politically important union organization in Mexico. As one of the main proponents of social insurance legislation, the CTM was guaranteed a greater voice in its adoption than were other minority labor organizations. The welfare state literature suggests that the transition to and the consolidation of democracy usually lead to welfare state creation. However, in Mexico’s case, the late s and early s witnessed what more closely resembled a transition to authoritarianism, which would be consolidated in the late s. The increasingly authoritarian nature of politics during this period was manifested in the violence and fraud that accompanied the  presidential elections. Although the Maximato and Cárdenas administrations were far from democratic, there had still been hope in  for a democratic transition and a fair presidential election. While Cárdenas did reorganize the PRM in  to increase the party’s control over the organized masses, its control of subordinate groups was not yet consolidated. Had the party’s control of the regime been ironclad before , several labor organizations would not have been able to withdraw (as they did) or threaten to withdraw their support from the regime, and the presidential succession struggles of that year might not have been so severe. The extent to which the PRM had to rely on fraud to win the presidential election reflected its political vulnerability. The  presidential elections in Mexico could be considered an important milestone in the transition to authoritarianism, which was later consolidated by the administrations of the late s and s.

 \                      

Table 3.2 Labor representation in Mexico’s Congress, 1936–1952 Senate term Labor senators Labor percentage of total 1936–1940

3 5.2 (CTM 1, national industrial unions 2)

1940–1946

7

12.1 (CTM 6, unknown 1)

1946–1952

5 8.8 (CTM 1, national industrial unions 3, unknown 1)

Chamber of Deputies term

Labor deputies

1937–1940

Labor percentage of total

7

4.1 (CTM 6, unknown 1)

1940–1943

9

5.2 (CTM 7, CROM 1, unknown 1)

1943–1946

10 6.8 (CTM 8, national industrial unions 1, unknown 1)

1946–1949

8 5.4 (CTM 7, national industrial unions 1)

Source: Middlebrook 1995, 103–4. See also Rodríguez Araujo 1975, 162–63, 180–85.

Although executive initiative has been cited for the creation of the IMSS (Spalding ; ), a comparison of policy making during the Cárdenas and Ávila Camacho administrations suggests that executive initiative alone did not produce social insurance legislation. Both presidents supported social insurance and worked for its adoption, and both appointed the same high-level bureaucrat —Ignacio García Téllez—to supervise the legislative proposal. Furthermore, in , the authoritarian regime had not yet been consolidated and the ruling party did not yet control subordinate groups such as organized labor. In the words of historian Stephen Niblo, referring to the – period, “Whereas today we tend to learn first lessons about the PRI and its component parts—the CTM, the CNC, and the CNOP—as though these groups were naturally and always had been the agents of the state, that was not the case. The government of the day was involved in a massive effort to tame the labor movement” (Niblo , ). This statement reinforces the claim above that labor maintained some autonomy during this period and was able to use its voice to influence policy outcomes. The

                      / 

government created the IMSS in response to labor demands and to rebuild the cross-class coalition that had been damaged by the  presidential succession. The history of organized labor’s demands for workers’ compensation, health care, and old-age and disability pensions since the Revolution can be traced through the policy statements of various labor organizations. The CROM in the mid-s, the CGOCM in the early s, the CTM at its foundation in , the PRM and its first two six-year plans, and the policy pronouncements of CTM founders Vicente Lombardo Toledano and Fidel Velázquez in the late s and early s all reflect organized labor’s consistent support for the adoption of national social insurance. Organized labor also consistently argued that social insurance should not be expected to end the lucha de clases, or class struggle. In other words, social insurance should be a minimum baseline, and labor unions should be able to negotiate better benefits in their labor contracts only if market conditions enable them to do so. Employers’ organizations usually opposed legislation that would require them to contribute toward health care and pension benefits. Indeed, the COPARMEX was founded solely to oppose labor legislation, which at the time included social insurance provisions. Employers’ organizations believed that social insurance should end the lucha de clases and lead to paz social. In this instance, the phrase paz social represents the policy position maintained by both the largest employers’ organizations—CONCAMIN, CONCANACO, and COPARMEX—and the PAN, with regard to social insurance. It signified their belief that social insurance should replace the negotiation of labor contracts and that IMSS benefits should be the maximum required by law.₃₆ According to the CONCAMIN, “the Mexican Social Security Institute ought to be an instrument of social peace, eliminating from discussion between parties all those issues that the Law already addresses and establishing that the law is the only conduit for the provision of social benefits” (CONCAMIN ; trans. by author). While these organizations claimed to support social insurance, they did so only because they assumed that social insurance would liberate them from negotiating with powerful unions that could demand more extensive benefits. However, the  social insurance legislation granted organized labor the protections it demanded and ensured that employers who had entered contracts with unions with more generous benefits would be forced to comply with the existing contract. Further, the IMSS took out ads in not only national daily newspapers but also the Confederación (the newsletter of the CONCAMIN) to remind employers and workers that labor contracts would remain in effect.³⁷ These tactics pushed employers to become even more steadfast

 \                      

in their opposition to social insurance once it became clear that the IMSS would not replace the negotiation of benefits in labor contracts and that the IMSS would interpret existing contracts to favor labor. While most employers’ organizations opposed the Social Insurance Law, there was one exception, at least for a time. The National Chamber of Manufacturing Industry (CANACINTRA) was formed in December  by ninety-three industrial companies that produced for the national market and favored import substitution and state intervention in the economy for that purpose (Alcazar , –). In this way, the CANACINTRA differed from the other employers’ confederations, which advocated private initiative and opposed state intervention.³⁸ Also unlike the CONCAMIN and the CONCANACO, the CANACINTRA included in its statutes an article stating that they would study and promote systems of social security most adequate for industry.³⁹ Indeed, members of the CANACINTRA had founded the group in reaction to the policy positions of other employers’ organizations, which “consisted principally in obstructing all legislation proposed by the governments of the Revolution, an effort that was very notorious in the case of the law that established Social Insurance” (CANACINTRA , ; trans. by author). While this small segment of the industrial bourgeoisie may have supported social insurance initially and in principle, that support waned once the realities of social insurance became clear in practice. In late , the CANACINTRA sent a letter of complaint to President Ávila Camacho about the implementation of the Social Insurance Law. By the late s, even that group had come to oppose the further expansion of social security benefits to new economic sectors or geographic regions (Niblo , –). Ultimately, Cárdenas’s failure and Ávila Camacho’s success with social security legislation appear most closely tied to the changes in the coalitional bases of their administrations and the need for the state to respond to the mobilization of organized labor and its temporary withdrawal from the ruling party during the  election season. Social insurance legislation was not politically feasible at the end of the Cárdenas administration because he had lost the support of the domestic industrial and financial bourgeoisie and of foreign capital interests. The oil nationalization, prompted by a labor dispute between unions and foreignowned enterprises, finally undermined the precarious coalition of bourgeois and popular interests that had supported the Cárdenas government. The schism caused by the nationalization of petroleum was mended only with the nomination and election of the more moderate PRM candidate, Ávila Camacho. Once in office, the more moderate president promoted “safer” policies, including legis-

                      / 

lation that protected and promoted domestic industry. Although Ávila Camacho promoted social security to satisfy some of the labor movement’s demands in order to regain the support undermined during the – electoral period, the social security concession was accompanied by legislation that tightened the state’s control over the right to strike. This tradeoff reflects the give-and-take process of coalition building in Mexico under the PRI-dominated authoritarian regime (see Collier and Collier ). Overall, the adoption and implementation of social insurance in Mexico can be explained as the product of shifting class coalitions and the need for the regime to offer incentives to rebuild the support of the organized working class for the regime.

Understanding the Founding of Mexico’s Welfare Regime The paired comparisons of this chapter illustrate the factors that contributed to the establishment of welfare institutions in Mexico after the Revolution. State capacity and economic development were critical components in comprehensive social insurance, but they were not enough to guarantee its establishment. In the case of central government workers, pensions helped build state capacity by promising the teachers and some of the bureaucracy modest welfare benefits. When social protections for the private sector were adopted in the early s, program implementation was limited by state capacity to provide services, and some benefits were provided by contract with private doctors. Economic development was an important factor because it shaped the development of the economic classes, including the organized working class and the bourgeoisie. The organized working class repeatedly articulated demands for social insurance benefits after the Revolution, while employers expressed their opposition to financing such benefits. These positions regarding social protection policies reflected each group’s collective class interest and its role in the capitalist economy. Although economic development contributed to the creation of class interests, organization, and demands, the actual creation of social protection was a patently political bargain arranged by the state in the early s. Uneven economic development across the country also shaped the implementation of social protection for private sector workers, which first included workers in the largest cities and most developed industries. The comparisons of state capacity and economic development also demonstrate the weakness of formal institutions as constraints on policy making during

 \                      

the early period in post-Revolutionary Mexico. On the one hand, divisions between elites that were reproduced in Congress contributed to political instability and stalemate. On the other hand, President Calles was able to bypass the Congress to adopt pensions for government employees in . Cárdenas’s reorganization of the dominant political party in  centralized political power in the cross-class ruling coalition and limited oppositional dissent in Congress. By the s, legislation was regularly passed with the nearly unanimous support of legislators. The dominance of the ruling party for the next five decades would overshadow the formal separation of powers and legislative institutions for policy making. The comparative analysis in this chapter illustrates the importance of social protection policies for solidifying the support of organized labor for the ruling party. Pensions for government employees served to generate political support for President Calles among government workers, and broader social insurance provisions for private sector workers helped persuade organized labor to return to the cross-class coalition after the divisive  presidential succession. Organized labor certainly played a central role in the coalition of subordinate classes that supported President Cárdenas. However, important sectors defected from the PRM coalition prior to the  elections, when the party began courting the domestic bourgeoisie for political support. The adoption of social insurance served to consolidate the support of organized labor for a new cross-class coalition, not only of peasants and workers but also of domestic capitalists, who were being courted through early ISI policies. Given the opposing class interests in this new coalition, policy would continue to oscillate between that favored by domestic industry and that favored by organized workers. Significant expansions of social protection policies often occurred in the context of increased worker mobilization and the coalition’s political shift toward the interests of organized workers over the objections of organized business interests. This analysis differs in some respects from that of the only other major study of these institutions in Mexico. Rose Spalding contends that key decisions made by the Mexican ruling elite ultimately led to the adoption of social security in  to build labor support, co-opt labor dissenters, and “increas[e] productivity and pacify . . . the workplace” (Spalding , ). She also argues that “labor leaders had not issued any forceful demands for a social security policy and played no important role in initiating the policy” (Spalding , ). While certain contextual conditions may have facilitated social insurance adoption in Mexico, this chapter provides evidence that the creation and initial design of the

                      / 

IMSS is best understood as the result of organized labor’s demands for social insurance and pressure at a time when it threatened to defect from the ruling coalition prior to the  presidential elections. This explanation of the origins of Mexican welfare institutions is not an obvious one because recent scholarship has suggested that Mexican labor was subordinate to the state. This discussion reminds us that, during the late s and early s (especially before the charrismo, or government imposition of union leaders, of the late s), Mexican labor organizations were important political allies that the state sought to placate and secure (see Collier and Collier ). During this period, the labor movement in Mexico was more powerful and influential than it was in many other Latin American countries (Collier ). Organized labor in Mexico was still fairly autonomous and capable of making demands on the state in exchange for its political support. The early power and influence of organized labor in Mexico stands in stark contrast to the subordinate role attributed to labor during the second half of the twentieth century. While the state was later able to subvert the autonomy of organized labor and co-opt its leadership, especially during the administration of Miguel Alemán Valdés, these later events should not color our understanding of the bargaining that took place between labor and the state in the late s and early s. From the standpoint of labor leaders at that time, the potential outcomes of bargaining with the state were neither obvious nor guaranteed. As the next chapter demonstrates, organized labor continued to mobilize for and demand the expansion of welfare during the height of Mexican authoritarianism, despite its formal ties to the ruling party. Indeed, organized labor effectively leveraged its insider access to the state through corporatist institutions, and it used its access to the ruling party to expand social protection for formal sector workers. The future development of welfare institutions would be constrained, however, by the foundations laid during the first two decades after the Mexican Revolution.

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THE EXPANSIO N O F W E L FAR E The Mid-Century Efforts of Organized Labor and Professionals

T   social insurance in Mexico continued to expand into the s. During this period, shifts in the underlying class coalition of the ruling party contributed to the expansion of social insurance through institutional reform and layering. In addition, existing welfare institutions, including labor contracts and the IMSS, generated new sources of political support for welfare. The most notable changes in Mexico’s welfare regime from the s through the s include the creation of the Government Workers’ Social Security and Services Institute (ISSSTE) in  and a significant expansion of geographic coverage and benefits in the IMSS, including noncontributory rural pensions and day care for the children of working women, two measures adopted in . Shaped by existing welfare institutions, these changes occurred in response to mobilization and demands from organized labor accompanied by shifts in the cross-class coalition supporting the ruling party regime. This period also marks the beginning of an important source of institutional stability for the IMSS, as doctors once opposed to becoming IMSS employees became the institution’s main defenders.



Although this period coincides with the height of Mexican authoritarianism and ruling party hegemony, the role of organized labor in articulating demands and using its position within the ruling coalition to promote the expansion and consolidation of Mexican welfare is remarkable. The analysis in this chapter therefore suggests that organized labor had more capacity for initiating and shaping policy outcomes than many other analyses of labor relations during this era suggest.

Social Insurance for the Public Sector Although government workers became eligible for pensions in the s, they did not have complete social insurance coverage until . In the interim, the Cárdenas administration adopted legislation outlining the rights and organizational principles of corporatist institutions for government workers. As the number of government employees grew, workers actively organized and sought improved job protection and welfare. By the end of the s, a realignment of the ruling coalition led to the election of a former teacher and union organizer to the presidency and the creation of a social security institute for government employees.

Labor Organization and the Prelude to Social Insurance for the Public Sector Government employees had begun forming labor organizations as early as the s, but their legal status remained ambiguous due to their exclusion from Article  of the Constitution and the Federal Labor Law of . In , several government employee unions formed the Alliance of State Worker Organizations (Alianza de Organizaciones de Trabajadores del Estado, or AOTE), which demanded medical benefits for government workers (Parra , , , ). It also wanted government employees to be included in and covered by the federal labor law proposals, though administrative employees preferred the idea of a civil service law instead of being covered under the federal labor law (Parra , , ). In , at the founding congress of the National Federation of State Workers (Federación Nacional de Trabajadores del Estado, or FNTE, the successor to the AOTE), the organization took a definite turn to the left, demanding incorporation into the existing federal labor law and resisting a civil service law that would have limited their unionization efforts (Parra , ). The Declaration of Principles of the newly formed FNTE included a demand for social insurance benefits

 \                  

for government employees, including workers’ compensation, health care, and old-age and disability pensions (Parra , ; ISSSTE , ). The FNTE joined the newly formed CTM that same year (ISSSTE , –; Parra , ), and the CTM fought for the implementation of a law that would legalize labor organizations representing state employees and grant state employees certain rights and benefits (CTM [] ). In , President Cárdenas responded to labor pressures and submitted legislation to Congress to codify the legal rights of federal government employees. The FNTE had participated on the commission that elaborated the new Juridical Statute for Government Workers (Estatuto Jurídico de los Trabajadores al Servicio de los Poderes de la Unión) (Parra , , ). The law included both inducements and constraints for organized labor (Collier and Collier ). For example, the new statute not only allowed government employees to organize into labor unions but also required that such organizations belong to only one labor federation, which in turn could not legally join or affiliate with other labor organizations. In October , the FNTE became the Federation of Government Workers’ Unions (FSTSE) and officially affiliated with the ruling PRM (and later the PRI) (Parra , –). To comply with the new legislation, the FSTSE had to sever its formal ties with the CTM. The  statute also severely restricted the rights of government employees to strike, prohibiting strikes in solidarity with other unions and during normal contract revisions; it permitted strikes only in instances of extreme abuse. At the same time, in response to demands the FNTE had been making since the early s, the  statute required the state to provide free medical services and medicine to its workers and to compensate workers for work-related accidents or illnesses. The law did not, however, create social insurance or mechanisms for such compensation (Article  of the statute; López Cárdenas , ). In , President Ávila Camacho implemented reforms to this legislation that unified the labor arbitration boards for government employees, prohibited individual government employee labor unions from belonging to other labor or peasant centrals or federations, and declared that a large number of government workers were in management positions not subject to unionization (Parra , ; FCE , ). Like the Federal Labor Law adopted in  and reformed in , the  statute regulating government employees was also reformed in , and the changes combined concessions to labor with new constraints on its organization and rights.₁ The labor reforms were also consistent with the shift away from Cardenismo that characterized the Ávila Camacho administration.

                  / 

During the s, government workers continued to demand the expansion and improvement of worker benefits. In response to labor mobilization and demands for improved benefits, the Civil Pension Law was reformed in  and  (Dirección de Pensiones Civiles ; Secretaría de Hacienda y Crédito Público [SHCP] , ). Although the earlier reform applied only to teachers and veterans, the  reform included all workers covered by the Civil Pension Law. The newly formed FSTSE helped to draft the  reform (ISSSTE , ), and one of the demands of the FSTSE was that benefits be extended to more federal government employees, since only federal teachers had really benefited to date (Parra , ). The reform also increased the replacement rates for oldage pensions to  percent for workers with fifteen years of service and up to  percent for workers with thirty years of government service. The disability pension for work-related accidents and illnesses was increased to  percent salary replacement, and non-service-related disability pensions would be the same as old-age pensions (SHCP , ). The  reform also included survivors’ pensions, adjusted the amounts of short-term loans and housing loans, and implemented a minimum pension of  pesos per month, which was six times the -pesos-per-month minimum pension in the IMSS system. This modest expansion of coverage and benefits followed on the heels of organization efforts by government workers and reflected the growing importance of government workers in supporting the regime. Despite government pension provision and the  mandate that the state provide its workers with health care, federal employees in the s still did not have funded social insurance benefits. Instead, government employee unions negotiated benefits for their workers, including health care, subsidized goods in retail stores, day-care services, subsidized medicines, and subsidized apartment housing in the context of their labor contracts (Parra , , ). When medical benefits were included in collective contracts, some government agencies provided coverage for workers’ families while others did not. Often, the medical facilities and benefits provided by collective contracts were not sufficient to meet the needs of workers (FCE , ). In some cases, labor contracts provided government workers with medical services administered by private third parties; in others, labor contracts led to the construction of clinics or hospitals to meet workers’ medical needs. By the late s, four clinics, three hospitals, and two sanatoriums were run by the state and directly providing health care to workers of some agencies in the federal bureaucracy (for a list of facilities, see FCE , –). This uneven patchwork of benefits negotiated through labor contracts between individual unions and their government agencies would create impor \                  

tant policy legacies. By creating precedents for a wide range of very generous social benefits, this patchwork of benefits eventually led to the creation of a unified social insurance scheme for government workers.

Mobilization, Layering, and the Creation of the ISSSTE Throughout the s, organized labor articulated demands and pressed for the expansion of welfare benefits for government workers beyond those guaranteed in existing labor contracts. For example, the FSTSE sent a letter to President Adolfo Ruiz Cortines (–) in  to complain that the new FSTSE healthcare facility had not been functioning and to ask that the government intervene (Fondo ARC, /./). In addition, several labor organizations representing federal government employees sent letters and telegrams to Ruiz Cortines requesting that government employees receive pay raises and medical and pharmaceutical benefits (Fondo ARC, ./). In  and , the FSTSE held national meetings to call for state-funded medical care for government workers and their families, subsidized medicines, and subsidized consumer goods, daycare services, and housing (FSTSE , –; FSTSE , –; Fondo ARC /./). In , the FSTSE also elaborated a Civil Pension Law reform proposal that called for improved retirement benefits and larger sums for shortterm and housing loans. The proposal also suggested that employees of state governments be allowed to join the federal pension system by agreement (FSTSE , ). State-level FSTSE affiliates, which wanted to be included in pension system, as well as the Federation of Pensioner and Retired Worker Organizations of Mexico supported the reforms and proposed new benefits in letters sent to the president in  (Fondo ARC /./ and //). The FSTSE secretary general requested an audience with the president in late  in order to discuss government employee benefits, and he followed up with another letter in  (Fondo ARC ./). These efforts reflected a concerted effort among retired workers and government worker unions to expand both the coverage of existing legislation and to improve the range and quality of benefits for government workers. Although some unions had negotiated welfare benefits in excess of those provided by the IMSS, some government employees’ benefits still lagged behind those enjoyed by private sector workers. In part, the organizational efforts by the FSTSE during the s sought to consolidate and extend to all government employees the welfare gains some unions had achieved in their labor contracts.                   / 

In the early s, the economic downturn following the end of the Korean War and the  currency devaluation provide a useful context in which to view the shift in the balance of the class coalition supporting the regime. Government worker labor contracts during – provided additional social benefits, including health care for workers and dependents, and such benefits mitigated some of the negative effects of the economic downturn (Reyna and Trejo Delarbe , –; Lomelí Vanega , ). However, the  devaluation of  percent compounded the economic problems of the working class (Pozas and Loyo , ). Although the major labor confederations and national industry unions supported the devaluation, even the CTM threatened to strike once price increases outpaced salary growth (Reyna and Trejo Delarbe , –; Lomelí Vanega , –). While prices rose in excess of  percent, salaries rose by less than  percent (Reyna and Trejo Delarbe , ). Within a month of the devaluation, in response to the rising prices, President Ruiz Cortines announced a pay increase of  percent for all federal employees with a monthly salary of less than nine hundred pesos and encouraged private industry and business to grant similar increases (Lomelí Vanega , ). The quick response to the price increases and the raise granted to government employees underline the growing importance of government workers for maintaining regime support. In contrast, business was slow to grant wage increases in the private sector, and labor organizations, including the official unions affiliated with the PRI, began to file strike petitions for salary increases. Ultimately, all but about two hundred of the thirty-two thousand strike petitions filed in the spring and summer of  were resolved before strike action was taken. The average increase in wages was  percent, less than that demanded but more than the  percent Ruiz Cortines initially suggested. In July , Secretary of Labor and Social Security Adolfo López Mateos, a former teacher and one-time secretary general of a section of the National Education Workers’ Union (Sindicato Nacional de Trabajadores de Educación, or SNTE), facilitated the resolution of many of the labor conflicts (Lomelí Vanega , ). His successful intervention set the stage for his presidential candidacy in . Shortly after the resolution of the  labor conflicts, the PRI began a membership drive in anticipation of the  midterm congressional elections. The FSTSE, which had become the largest member of the PRI-affiliated National Confederation of Popular Organizations (Confederación Nacional de Organizaciones Populares, or CNOP), played a central role in the PRI’s efforts to bolster its party lists (Pellicer de Brody , ).² In the  midterm elections, the growing importance of the CNOP was reflected in the party’s lists and placement  \                  

of CNOP representatives in the federal Chamber of Deputies and Senate, largely to the detriment of the representatives of the National Confederation of Peasants (Confederación Nacional Campesina, or CNC) (Pellicer de Brody , ). This shift in the candidate lists of the ruling party reflects the PRI class coalition’s underlying shift toward the popular sectors, including government workers. Indeed, in November , Ruiz Cortines chose López Mateos as the PRI presidential candidate in order to unify the party in anticipation of the  election (Lomelí Vanega , –).³ As noted earlier, López Mateos had held leadership posts within the teachers’ union prior to becoming secretary of labor in the Ruiz Cortines administration. His candidacy for president reflected both the growing importance of the popular sector and, in particular, government employees for the cross-class coalition and the leftward shift of that coalition at the end of the s. Shortly after the nomination of López Mateos, a group of teachers concentrated in the Federal District organized the Revolutionary Teachers Movement (Movimiento Revolucionario de Maestros, or MRM) in December . Beginning that year, two groups claimed to represent the primary-school teachers of the Federal District in Section IX of the SNTE (Pellicer de Brody , ).⁴ In April , labor dissidents in Section IX of the SNTE began mobilizing again in order to demand recognition of their leaders, salary and pension increases, and the construction of a hospital and adequate day-care services for the children of teachers (Pozas and Loya , ).₅ Police repression of a Section IX demonstration in April outraged the public and helped generate widespread support among the urban popular classes for the movement. Many parents began to join the teachers in their marches and demonstrations in the nation’s capital. The federal government tolerated the MRM of Section IX in early  because of the national presidential election set for July of that year (Pellicer de Brody , ). The teachers of Section IX continued to press their demands and went on strike in May , only months before election day. To decrease tensions, President Ruiz Cortines announced on May —National Teachers Day—a  percent salary increase for teachers (Pellicer de Brody , ).₆ Section IX did not abandon its strike, however, since its demand for representation and other benefits had not been met. However, the SNTE leadership sought to impose its own discipline by threatening the striking teachers with dismissal if they did not return to work (Pozas and Loyo , –).⁷ At the June  elections for SNTE officers, the new secretary of labor refused to recognize the victories of the dissident leaders of Section IX, and many MRM leaders were arrested just before the July  presidential elections (Pozas and Loyo , –).                   / 

In spring , several other labor movements in the public and para-state sector experienced comparable upheavals. Aside from the teachers’ movement, the most notable movement in terms of visibility and political impact was that of the railroad workers (Pozas and Loyo , ). Like the teachers’ movement, the railroad workers’ conflict began when a group of workers demanded improved wages and benefits and internal union democracy and criticized the staterun enterprise for mismanagement, at best, or corruption, at worst (Pozas and Loyo , ). In June and July , railroad workers began a gradual strike, but the Federal Labor Arbitration Board declared the strike illegal and arrested many of the strike participants (Pozas and Loyo , –). Similar conflicts occurred among telegraph and petroleum workers in the spring of .⁸ These labor movements not only had similar demands but also involved unions representing government or state-run enterprises (Pozas and Loyo , n; Collier , ). Many of these unions protested the FSTSE’s role in representing government worker unions and sought to create their own labor federation. The CTM and the Worker Unity Block (Bloque de Unidad Obrera, or BUO) threw their weight behind the FSTSE to subdue the criticisms (Collier ). Because of the timing of these movements—soon before the presidential elections—the PRI regime could not afford to fully repress the  labor movements because the political costs would have been high (Pellicer de Brody , ). Eventually, however, the government combined selective repression of dissident union leaders with concessions to their demands for better wages and benefits (Collier ). Prior to the presidential elections, pensioner organizations and labor unions renewed their efforts to gain greater social insurance benefits for government employees. In  and , the National Union of Civil and Military Pensioners (Unión Nacional de Pensionados Civiles y Militares) and the National Union of Retired Teachers (Unión Nacional de Maestros Jubilados) sent letters to Ruiz Cortines requesting that pensions be indexed to wages of active workers and that health care be provided to pensioners and their families (Fondo ARC //). Throughout his presidential campaign, López Mateos promised government workers health-care benefits and other forms of social protection (López Mateos , ). Following his election, López Mateos received telegrams from various government employee unions reminding him of his campaign promises regarding social insurance benefits for government workers (Fondo ALM /./).⁹ That same year, retired government employees began a letter-writing campaign to the president, requesting that their pensions be increased to equal those that

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current employees would receive (Fondo ARC ./ and //). Shortly after taking office, President López Mateos (–) responded to these pressures by creating a new social security institute for government employees. Although discussions within the PRI about consolidating the medical services of the various government ministries preceded López Mateos’s presidency, the IMSS administration protested that the IMSS law clearly indicated that state employees were to be incorporated into the IMSS (Moreno Islas , –). Throughout , preparations were made to extend the new benefits to government employees. López Mateos delegated responsibility for the design of the benefits and coverage to Antonio Ortiz Mena, who had been director general of the IMSS during the Ruiz Cortines administration and was secretary of finance in the new administration (Ortiz Mena , ). Given his experience in the IMSS and the fact that the Secretariat of Finance administered the existing public servant pension system, Ortiz Mena was the natural choice to design the benefit program for government workers. Ortiz Mena initially considered incorporating government employees into the IMSS system, as was legally required by the original Social Insurance Law in . However, the existing pension system for government employees had a contribution rate that was double that of the IMSS old-age pension system, and replacement rates were much higher for government employees (Ortiz Mena , –). Government employees also had access to short-term loans and housing loans and were eligible to retire at a younger age than other workers were (Ortiz Mena , ). According to Ortiz Mena, government officials ultimately decided not to incorporate government workers into the existing IMSS system for two reasons. The first was that the government would have had to pay a double contribution—the employer’s portion and that of the state—making the state’s burden prohibitively expensive. The second and more important reason was that since government employees already had more generous benefits than did workers in the IMSS system, incorporating government workers could have led private sector workers to demand comparable benefits. Such a possibility was considered “horribly dangerous” in political terms, and so a separate social security institute for government employees was proposed (Ortiz Mena ). Creating a new institution to provide social insurance for government employees was the most politically expedient strategy for the ruling party. The new social security institute would improve efficiencies by allowing the government to provide comprehensive benefits to all employees rather than providing different benefits to each agency union through collective contracts (Ortiz Mena , ).

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The adoption of the ISSSTE law in  thus reflects the ways in which shifts in political power and the underlying class coalition can lead to institutional change through institutional layering. The election of López Mateos signaled a reshuffling of the class coalition following the labor unrest of  and  and, in particular, the growing importance of the unions representing government workers. As a result of this shift, the new president moved quickly to deliver one of the key campaign promises made to labor supporters. The form of social insurance for government workers was constrained, however, by the generosity of existing labor contracts and concerns about incorporating government workers into the IMSS as originally envisioned in the early s. Instead, the ISSSTE was created to provide social insurance and related benefits that often reflected the most generous labor contracts in the public sector, rather than the lowest common denominator. Throughout , the government made preparations for the new social security institute. Actuarial studies were compiled with the help of IMSS actuaries and Emilio Schoenbaum, who had prepared the  Social Insurance Law calculations while representing the ILO, and construction began on clinics and hospitals for the new institute (Ortiz Mena , ). At the end of , López Mateos announced the proposal for a new social security system for government employees first to a meeting of the SNTE, then to representatives of the FSTSE (López Mateos , ). It is not surprising that López Mateos announced the new proposal to the teachers’ union; the SNTE has always been the largest member of the FSTSE (Cook ). Although an exact estimate of its membership in  is not readily available, in the s, nine unions (one of them the SNTE) made up  percent of the FSTSE’s membership (Sirvent , –), and by , after two decades of growth in the federal bureaucracy, the SNTE still represented more than  percent of the FSTSE’s membership (Parra , –). It is safe to assume that the largest single group to benefit from the creation of the ISSSTE was the members of the federal teachers’ union. The new Social Security and Services Institute for State Workers Law (Ley del ISSSTE) was presented to the Congress in December  and formally enacted on January , . The ISSSTE law provided government workers with fourteen different benefits, including medical and maternity insurance; work accident insurance; re-education and rehabilitation of those on disability; services to raise the standard of living of state workers; programs to improve technical, social, and cultural preparation; credits for the acquisition of property, land, or houses; renting of inexpensive

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housing; mortgages; short-term loans; retirement (for years of service); old-age pensions; disability insurance; life insurance; and a global indemnity for dismissal or leaving employment. Contributions were  percent of salaries evenly divided between workers and the government.₁₀ The minimum ISSSTE pension doubled the existing government pension and was more than twice the  increase in the IMSS minimum pension. Replacement rates and contributions for oldage and retirement pension benefits were comparable to those of the  Civil Pension Law reform. The ISSSTE also provided comprehensive health care for workers and their families. Initially, the ISSSTE absorbed the hospitals and clinics that had formerly provided health-care services to workers of particular agencies. For instance, in , the teachers’ union had begun construction of a hospital facility, which became one of ISSSTE’s primary medical centers when the union ran out of funds to finish the project (Ortiz Mena , ). Facilities of other federal agencies, such as the Secretariats of Finance and Public Education, were also incorporated into the ISSSTE health-care system (Sirvent , ). By the end of , the ISSSTE offered medical services in  localities in eleven states and Mexico City; by the end of , the number of localities had increased to  (Ortiz Mena , ). In , only , government employees received old-age pensions or retirement benefits, but about , more individuals received some sort of disability or survivor’s benefit according to the new rule of the ISSSTE system (ISSSTE , –; ISSSTE ). The number of individuals receiving cash benefits that year was small, but because the new law provided health care for workers and their dependents, , individuals were eligible for ISSSTE health care. As federal government employment grew rapidly in the s, coverage grew as well.₁₁ The creation of the ISSSTE modestly increased the old-age and retirement benefits of government workers. The real innovation, however, was in the wide range of social benefits and the comprehensive health care for government workers and their families. The legislation formalized some of the benefits that particular government employee labor unions had been able to negotiate in their collective contracts and extended such benefits to all federal government employees. The wide range of social insurance and other benefits provided by the ISSSTE also illustrates the political origins of the new institute. Rather than providing lowest-common-denominator benefits to workers through the IMSS and additional benefits in piecemeal fashion through labor contracts with agency unions, the government created a new institution (the ISSSTE) to provide be-

                  / 

nefits matching those enjoyed primarily by the most well-organized and militant government worker unions. The ISSSTE was not only a response to demands from public sector workers but also reflected the growing importance of these workers within the ruling party’s cross-class coalition.₁₂ In purely legal terms, the creation of the ISSSTE violated the existing IMSS law, which indicated that federal government employees should be covered by the IMSS system at the discretion of the president. However, a constitutional reform to Article  in  eliminated this problem. The FSTSE had elaborated a proposal for such an amendment in the mid-s and submitted it to the Ruiz Cortines administration (FSTSE , –; FSTSE , ). When the draft ISSSTE law was introduced in December , President López Mateos proposed a constitutional amendment that elevated the legal status of state workers by creating “Part B” in Article  (Secretaría de Gobernación , –). The new section of Article  codified in the Constitution the existing legislation regarding federal government employees, including the provision of social insurance for federal employees (Article , part B, sec. IX). New regulations congruent with the constitutional amendment were adopted in  (Parra , ). In , President López Mateos simultaneously conceded new benefits for government workers and selectively suppressed dissident labor leaders in the public sector. After taking office in December , López Mateos had released many teachers who had been arrested for their dissident activities earlier that year (Pozas and Loyo , ). However, the SNTE leadership soon expelled dissident Section IX leaders with little comment from the PRI government (Pellicer de Brody , ; Pozas and Loyo , ). The reaction against the dissident railroad workers who demanded new wage increases and medical benefits for family members during their contract revision in February  was more definite: the new secretary of labor and social welfare declared the strike illegal and the leaders of the movement were jailed (Pozas and Loyo , –). After the presidential election and inauguration of the new administration, the PRI regime had more latitude to repress dissident labor movements that challenged the official union leadership. Like the conservative administration of Ávila Camacho (–), the López Mateos administration took office after significant union mobilization and upheaval, and it responded to the unrest with new efforts to limit the mobilization capacity of labor while also providing significant social insurance concessions. Unlike Ávila Camacho’s administration, however, that of López Mateos represented a shift in the ruling coalition toward the left rather than the right, and it faced mobilization and conflict with public  \                  

sector unions rather than those of the private sector. The fact that different administrations, with different ideological profiles and facing similar mobilization from two different sectors, responded similarly—by combining social insurance concessions with reforms to constrain mobilization of or to repress dissident movements—reflects the ruling party’s general strategy for maintaining labor support for the regime’s cross-class coalition. In sum, the election of López Mateos in  signaled a shift toward the left in Mexican presidential politics. Indeed, López Mateos was well known (and criticized by business) for declaring that his government was on the leftmost extreme within the confines of the Mexican Constitution. His personal background as a labor leader and organizer suggested his ideological leanings even before he became president (Camp ; Parra , –).₁₃ In this sense, his administration represented a shift within the ruling cross-class coalition in which organized labor, particularly government employee unions, asserted their influence among the regime’s supporters. In the early months of his presidency, López Mateos applied the tried-and-true PRI strategy for dealing with labor mobilization—using constraints combined with generous concessions to labor’s demands in order to garner labor’s support for the ruling regime. Thus, while his administration helped repress dissident movements within official labor organizations, it also granted new benefits in response to petitions from loyal labor organizations.₁₄ The labor movements of the late s did not exclusively seek an ISSSTE-type answer to their problems, but the new López Mateos administration responded to labor discontent with social insurance concessions designed to appease the dissatisfied government workers, the majority of whom were represented by the powerful teachers’ union. The creation and design of the new social insurance benefits for government workers was constrained, however, by the existing agreements and benefits that government employee unions had attained through contract negotiations with government agencies. Thus, the creation of the ISSSTE reflected not only shifts in the composition of the cross-class coalition supporting the ruling regime but also the ways in which policy legacies and such shifts in coalitions can contribute to institutional change through layering.

The Consolidation and Expansion of the IMSS The original IMSS law adopted in  provided for national social insurance coverage for private sector workers. Nevertheless, the geographic expansion of coverage proceeded slowly. Previous analyses of this period of IMSS expansion                   / 

have emphasized technocratic and centralized decision making within the IMSS to explain the pattern of expansion (Spalding ). This emphasis is present in most interpretations of labor politics during this era, which tend to stress the ruling party’s top-down corporatist control of labor organizing. By most accounts, although labor organizations were able to exert some influence through their relationship with the ruling party, they “were not able to initiate policy through their membership in the PRI” (Collier , ). In contrast, the evidence and analysis presented here suggest that labor organizations affiliated with the PRI were able to articulate and convey new demands from the rank-and-file members and affiliate organizations through both the ruling party and positions on the Technical Council of the IMSS. The evidence suggests that even within the constraints of labor’s formal relationship with the ruling party and during the height of Mexican authoritarianism, organized labor still expressed demands for the expansion of social insurance coverage and benefits.

IMSS Expansion in the s and s The administrations of presidents Ruiz Cortines (–) and López Mateos (–) were periods of expansion and growth for the IMSS. In addition to providing coverage to new regions and sectors, legislative reforms also provided workers with new and more generous benefits. Many of the legal reforms before  were modest, technical reforms; they primarily adjusted the income brackets used to calculate contributions and benefits in order to keep up with rising salaries and prices. The contribution rates were also modified several times to improve the financial reserves of the institution. The s actuarial calculations did not anticipate benefits for workers’ families, so reforms had to be undertaken to keep contributions in sync with rising expenses. The minimum pension was also increased to keep up with inflation. Coverage for family members was broadened, and replacement rates for worker and survivor pensions were modestly increased, as were sickness benefits. Replacement rates were still not generous, even for minimum-wage workers, rarely exceeding  percent. Much more important than the modest increases in benefits during the s and s was the expansion of coverage to new regions and sectors. By the end of the s, the IMSS was operating and providing services to formal private sector workers in thirty-five municipalities concentrated in six states—Jalisco, Nuevo León, Puebla, México, Veracruz, and Tlaxcala—and the Federal District. Although the original law establishing the IMSS had required presidential decrees to deter-

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mine the regions to which services would be extended, this responsibility was quickly delegated to the tripartite IMSS Technical Council, which had equal numbers of representatives from labor and business organizations and the state. During the administration of Antonio Ortiz Mena, director general of the IMSS from  to , the number of urban municipalities included in the IMSS more than tripled, to , and  rural municipalities were added.₁₅ Technically and legally, the IMSS had a set of criteria for determining the regions that were to receive coverage. Services were to extend first to those areas with high levels of economic output; high concentrations of urban, formal sector workers with wage levels sufficient to support the new benefits; a relatively developed infrastructure (including roads and clinics); and sufficient medical personnel (García Cruz a). According to one IMSS official, expansion often occurred in response to demands from labor unions and workers for improved benefits and for social security programs to be expanded to serve new populations (García Cruz b, ). In particular, labor confederations, including the CTM, pushed for the national expansion of benefits. Throughout the s and s, the CTM’s primary concern with regard to the IMSS system (in addition to improving the quality of health care) was the regional expansion of coverage. At CTM national congresses, CTM leaders reiterated their petition that services be expanded to cover workers throughout the nation.₁₆ Their member labor unions also continued to make demands for coverage in particular municipalities or regions by way of the CTM representative on the IMSS Technical Council. For instance, the CTM reported that in  it conveyed a request for IMSS coverage from workers in the state of Veracruz to members of the IMSS Technical Council (CTM a, ). Compared to workers in other states, the workers in Veracruz received benefits relatively early, in April  (García Cruz a, ). Internal CTM reports indicate that the organization conveyed requests from other unions as well (see CTM  and CTM , ). The CTM often provided “constituent service” for the workers it represented and acted as a liaison for them if they needed help resolving problems with their claims for benefits.₁₇ Although the extension of benefits to specific groups of workers under “special regimes” (e.g., sugarcane workers) is indicative of the clientelistic use of social insurance, the geographic expansion of coverage in response to union demands was not. When IMSS coverage was expanded to new geographic areas, all formal sector workers were eligible even if the demand originated within one union local. In this sense, the expansion of social insurance did not represent a clientelistic exchange of individual and politically excludable benefits for political support or votes.

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The Expansion of IMSS to Rural Wage Workers In the late s and early s, rural workers continued to organize. In , several peasant unions left the CTM to form the General Union of Mexican Workers and Peasants (Unión General de Obreros y Campesinos de México, or UGOCM), comprising approximately , members, of whom  percent were peasants (Montes de Oca , ). The UGOCM was one of the first dissident confederations that did not formally affiliate with the PRI (Collier and Collier , –). The group was later denied official government recognition, causing many labor unions to leave the confederation, which thereafter consisted primarily of peasant organizations. In , the Revolutionary Confederation of Workers and Peasants (Confederación Revolucionaria de Obreros y Campesinos, or CROC) was founded, representing various organizations of urban and rural workers. A member organization of the CROC that was based in Veracruz— the Revolutionary Federation of Peasants of Orizaba (Federación Revolucionario de Campesinos de Orizaba)—petitioned President Ruiz Cortines for inclusion in the federal pension system (Fondo ARC /./). The extension of social insurance benefits to rural workers has been attributed to CROC’s organization in the early s (Mesa-Lago ). In the years immediately preceding the decision to extend social insurance to rural wage workers, peasant and rural wage workers had mobilized and organized alongside industrial workers in both the UGOCM and the CROC. Further, according to one scholar, “‘peasant struggles’ have really been struggles of an agricultural proletariat for proletarian, not peasant, demands,” including the right to organize and the right to receive better wages and benefits (Montes de Oca , ). Although the Mexican state usually responded to the demands of rural workers with “peasant solutions” such as land reform (Montes de Oca , ), the extension of social insurance coverage was a response to the proletarian influence on and formal organization of rural workers in the early s. Although the architects of the original  IMSS law acknowledged the difficulties of extending social insurance to rural workers, the law included provisions to extend coverage to them in the future, at the discretion of the president (Archivo Histórico del Instituto Mexicano del Seguro Social [AHIMSS], //). In , the IMSS completed an internal study on the feasibility and means of extending coverage to agricultural workers, offering suggestions that were generally consistent with measures later implemented (AHIMSS, //). In , IMSS officials began formulating a proposal for providing paid agricultural workers

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with social insurance benefits, especially medical services. The result was the provision of social insurance in  under a modified contribution system (involving coupon books) for agricultural workers in three states with well-developed agriculture employing high concentrations of workers: Baja California, Sonora, and Sinaloa. Small landowners and members of agricultural cooperatives in these states were also granted IMSS benefits. The large landowners in these areas, especially in Sonora, resisted the IMSS expansion and the contributions that they had to make on behalf of their workers (Moreno Islas , preface). In , the first year IMSS provided coverage in the three states, the IMSS served , rural workers and , of their dependents in seven rural municipalities. These workers and dependents represented less than  percent of all IMSS beneficiaries (IMSS ), but at the time such families represented an important and mobilized constituency of the ruling cross-class coalition. In  and , the UGOCM organized land invasions to illegally squat or reclaim land, particularly if it was foreign owned, often with the implicit support of the government (Montes de Oca , ; Collier and Collier , –). As a result, the  IMSS reform legislation formally incorporated rural workers into the general social insurance scheme and expanded the capacity of the IMSS to design and provide benefits for agricultural workers (García Cruz b, ). The new reform was met with approval from various labor organizations, including the BUO, and the professional agronomist organization, the Mexican Association of Agronomists (Sociedad Agronómica Mexicana, or SAM) (García Cruz b, ). Throughout the s and s, in response to worker petitions, the IMSS also extended benefits to various groups of workers in specific sectors under “modified schemes,” the most well known of which was extended to sugarcane workers in . In the modified scheme, contributions were based on daily production rather than on salaries. In , , sugarcane workers received IMSS benefits, along with more than , of their dependents, making up roughly  percent of IMSS beneficiaries (IMSS ). Throughout the s, the IMSS continued to add modified schemes for rural workers, until twenty-seven such schemes existed in , with another seventeen being organized (IMSS [] , –). In most instances, as for the sugarcane workers, contributions were based on production rather than salaries and were bipartite rather than tripartite. However, workers were eligible for benefits comparable to those of regular rural or urban workers.₁₈ Overall, by ,  percent of all IMSS beneficiaries were classified as rural workers according to one of the existing contri-

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bution schemes (IMSS ). This expansion of IMSS coverage through the creation of modified schemes for workers in various agricultural or seasonal industries occurred in a piecemeal fashion, in response to worker demands. These modified schemes illustrate social security expansion through layering of new contribution and benefit structures alongside existing institutions to accommodate the special circumstances of seasonal or temporary employment in the countryside. The expansion of social insurance coverage in the Mexican countryside was also a response to the organization and demands of rural wage workers and was at the same time guided by the IMSS-established wage and concentration criteria. Coverage was sometimes extended to groups of workers who did not meet the formal requirements for coverage, which reflects the politicized nature of social insurance.

IMSS Medical Unions and Institutional Conversion By the end of the Miguel Alemán Valdés administration (–), excessive spending and corruption had depleted IMSS reserves. President Ruiz Cortines (–) appointed Antonio Ortiz Mena as director general of the IMSS, in part to clean up its finances (García Cruz a, –; Ortiz Mena , ). To meet workers’ increasing demand for health-care services while containing costs, Ortiz Mena expanded reliance on “medical unions” to provide IMSS health care. The use of medical unions, or the subcontracting of medical services to third parties, was included in the  changes to the IMSS law. The  IMSS reforms further facilitated such agreements (García Cruz a, ; FCE , –). Medical unions received all of the IMSS contributions for the workers they treated. Services were often provided at the workplace or in the doctors’ private clinics. According to Ortiz Mena, the medical unions were a cheap and easy way to expand coverage to remote or less populated areas where the IMSS did not have a medical infrastructure (Ortiz Mena , –; Ortiz Mena ). In the second half of the s, the IMSS also used medical unions to implement services in areas where local doctors resisted becoming employees of the institute. In Sonora, Sinaloa, and Jalisco in particular, doctors resisted the expansion of IMSS into their areas (Ortiz Mena , –; Ortiz Mena ; Moreno Islas ; González Balderán ). Doctors in these regions were more likely to have studied in the United States or at a private university in Guadalajara, so they did not share the same professional (or political) culture as those educated

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at the Universidad Nacional Autónoma de México (UNAM) in Mexico City (González Balderán ).₁₉ In some cases, the director general of the IMSS threatened to transfer a large number of doctors from the Federal District to regions where doctors refused to cooperate with the IMSS (Ortiz Mena ). Doctors opposed to working for the IMSS continued to sabotage the system by writing expensive prescriptions for patients and overcharging for their services (Moreno Islas ; González Balderán ). Although the medical unions provided a cheaper alternative to building IMSS clinics and hospitals in smaller and more remote cities, the subcontracting of medical services was beginning to receive criticism by the early s. Specifically, the system’s cost-effectiveness was questioned, especially in light of the disparities that often existed in the quantity and quality of care available to workers who were contributing at the same level (FCE , –). Furthermore, the system was plagued by idiosyncrasies and the elevated costs imposed by doctors opposed to the idea of social insurance (FCE , –; García Cruz a, –). The use of medical unions was also becoming less necessary due to the IMSS construction boom during the administrations of Ruiz Cortines (–) and López Mateos (–), when the number of medical facilities operated by the IMSS nearly doubled. The number of hospital beds operated by the IMSS increased by  percent between  and , and that figure increased by another  percent between  and  (INEGI –). The biggest construction boom occurred between  and , under Director General Benito Coquet. In , Coquet’s administration purchased a large medical complex from the Secretariat of Health when it could no longer financially maintain the facility (González Balderán ; García Cruz a, ).²⁰ Because of the inefficiencies and the growth of the IMSS infrastructure, the IMSS terminated the widespread use of medical unions in , and the IMSS became the owner and operator of existing clinics and hospitals (García Cruz b, ). Doctors who wanted to continue to providing services to IMSS beneficiaries became IMSS employees, and so the union of IMSS workers—the National Union of Social Insurance Workers (Sindicato Nacional de Trabajadores del Seguro Social, or SNTSS)—grew. Both the creation of the ISSSTE in  and the end of IMSS medical unions in  meant that more and more doctors were becoming government employees and union members rather than remaining independent or self-employed professionals. In late , doctors began mobilizing to demand payment of their end-of-year bonus, or aguinaldo, as required by Mexican labor law (Fernández Christlieb and Rodríguez Araujo , –).

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The demands of the doctors’ movement quickly expanded to include improved wages, better working conditions, and job security (Stevens , –). Although the movement initially began with residents and young doctors, it quickly expanded to include doctors of both social security institutes (Pozas Horcasitas , ). By March , the doctors had left the official labor movement, criticizing the CTM and the FSTSE for their public efforts to discredit the doctors’ movement (Fernández Christlieb and Rodríguez Araujo , –). They also began to criticize health-care policy because it privileged industrial and government workers with social insurance and did not adequately meet the needs of those without social insurance or those served by the Secretariat of Health (Stevens , –). Given the concentration of industry and government employment in Mexico City and the more progressive attitudes of doctors graduating from the UNAM, it is not surprising that the doctors’ movement and the strikes of  were concentrated in the Federal District. In , half of all the nation’s doctors were concentrated in Mexico City (Pozas Horcasitas , ). However, the movement sought to generate broader support throughout the country, especially support for doctors as “dedicated professionals” (Stevens , ). Ultimately, the government repressed some and gave in to some of the doctors’ demands. The repression, including arresting some leaders, was mild considering the repressive capacity of the state, and doctors received some improvements in their salaries, benefits, and job security (Fernández Christlieb and Rodríguez Araujo , –; Stevens , ). In this way, the government’s response to the mobilization of doctors employed by the IMSS and the ISSSTE continued to be consistent with earlier strategies of offering inducements for cooperation and applying constraints on mobilization and militancy. However, the doctors’ movement was also significant in that it signaled the beginning of institutional conversion, especially among IMSS doctors. Although many doctors, especially those in the northern and western regions of the country, continued to resist government employment, as the movement grew and expanded its demands beyond the call for better working conditions, it began to both criticize the stratification caused by existing social insurance institutions and demand the expansion of public health care. The movement also criticized both the official status and lack of union democracy of both the CTM and the FSTSE. These sentiments foreshadowed the role and posture of the union of IMSS workers (the SNTSS) in the s and s. The SNTSS has become one of the most independent unions and most vocal defenders of IMSS health-care provision since . As such, the important role of the SNTSS as a defender of

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public health insurance and direct provision of health-care services by the IMSS serves to demonstrate how existing welfare institutions may unintentionally create new constituencies that derive both their power and legitimacy from the institutions themselves. The doctors’ movement of – also signals the consolidation of the IMSS as the primary institution in Mexico’s welfare regime.

The New IMSS Law of  Throughout the s and s, IMSS reform laws had primarily been designed to increase geographic coverage or the level of contributions in each sector to help solidify the institute’s finances. However, in  the CTM began to focus less on the geographic expansion of coverage and more on proposals to improve existing benefits and create new benefits for workers.₂₁ At its national congress in , the CTM created a commission to draft a reform proposal for the Social Insurance Law (CTM ). In August , just months before the PRI national convention (at which the next presidential candidate would be ratified), the CTM held its own national congress and introduced a list of demands regarding social insurance, including calls for the immediate extension of social insurance coverage to all municipalities in the country and for a public relations campaign to encourage workers to notify the IMSS if they were not enrolled for benefits by their employers (CTM , –). The CTM also outlined specific reforms to the Social Insurance Law, including coverage during strikes, a higher age limit for child dependents, full income replacement during hospitalization, adjustment of pension benefits, increased wage replacement rates during sickness (to  percent of regular income), increased minimum pension levels, and more flexible rules for insuring dependent extended family members (CTM , –; CTM , ). In , the CTM and the largest national unions also formed the Labor Congress (Congreso del Trabajo, or CT). Though the CT united unions formally affiliated with the PRI, it was still seen as subordinate to the party (Fernández Christlieb and Rodríguez Araujo , –; Middlebrook , –; Davis and BrachetMárquez , ). Among the initial demands of the CT were a shorter workday, an increase in the minimum wage, profit sharing, price controls, and institutional reforms to the Federal Labor Law, the Social Insurance Law, and Articles  and  of the Constitution (Fernández Christlieb and Rodríguez Araujo , ). In , the CT presented an official proposal for a reform of the IMSS law, including more worker participation in IMSS administration and expanded benefits,

                  / 

such as housing (Fernández Christlieb and Rodríguez Araujo , –). Both the CTM and the larger CT organization, to which it belonged, proposed a significant revision to the Social Security Law in the years leading up to the  presidential election. In addition to these organizational efforts, mobilization of both the CT and CTM increased in the second half of the s. Labor conflicts and the filings of strike petitions grew in number, peaking in  and . Of particular note were conflicts between  and  in agriculture, ranching, mining, traditional manufacturing, and services (Fernández Christlieb and Rodríguez Araujo , ). These conflicts signaled the beginning of a renegotiation of labor’s support for the ruling cross-class coalition. At the same time, the CT led a membership drive for the PRI and actively supported the candidacy of Luis Echeverría Álvarez, then secretary of the interior, for president (Fernández Christlieb and Rodríguez Araujo , –, ). Alongside the labor disputes, the CT’s and CTM’s mobilization efforts are representative of labor’s proactive effort to redefine its role within the cross-class coalition and renegotiate the basis of its support for the ruling party. Mobilization efforts seek to enhance the ability of organized labor to set the party’s and the regime’s agenda, including future social welfare policy. Luis Echeverría was elected president in , when the PRI regime enjoyed little popular legitimacy, thus increasing its dependence on the popular classes for political legitimacy. This situation also increased the popular classes’ relative power within the context of the PRI-controlled state. Since the new president was considered responsible for the fierce repression of the  student movement, which occurred during his tenure as secretary of the interior, further popular unrest seemed a possibility. Seeing opportunity, labor organizations continued to mobilize and demand improvements in wages, working conditions, and social security provisions in the first years of Echeverría’s administration. Once again, a new president, elected after intense popular, labor, or peasant conflicts, faced heightened demands for benefits or concessions from popular classes and needed to respond in a way that would rebuild their support for the ruling class coalition. In , following discussions with other members of the CT, the CTM developed another, more comprehensive IMSS reform proposal and forwarded it to both the president and the secretary of labor and social welfare (CTM , ). The following year, the CT submitted a complete reform proposal to the PRI at its national convention (AHIMSS /--/). At the same time, labor protest and dissidence both within and outside the CTM and in the countryside accelerated (Montes de Oca , ; Collier , –; Trevizo ).  \                  

Compared to the wave of union mobilization in the late s, the mobilizations of the early s were more widespread and of longer duration (Collier , –). In response to the proposals from PRI-affiliated labor organizations and the heightened mobilization that further threatened the regime’s political legitimacy and cross-class coalition of support, Echeverría submitted to the Congress in early  the new Social Insurance Law to replace the original law adopted in . The president’s proposal acknowledged the CTM’s participation in the development of the legislation (Zamora Fernández de L. , –). Reforms of the previous decades had left the  law a conglomeration of original provisions and reform articles. The new law essentially updated the legal language of the existing legislation and simplified the benefit structures. It did not significantly change the level of benefits and replacement rates, and contribution rates remained the same. The revised law did provide for automatic adjustments to pension amounts every five years instead of relying on new legislation for adjustments. The law also allowed workers to choose to continue contributing to the IMSS after leaving covered employment. Likewise, the new law allowed domestic workers, independent workers, small merchants, artisans, unsalaried workers, small landowners, employers, and state and local government employees not otherwise covered by social insurance legislation to enroll voluntarily in the IMSS system. Often, however, such voluntary enrollments required workers to pay both the worker and employer contributions to maintain eligibility. In the first year of the new law, only thirty-four thousand workers continued their IMSS coverage through the voluntary coverage clause after leaving covered employment. The two most important innovations of the Social Insurance Law of  were the provision of noncontributory health care for the rural poor and of daycare services for the children of working women. Both of these new benefits should be understood in light of the mobilization of the beneficiaries of these new programs prior to and at the time of the new law’s adoption and the role that the benefits played in rebuilding popular support for the ruling coalition among disaffected workers.

The Social Solidarity Program The Social Insurance Law of  created the IMSS Social Solidarity Program (Coordinación General del Plan Nacional de Zonas Deprimidas y Grupos Marginados, or IMSS-COPLAMAR), which provided noncontributory health care to the rural poor in marginal areas. The program was to be funded by general rev                  / 

enues contributed to the IMSS and in-kind contributions from the communities served by the program. In practice, IMSS reserves were often used to subsidize the program (Spalding , ). The Social Solidarity Program was a significant innovation, compared to previous policies, for at least two reasons. First, it deviated from the insurance principle and provided noncontributory and essentially redistributive benefits for the rural poor (Spalding , ). Second, it represented a state response to mobilization by rural workers that addressed their needs as workers rather than as peasants. Despite its establishment of the Social Solidarity Program for the rural poor, the Echeverría administration did not at first support the landless peasant and rural worker movement. In April , the administration adopted the Federal Agrarian Reform Law, which largely benefited large landowners and took some ejido, or communally held land, from local communities (Trevizo ). It was not until rural peasants embarked on widespread land invasions in the first years of his administration that Echeverría began to respond to the demands of the rural landless and rural poor. Although the National Peasant Confederation or CNC channeled the demands of landed peasants, the s witnessed increased efforts by dissatisfied, landless peasants to mobilize independently of the official confederation (Trevizo , ). These movements spread, and invasions of large landholdings began in  and accelerated through the early years of the decade. According to one sample based on every third day’s news in a national newspaper at the time, reported land invasions expanded from fewer than twenty in  to more than thirty in  and  (Trevizo ). Other estimates suggest that between January  and July , seventy invasions were mentioned in the press and that in November of , one news estimate suggested that in three states alone there had been six hundred land invasions over the three years (Montes de Oca , ). During  and , the administration and the CNC tacitly allowed the land invasions. As the invasions became more widespread, they threatened both the national economy and political stability by disrupting agricultural production and undermining regime legitimacy (Trevizo ). By threatening regime legitimacy and the PRI’s claim to represent the interests of peasants, the mobilizations and the government’s subsequent efforts to both repress and appease the disaffected groups through policy concessions revealed the capacity for relative autonomy and voice available to subordinate groups. As a result, the CNC began to distance itself from the movements (Montes de Oca , ), and the government increasingly used “low-level” repression against the invasions. Nevertheless, those states

 \                  

with higher numbers of land invasions had statistically more land reform, suggesting that the government combined repression with concessions (Trevizo ). In light of these actions, the creation of the Social Solidarity Program in March  as part of the new Social Insurance Law of  represents another effort of the Echeverría administration to mollify the rural poor and ensure that they did not further disrupt the political legitimacy of the regime or coherence of the cross-class coalition. Although the CTM in the late s and early s had in principle supported the expansion of IMSS coverage for peasants, the self-employed, and seasonal or part-time workers (CTM , ; CTM , ), the organization backpedaled when the nature of the new Social Insurance Law became clear. The CTM cautioned the IMSS to meet the needs of urban workers and improve their services before expending too many resources on the proposed Social Solidarity programs. Unlike other aspects of the new law, the provisions for the Social Solidarity Program were not created in response to demands from industrial unions but rather as an effort by the Echeverría administration to provide benefits to the rural poor and landless who were engaging in widespread protest and land invasions. The mobilization outside the control or organization of the CNC challenged the ruling party’s control of the peasantry’s inclusion in the cross-class coalition originally negotiated in the late s. At the same time, concession of noncontributory social insurance benefits would ameliorate rural hardship and quell protest without directly challenging the large landowners who were also crucial to PRI efforts to maintain rural stability and peace. The extension of noncontributory social insurance benefits to landless rural workers highlights the difficulty the PRI regime often had in balancing the competing demands from members of its cross-class coalition. Although many of the protests and land invasions of the early s were focused on land reform, to initiate significant redistribution of landholdings would have further antagonized large landowners, on whom the PRI relied for agricultural production and rural stability. At the same time, the mobilization by landless peasants threatened the popular legitimacy of the ruling party and threatened to destabilize the party’s peasant organization unless widespread repression was used to end mobilization. Although many of the rural poor have often mobilized as workers rather than peasants, the state has typically responded to rural mobilization with “peasant” solutions, such as land reform (Montes de Oca , ). In this instance, the Echeverría administration responded to land invasions, or peasant mobilization, with a “worker” solution—social insurance.

                  / 

Day Care The other important new program introduced by the  reform was the IMSS day-care system for the children of working mothers. Since the s, Mexican labor law had required that employers provide day care for female workers’ children, though employers almost never complied and the government rarely enforced the law. In , President Adolfo López Mateos issued regulations requiring employers with more than fifty women workers to provide day-care services, and the  labor law reform (Article ) delegated the provision of day-care services to the IMSS. Again, these regulations were usually ignored, and the labor law did not provide IMSS with a means of funding such services. However, the Social Insurance Law of  finally provided a funding mechanism for IMSS day-care services, specifying that the IMSS would be responsible for providing such services. The presidential explanation for the new program was that the increasing number of women in the paid workforce necessitated the program. Employers were to pay  percent of all workers’ salaries to fund IMSS day care, with both men’s and women’s salaries being taxed to discourage preferential hiring of men rather than women (“Exposición de Motivos” [] ). Since , female workers had been entitled to forty-two days of paid leave at  percent of their salary following the birth of a child, and according to the new law, female workers’ children were eligible for day care from the time they were forty-three days old until their fourth birthday and the beginning of their school careers. Women also had the right to leave their children in day care for the first four weeks after leaving IMSS-covered employment. The day-care provisions in the  law were created in response to demands and mobilization from textile workers in the early s, when those workers asked the CTM and the IMSS for a reform that would give female workers access to day-care services through the IMSS. Although the CTM created a commission to study the issue and make a recommendation, the commission’s support for day care was lukewarm; the CTM claimed it could neither accurately estimate the costs of such a proposal nor make a definitive policy recommendation. The group also indicated that it would forward the results of its study to the IMSS, which would ultimately, along with the federal administration, make a decision on the matter (CTM , ). The CTM did not list day-care services in its outline of demands at its national congress in  (CTM , ), but a CTM leader claimed in  that the CTM had submitted a proposal to President Echeverría in  that had included a demand for day care (AHIMSS / --/).

 \                  

In , textile workers conducted strikes, and in early , a new wave of strikes began and continued through the first months of  (Fernández Christlieb and Rodríguez Araujo , ; Basurto [] , –). Among the workers’ complaints were lack of quality services and facilities from the IMSS. A Supreme Court decision in February  upheld textile workers’ demands for benefits. In some cases, dissident worker movements emerged to protest the failure of the CTM to effectively negotiate new labor contracts. As in other cases of labor dissidence, the government repressed some of the movements and forced its own people into CTM leadership positions (Basurto [] ). At the same time, by including provisions for funded day-care services in the new Social Insurance Law, the government also provided concessions to some of the demands of the textile unions. Importantly, the demand for day-care services to be provided by social insurance came from textile workers and not from the Mexican feminist movement. The textile industry has historically had problematic gender relations. Women’s employment in the industry has varied significantly over time and across different regions and enterprises. Often, men replaced women in the workplace as the industry became mechanized, but high concentrations of women workers persisted in regions with lower male unemployment or with large-scale handicrafts (Keremitsis ; Bortz ; Gauss ). Unions in the industry had also complained since the s that employers used the day-care provisions of the Federal Labor Law to justify gender discrimination (Keremitsis ; Gauss ). Therefore, by seeking a reform that would require funding of day-care services through employer contributions based on both men’s and women’s wages, the textile unions sought not only to gain a new benefit for their workers but also to eliminate a source of discrimination against women in the industry. Although the IMSS began collecting contributions for the new day-care benefit shortly after the law passed, implementation of the new day-care policy was slow because day-care fund reserves were used in part to support the healthcare services and the new Social Solidarity Program. As a result, the adoption of day-care benefits was something of a limited victory. The law does provide a legal basis for day-care provision, which industries or shops employing large numbers of women can use when petitioning for a day-care facility to open in a particular area, but it is impossible to evaluate the extent to which this has occurred. As late as , only  IMSS day-care programs were operating, with only , children enrolled.²² Publicly provided day care for the children of female workers was an important symbolic achievement of the Social Insurance Law of , but the limited implementation of services diminished the law’s real impact.                   / 

Explaining the Social Insurance Law of  The groundswell of mobilization by workers and peasants in the late s continued to grow in the early years of the Echeverría administration. As occurred time and time again with earlier PRI governments, Echeverría’s administration responded to popular mobilization with both a touch of repression and a good dose of concessions. The new law repaired the rupture in Echeverría’s political legitimacy caused by his role in the repression of the  student movement and his poor showing in the  presidential election (Spalding ). The adoption of the new Social Insurance Law did not effectively preclude further mobilization by either urban workers or the rural landless, however. In  and , organized labor pressed the state for a forty-hour work week and emergency salary increases to compensate for inflation (Martínez Nava , ; Zamora Fernández de L. , –; Lomelí Vanegas , –). Although Echeverría granted a forty-hour work week to bank employees and the federal bureaucracy in , he did not extend it to the private sector, despite repeated calls by the CTM to do so. In part, Echeverría’s reluctance to adopt the forty-hour work week for the private sector can be interpreted as an unwillingness to further aggravate his administration’s relationship with employers, which had been negatively affected by his other progressive policies. Nevertheless, the administration effectively supported worker demands for wage increases, and labor showed its support in late  by mobilizing a large demonstration in support of the president (Martínez Nava , ). The concessions the Echeverría government had made to urban and rural workers led both capitalists and landowners to organize and express their dissatisfaction with the regime’s reformist policies. In , business began discussing the need to form an umbrella organization to respond to the state’s policies, and the business chambers, with the support of the Mexican Council of Businessmen (Consejo Mexicano de Hombres de Negocios, or CMHN), founded the Business Coordinating Council (Consejo Coordinador Empresarial, or CCE) in  (Martínez Nava , –; Arriola Woog , –; Schneider ). Among the founding principles of the CCE was the assertion that social security should be based on tripartite contributions and provision of benefits (Arriola Woog , ). This principle should be interpreted as a criticism of the trend that had shifted the burden of contributions onto employers and emphasized state provision of services and benefits. The CCE wanted workers and the state to contribute more to the costs of social insurance, and it wanted the option of providing workers with private insurance coverage. Agrarian capitalists also organized a new inde-

 \                  

pendent organization to protest Echeverría’s policies and the mobilization of peasants. The National Agricultural Association (Unión Agrícola Nacional, or UAN) also sought to establish the economic and political autonomy of agrarian capitalists (Trevizo ). The organizational efforts of capitalists, both industrial and agrarian, reflect their resistance to the pro-labor policies, including the Social Insurance Law of , promoted by the Echeverría government.

Mexico’s Welfare Regime at the End of the s The period from the s through s witnessed an expansion of social insurance coverage and the government’s tendency to both universalize and stratify the benefits, principally by layering new institutions alongside existing institutions. Coverage expansion during this period led to direct state provision of healthcare benefits for both public and private sector workers. Some reforms were also intended to reduce families’ share of the welfare burden, though these efforts fell short due to implementation problems. Many of the changes during this period not only reflected the “revolutionary” ideals of the ruling PRI regime but also pushed Mexico’s welfare system toward the ideal typical of social democratic welfare states. However, poor coverage due to the nation’s large rural population and evasion in urban areas kept Mexico far short of reaching this ideal. In , only  percent of the population had access to public health insurance provided by the IMSS. By , after the creation of the ISSSTE, coverage had increased to  percent of the national population. Health-care coverage provided by the IMSS and the ISSSTE nearly doubled again by  (to  percent of the population) and again by  ( percent). The take-up rate for old-age public pensions lagged behind that of health-care coverage since many workers had not worked long enough to qualify for benefits. In , only . percent of the population over sixty was receiving an IMSS pension. By , that number had increased to only . percent of the retirement-age population.²³ Although the number of retirement-age pensioners covered by the ISSSTE system doubled between  and , by the latter date only fifty-four hundred persons were receiving an old-age or retirement pension from the ISSSTE (ISSSTE ). Replacement rates for both old-age and disability pensions in the IMSS system continued to rise gradually throughout the period, peaking at nearly  percent income replacement for low-wage earners and dropping sharply for high-income workers. Minimum pension amounts were adjusted for inflation and in many cases provided higher replacement rates for minimum-wage workers than the                   / 

average replacement rate. Replacement rates in the new ISSSTE system were significantly higher than those in the IMSS system, with the potential for full replacement after thirty years of service, regardless of age. In addition, the contribution structure for the IMSS was revised in  and . Although contribution rates for all parties increased somewhat during the s and s, the state sought to protect workers from funding a larger share of their benefits and instead shifted more responsibility to employers. These changes in the contribution and benefit structure reflect both increasing stratification among social insurance beneficiaries and state efforts to shift the burden of social insurance onto employers. This shift reflected the growing reliance of the party on popular support from organized labor within the ruling coalition. As discussed above, the s through s was the greatest period of growth for public medical employment and infrastructure. Although the IMSS had subcontracted medical services to private physicians in the s in order to expand coverage, a spate of medical facility construction in the early s cut down on the subcontracting of medical services, and the IMSS began to provide healthcare services directly to insured workers. When the ISSSTE was created in , it took over many of the existing clinics and hospitals operated by federal employee unions or federal agencies and provided health-care services directly to workers. Likewise, the pension benefits of the IMSS and the ISSSTE were administered and invested by public entities, leaving little room for private insurance or pension plans. Indeed, the ISSSTE replaced the private health insurance or privately administered supplemental pension plans that workers in privileged federal government agencies had negotiated as part of their collective contracts. In that sense, the s through s saw unprecedented state expansion of welfare provision. This expansion laid the foundation for institutional conversion by inadvertently creating a new interest group—social insurance workers—that would become fierce defenders of these welfare institutions in the s. Reforms and expansion of social insurance coverage were intended to provide nearly universal coverage and generous benefits for most Mexicans from before birth to after the grave. However, the fact that the majority of Mexicans still lived and worked in the countryside or informal sector limited those efforts. Furthermore, the advent of a separate social security system for federal government employees reinforced existing inequalities between public and private sector workers. Consequently, the Mexican welfare regime never really approached a social democratic ideal, and instead, at the end of the s, it represented a patchwork of policies that were drawn from the conservative and social democratic models of Europe. This chaotic pattern of expansion was due in part to the  \                  

process of institutional layering, including both the creation of the ISSSTE in  and the expansion of the IMSS through the advent of numerous “modified” or special schemes for rural workers. This layering also created stratification, which is consistent with Christian Democratic or corporatist welfare regime types, though it was still significantly less pronounced than the occupational stratification in the Chilean or Argentine social insurance systems. Layering occurred in part because new or increasingly important groups demanded benefits that were often superior to those of existing groups. This period of institutional consolidation also established the basis for institutional conversion and the creation of the social security workers as a powerful constituency that would become a fierce defender of welfare from retrenchment pressures in subsequent decades. The role played by organized labor and the mobilization of popular classes in the explanation of social insurance expansion presented in this chapter offers a corrective to characterizations of Mexican authoritarianism during the s through s that underestimate the capacity of organized labor, in particular, to articulate autonomous demands for policy. Many prominent explanations of policy making attribute a reactive or subordinate role to organized labor in the policy process in this era. Typically, analysts have argued that organized labor had the capacity to influence or modify policy outcomes but rarely initiated demands for policies (Collier and Collier ; Collier , ; Middlebrook ). However, the CTM, in particular, used its position on the Technical Council of the IMSS to convey requests for social insurance coverage from member unions. In other cases, member unions of the CTM, such as the textile workers in the early s, were able to get their policy demands incorporated into law despite weak support for the proposal. This interpretation of social insurance policy making during the height of the authoritarian regime in Mexico is consistent with emphases on the dynamic nature of the relationship between unions and the state and the “continual need of renewal” that the labor-state bargain entailed (Collier , –; see also Cook ). By emphasizing the capacity of organized labor to articulate, demand, and mobilize in support of social insurance concessions, this chapter does not intend to minimize the repression used by the Mexican state during this period to control and intimidate organized labor or peasants. Instead, its purpose is to provide a correction to those interpretations that underestimate the capacity of subordinate classes to express demands and effectively mobilize for social insurance. Such mobilization reflects the ways in which the ruling cross-class coalition was open to constant renegotiation and in which social insurance often played a central role in securing popular support for the ruling regime.                   / 

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RETRENCHMENT AND R E F O R M Late-Century Effects of Globalization and Democratization

T   on the political capacity of domestic actors, economic and political liberalization during the s and s profoundly shaped debate and conflict regarding the future of Mexican social insurance. During the s, some reforms fundamentally reoriented the foundations of social insurance, while other reforms were proposed but then blocked by powerful domestic political actors. Such patterns of uneven reform suggest several theoretical and empirical puzzles. For example, why did the government fail to privatize the IMSS pension system in  but succeed in , even though the ruling party had controlled more congressional seats in ? Why did the government choose to privatize the IMSS pension system when it was the ISSSTE pension system that was more costly for the government and in greater need of reform? With the ruling party controlling all branches of government, why was the administration unable to privatize health care after it had successfully imposed pension privatization over the objections of powerful domestic actors? The answers to these questions may be found by comparing the social insurance reforms of the Carlos Salinas de Gortari (–) and Ernesto Zedillo 

Ponce de León (–) administrations and efforts to reform both pensions and health care provided by the IMSS and the ISSSTE. These comparisons highlight the ways in which economic crisis and subsequent economic and political liberalization altered the composition of the cross-class coalition of support for the ruling party. In particular, globalization and democratization led to shifts in the balance of class power within the coalition, including an erosion of the political capacity of organized workers in tradable sectors and employers’ achieving greater influence. Due to these shifts, the presidential administrations of this period embarked on an ambitious reform agenda that was only partly successful, and their failures reveal the significant changes in the class composition of the ruling coalition. The economic crisis and liberalization policies also led to an increase in the number of unorganized urban and rural poor in the s and s.

Political and Economic Liberalization in the s and Early s In , economic recession, which accompanied a drop in oil prices and an increase in interest rates, led the Mexican government to default on its debt, sparking a regional debt crisis and the beginning of the “lost decade.”₁ In response to the crisis and to stabilize prices and begin the process of a structural adjustment, the government reduced social spending. As a share of total programmable government spending, social welfare expenditures declined from  percent in  to a low of  percent in . Similarly, public health spending as a percentage of GDP declined significantly during the s, and by the end of the decade it had not yet returned to its  level. The economic crisis also worsened the financial position of both the IMSS and ISSSTE, as inflation eroded existing reserves and reduced new contributions to the system. The financial situation was exacerbated by rising health-care costs, increased longevity of workers, increased chronic health problems, and relatively low retirement ages. By all accounts, the financial situations of the IMSS and ISSSTE were precarious by the end of the s (Laurell ). The economic crisis also had an immediate effect on the domestic labor market and prompted the government to begin significant structural reforms, such as dismantling import substitution industrialization and liberalizing the economy. In the short term, the crisis generated significant unemployment and stimulated the growth of informal employment (Lustig ; Alarcón ; Kurtz ), thus reducing the demand for social insurance, which protects only formal sector                      / 

workers. In the medium term, structural adjustment policies, including privatization and trade liberalization, institutionalized these shifts in the labor market. President Miguel de la Madrid Hurtado (–) began economic liberalization toward the end of his term. President Salinas accelerated and deepened the adjustment process. By the end of Salinas’s administration, Mexico had liberalized its market for goods and services and begun to open its capital account to facilitate further foreign direct and portfolio investment. In addition to these formal institutional reforms, Salinas facilitated the de facto liberalization of the labor market by weakening enforcement of existing labor contracts.² Together, privatization, trade liberalization, and de facto labor market liberalization all eroded the capacity of labor unions representing formal sector workers, especially in tradable industries, to maintain their previous levels of organizing and mobilizing (Kurtz ). The economic crisis of the s and subsequent economic liberalization policies also undermined popular support for the PRI regime and the ability of sectoral organizations (i.e., peasant and labor confederations) to guarantee electoral support for the ruling party. This situation undercut organized labor’s political leverage with the regime, especially for the unions officially affiliated with the PRI and representing tradable industries. The debt crisis and neoliberal economic reforms challenged the PRI’s claim to legitimacy and helped explain the declining hegemony of the party (Gómez and Klesner ; Cornelius, Craig, and Fox ). This decline first became evident in local and state elections, when opposition parties began gaining ground in the mid-s. In , for the first time since the Revolution, an opposition party candidate won a governorship. Popular dissatisfaction with the PRI was also reflected in the defection of a large segment of the leadership in  and the hotly contested and fiercely questioned election of President Salinas in  (Bruhn ). In response to this heightened political competition, the PRI reorganized its internal structure along territorial rather than sectoral lines and began deemphasizing its formal relationships with workers, peasants, and popular sectors in favor of appealing directly to citizens (CTM , , ). The decline of the sectoral organizations, particularly labor, was also reflected in their decreasing share of nominations for PRI congressional candidate lists since the s (Langston ). This is just one more indication of the changes in the role of organized labor within the ruling party’s cross-class coalition. Whereas the buildup of the PRI’s authoritarian regime during the s and s enabled labor organizations to exert significant influence over state policy (including the expansion of

 \                     

social insurance benefits and coverage), the process of democratization directly threatened the inside influence of official labor organizations and shifted the PRI’s electoral focus toward the growing unorganized informal sectors and rural poor. Furthermore, because electoral competition was fiercest for local, state, and congressional offices, the PRI had an added incentive to offer welfare benefits to attract swing voters in competitive elections. These patterns of electoral competition had important implications for the cross-class coalition supporting the ruling party and thus for social insurance.

The Origins of Reform during the Salinas Administration In the late s and s, the reserves of the IMSS and the ISSSTE were hit hard by extremely high levels of inflation. The federal government also fell behind in its contributions to these organizations, and it cut funding for the noncontributory health-care benefits provided by the IMSS-COPLAMAR program, which put additional financial pressure on the IMSS reserves. In response, the government made changes in IMSS contribution rates in , , and . Although the  reform did not increase the overall level of contributions for health insurance and old-age and disability pensions, it shifted the majority of the state’s financial burden to employers, leaving workers’ contributions untouched. The  reform significantly increased contributions for health insurance for workers, employers, and the state, though employers again bore the brunt of the increase. Similarly, the  reform increased overall contributions for old-age and disability pensions, again with the increase in the employers’ share being greater than that of workers and of the government. At the same time, inflation was also eroding the real values of benefits. The  law had included automatic increases in workers’ compensation and old-age and disability pension amounts every five years in relation to the statutory minimum wage. In , due to rising inflation rates and a decline in the real value of pensions, reforms were enacted to enable the IMSS General Assembly, a tripartite body, to revise pension amounts annually. The size of the increases was not automatic, however, and they were thus susceptible to political constraints. In , reforms indexed IMSS pensions to the statutory minimum wage. This solution was also problematic, however, because the minimum wage is also not automatically adjusted for inflation and is thus subject to the political climate. These parametric reforms were consistent with efforts by the ruling party to

                     / 

maintain the support of organized workers at a time when real salaries were declining and unemployment was high.³ The parametric reforms did little to solve the problem of low benefit amounts and the financial problems of the social security system. In the early s, nearly  percent of IMSS pensioners and  percent of ISSSTE pensioners were receiving the minimum pension amounts (World Bank a, ). By the mid-s, IMSS pensioners receiving the minimum pension amounts had risen to  percent (Solís Soberón and Villagómez , ). In the late s, IMSS was estimated to have enough reserves and income to survive until the s, while the ISSSTE system was expected to be operating with a deficit by the late s (World Bank a). It was very clear at the beginning of the s that significant reform of the social insurance system was necessary. In , members of the administration began considering reform options and visited Chile to learn about that nation’s privatized pension system (Brooks , –). In January and February , the World Bank completed its effort in Mexico to “provide analytic support to the policy reform program that the Mexican Government is planning to undertake in this important area” (i.e., contractual savings) (World Bank a, n.p.). In April, Secretary of Finance Pedro Aspe Armella and his undersecretary, Guillermo Ortiz, presented a proposal in a meeting of Salinas’s economic cabinet to modernize the Mexican pension system by implementing a Chilean-style pension privatization (Salinas , ). The intention was to replace the IMSS and ISSSTE defined-benefit pension systems with a mandatory, defined-contribution system of privately managed individual accounts. Initially, the proposal was met with resistance from thenSecretary of Planning and Budget Ernesto Zedillo, and Secretary of Commerce Jaime Serra. In particular, Zedillo was not convinced that such a plan would increase the overall level of savings in Mexico, as its proponents were suggesting it would. Serra also doubted the plan would raise savings levels and worried that any increase in labor taxes and costs would hurt Mexico’s international competitiveness (Reynoso ; Salinas , –). Government documents cited globalization pressures as a reason why parametric reforms and increases to contribution rates were no longer possible (IMSS ; Centro de Desarrollo Estratégico para la Seguridad Social [CEDESS] ). Economic liberalization also increased the state’s dependence on private capital for investment and economic growth. The capitalist peak organization in Mexico emphasized the importance of lowering IMSS contribution rates in the new global context (Comisión . . . del Consejo Coordinador Empresarial [CCE]

 \                     

). Even leaders of the largest official labor union affiliated with the PRI government, the CTM, acknowledged that globalization would limit reform options and recognized the potential tradeoffs between higher contribution rates and fewer jobs in the long run (Aceves del Olmo ). Thus, while economic liberalization did not necessarily cause or prompt social insurance reforms, it limited the number of options that policy makers considered politically and economically feasible. Over the next six to nine months, members of the Secretariat of Finance and the Central Bank carried out extensive studies in order to formulate a reform proposal. These studies focused on ascertaining the financial and actuarial balance of the existing pension systems of the IMSS and ISSSTE and determining the likely impacts of reform proposals. During this time, Finance and Central Bank officials discussed their plans with World Bank representatives with whom they had worked previously, often meeting more than once a month. The studies revealed important differences between Mexico and Chile that made a Chileanstyle reform problematic for Mexico. Specifically, Mexico lacked a system of controls and the information systems necessary to oversee such a reform at the time (Reynoso ; Sales ). Furthermore, government debt was likely to limit reform options due to the high costs of pension privatization.⁴ In March , the Mexican government had signed onto the U.S.-brokered Brady Plan to restructure its debt, which was excessive at the end of the s. The Retirement Savings System Law (Ley del Sistema de Ahorro para el Retiro [SAR]) was formally approved by the Congress in the spring of . This reform created a system of individual accounts into which employers were to contribute an additional  percent of workers’ salaries. For ISSSTE beneficiaries, the government contributed  percent to their individual accounts. Managed by the private financial system, the accounts were intended to provide workers with a supplement to their IMSS or ISSSTE retirement pension. The SAR system was debated in Congress but ultimately passed without much struggle or opposition from unions since it was promoted as a new benefit paid for by employers. The Salinas government began a year-long public relations campaign, directed by an election consultant, to educate the public about this new “benefit,” using slogans like “SAR, your new benefit by law” and “So that your account counts” (Salinas , ). Unlike previous reforms, the one establishing the SAR originated outside the organized labor, employer, or even social security bureaucracy. Although the Secretariat of Labor and Social Welfare (the ministry with the strongest formal association with the IMSS) was briefed on the reform proposals being discussed in

                     / 

the president’s economic cabinet, neither the secretary nor the IMSS significantly participated in the proposal’s development. Likewise, cabinet members were likely to have discussed the reform proposals with leaders of organized labor and employers, but these groups did not directly participate in the discussions of the contents of the reform proposal within the economic cabinet (Reynoso ). The formulation of the SAR proposal within the economic cabinet rather than the social insurance bureaucracies signaled the beginning of a fundamental shift in social insurance policy making. In the past, organized labor had often prompted social security reforms with demands for new benefits or improvement of existing benefits. However, organized labor did not ask for the mandatory individual retirement accounts and was opposed to any privatization of pensions.₅ Labor’s opposition to pension privatization explains, in part, the decision to adopt mandatory individual accounts as a supplement to the existing pension system rather than to pursue full privatization in  and . At the time, President Salinas sought the support of organized labor for the adoption of the North American Free Trade Agreement (NAFTA), and it was understood that labor leaders would not accept both NAFTA and pension privatization (Saenz Garza , Solís Soberón ; González Balderán ; see also Madrid ). This pattern of negotiation and reform reflects the changing role of organized labor within the dominant coalition in the early s. On the one hand, organized labor could not prevent the adoption of NAFTA and remove pension reform from the policy agenda; labor’s inability to do so illustrated the beginning of its diminished political power within the ruling coalition. On the other hand, organized labor was able to temporarily block the comprehensive pension privatization as originally envisioned by the Salinas administration. The administration chose to impose the costs of the reform on employers, despite having justified the reform by pointing to the need to improve Mexico’s competitiveness. Employers opposed the increase in labor taxes that they would have had to pay under the SAR reform (Reynoso ). One explanation for this situation is that labor had more political capacity to block pension reform efforts than did employers (Reynoso ). According to Salinas, his administration had originally tried to make the additional employer contributions for the SAR part of the tripartite economic pacts negotiated among labor, employers, and the state in the late s but was unable to do so (Salinas , ). Furthermore, the Mexican government has a history of proposing extreme measures and then accepting a weaker measure or reform after negotiating with other political

 \                     

actors (Dávila ).The Salinas administration was able to place the burden of financing the SAR reform on business because the business community had little formal capacity to stop the reform. Employer organizations had no formal ties to the ruling party, and they did not hold any elected positions in Congress. The increase in social insurance contributions to pay for the new private pension accounts came during a period when the Mexican government was otherwise favorable to internationally oriented businesses—pursuing NAFTA and allowing de facto liberalization of labor regulations. In this sense, the nearly simultaneous adoption of NAFTA, which was favored by business elites, and implementation of new private individual pension accounts, which was opposed by business, reflect the Salinas administration’s efforts to balance the contradictory preferences of its coalition partners—organized labor and employers.

Institutional Layering and the SAR The experience of the Salinas administration highlights how concerns about globalization and competitiveness initially shaped social insurance reform. In the eyes of the administration’s economic cabinet, competitiveness concerns took precedence over reforms that would significantly increase contribution rates to keep the existing system financially solvent. Policy makers began looking for ways to avoid increasing the pension contributions. At the time, Salinas’s economic cabinet rejected full pension privatization because it needed the support of labor for the free trade agreement with the United States and Canada. Knowing that even official unions would resist pension privatization efforts, the administration decided to adopt a partial reform that would be acceptable to unions and that would pave the way to more sweeping reform at a later date. The decision to not pursue full pension privatization during the Salinas administration shows that organized labor was still able to use its position within the ruling coalition to alter reform efforts. The unions’ influence was brought to bear prior to the introduction of any reform proposal publicly in Congress and underscores the centralized pattern of decision making within the ruling party, even in the early s. Although the PRI still controlled a majority of the seats in Congress, the unions that would be most hurt by privatization and that had the capacity to mobilize public opinion against reform were able to use their influence within the regime to block full privatization, even before such a proposal was made public. However, the unions would not be able to block pension privatization indefinitely.

                     / 

Given the perceived need for reforms but with limitations on options due to technical, economic, and political considerations, the Salinas administration agreed to pursue a gradual reform strategy. Such an approach would enable the government to create the infrastructure for a fuller reform later and would postpone the costs associated with a complete transition to a fully funded, definedcontribution, individual account system. In this sense, the SAR reform of  was never seriously considered a solution to the problems the IMSS faced. It was instead viewed as the initial step in the process of implementing a full-scale pension privatization (Borrego Estrada ; Solís Soberón ; Sales ; and Reynoso ). The SAR would serve to familiarize workers with private pension accounts, create the infrastructure necessary to govern such accounts, and make the move toward a full privatization slowly (Sales ; Reynoso ). In his last state of the union address, President Salinas indicated that social security and judicial reform were the only two of his projected reforms still pending at the end of his administration (Salinas ). A gradual social security reform strategy was consistent with the recommendations of the World Bank report on pension reforms in Mexico (World Bank a). The creation of the SAR as the first step toward privatizing Mexican pensions reflects the tendency for government to use institutional layering as a reform strategy when powerful actors block wholesale institutional reforms. In this case, organized labor blocked full privatization of the public pension system for private sector workers, so policy makers layered a new pension institution alongside the existing one. By portraying the employer-funded, defined-contribution, individual account system created by the SAR as an additional benefit for workers rather than an initial step toward privatization, policy makers were able to sidestep worker resistance and lay the groundwork for privatization without incurring the immediate economic costs associated with the transition to a fully privatized pension system.

Institutional Legacies of the New SAR System Because the  law did not address the financial problems of the existing IMSS pension systems, an additional adjustment of the contribution rates for IMSS workers’ compensation insurance, health benefits, and old-age and disability pensions was still necessary to sustain the system for the short term. In , a reform increased contributions. The increase, ostensibly intended to promote the financial health of the institute, was distributed among workers, employers, and the state

 \                     

(“Exposición de Motivos” ). These increases were considered the last that Mexico could endure before its international competitiveness would be jeopardized. At the same time, the implementation of the new SAR system proved problematic. The original law did not create the necessary regulatory framework to supervise the individual account system. Consequently, in , the government created the National Commission of the Retirement Savings System (Comisión Nacional del Sistema de Ahorro para el Retiro, or CONSAR) to regulate and oversee the administration of the individual accounts the new SAR system created. Even with the new agency, however, a number of problems plagued the system. First, the CONSAR was a fairly weak institution with little regulatory capacity. Second, because employers chose the financial institutions where their workers’ accounts would be set up, workers had an average of three individual retirement accounts each and often did not know which financial institutions held their accounts (Solís Soberón ; Kroepfly Saury ). Some workers, such as those in construction, had an average of eight different accounts (Aguilar Solís ). Third, the problem of multiple accounts was aggravated by the lack of a unique social security identification number to identify contributors (Solís Soberón ; Dávila ). Fourth, many banks were uninterested in the potential business created by the SAR accounts, especially for small and mediumsized enterprises, because the transaction costs were high and the saved amounts were relatively small. The administrative problems associated with the SAR reform were so grave that one official indicated that the SAR almost became an impediment for future privatization efforts during the Zedillo administration (Dávila ). In any case, the problems with SAR taught policy makers and administrators important lessons, and many of the system’s shortcomings were corrected in the  reform.₆

Reform during the Zedillo Administration, – From the beginning, the Zedillo administration faced tough economic decisions, in part due to a peso devaluation and economic crisis that revealed the risks of capital account openness and boosted policy makers’ claims that Mexico needed to find ways to promote domestic savings. For many, the Chilean pension privatization in  offered a promising way to generate domestic savings, which would support macroeconomic stability and growth (Weyland , ; Brooks , ).⁷ In objective terms, the ISSSTE system in the early s was arguably

                     / 

more in need of reform than the IMSS system. It had consequently been included in the plans for reform in the early s as well as in the  SAR reform. However, it was not included in the  reform process, despite fiscal imbalances that were more extreme than the IMSS’s, especially in the ISSSTE pension system, which offered generous old-age retirement benefits. Although the severity of the ISSSTE situation and associated transition costs for a reform may have made privatizing ISSSTE pensions prohibitively expensive, union leaders, bureaucrats, and politicians were unanimous in attributing the exclusion of ISSSTE in the  social security reform proposal to the anticipated opposition from government employees’ unions (Saenz Garza ; García Sáinz ; Solís Soberón ; Villagómez ; Dávila ; Aguilar Solís ). According to Genaro Borrego Estrada (then-director general of the IMSS), President Zedillo, at one of the economic cabinet meetings, asked Manuel Aguilera Gómez (thendirector general of the ISSSTE) if the ISSSTE should be included in the reform. Aguilera responded that he could not be responsible for the consequences if ISSSTE were included, suggesting that it was too sensitive a political issue to touch. It was agreed that to exclude the ISSSTE from the social security reforms would be the most politically expedient thing to do (Borrego Estrada ). By setting aside ISSSTE reforms, the administration could avoid a direct conflict with the largest national labor federation, the FSTSE, and its largest member, the SNTE, the national teachers’ union (Borrego Estrada ). In November , before Zedillo formally assumed the presidency, the Technical Council of the IMSS approved the creation of the Center for the Strategic Development of Social Security (Centro de Desarrollo Estratégico para la Seguridad Social, or CEDESS), a multidisciplinary think-tank organized by types of insurance (pensions, workers’ compensation, health care, day care, and so forth) to work independently of the IMSS and develop a reform proposal (CEDESS , ). IMSS director general Genaro Borrego Estrada chose the individuals who were to oversee each branch of social security, and he oversaw the hiring of numerous actuaries and economists to develop reform proposals (Villafaña ). The CEDESS staff had contact with some high-level members of the IMSS administration; leaders of the business sector (notably the CCE); representatives from international organizations such as the World Bank, International Labor Organization, and the OECD; and representatives from the top levels of the ISSSTE, INFONAVIT (Instituto del Fondo Nacional de la Vivienda para los Trabajadores, or Institute of the National Fund for Workers’ Housing), Secretariat of Finance, the Central Bank, and CONSAR.

 \                     

This arrangement was intended to isolate the reform process from politics and essentially exclude the labor sector from participation in the early phases of reform in anticipation of their opposition to the privatization measures (confidential interview). The CEDESS also isolated the reform process from the majority of the IMSS bureaucracy, since it often drew upon outside resources and leadership to direct reform proposal development. In April , the CEDESS produced the Eagle Proposal (Proyecto Águila), which outlined detailed reforms for each IMSS fund and formed the basis for the law sent to the Congress in December . This document was never made public and only circulated within the CEDESS and among proponents of reform.⁸

Pension Reform under the Eagle Proposal The Eagle Proposal described two alternative pension reform options, only one of which formed the basis for the reform proposal submitted to the Congress. The proposal recommended dividing the combined fund for disability, old age, old-age unemployment, and life insurance into two separate funds: one for disability and life insurance and another for old-age retirement and old-age unemployment (CEDESS , ). The division was intended to quell resistance to the pension privatization among IMSS officials, who would keep responsibility for the disability and life insurance funds (Kroepfly Saury ; Madrid , chap. ). The proposal specified that the retirement age would increase, third parties (not the IMSS) would designate disability status, and a flat-rate, tripartite contribution would fund pensioners’ health benefits (CEDESS , ). Although the nominal rate of contributions would remain the same, the distribution of responsibility and the total amount of funds collected would change because of a recalculation of the salary upon which contributions were based. In addition to these general guidelines for pension reform, the Eagle Proposal included two different pension privatization recommendations. Of these, the one that was more politically feasible and ultimately similar to the final proposal was called the New Social SAR (Nuevo SAR-Social). The contribution rate to individual worker accounts created by the SAR would increase to . percent of salaries, and workers would earn market interest rates on their balances. The IMSS would also collect an additional  percent of workers’ salaries as a “shared contribution,” which would earn regulated interest and be divided equally among all workers on a bimonthly basis. Upon reaching retirement age, workers would begin drawing a pension based on the calculations prescribed by the law, withdrawals com-

                     / 

ing first from their individual account and then from their individual account holding collective funds. The IMSS would cover any shortfall. Transition workers, or those who had contributed to the old system, would be guaranteed a pension comparable to that of the old system, an approach that was projected to be less costly than using recognition bonds. New workers would be guaranteed a minimum pension equal only to the statutory minimum wage (CEDESS , –).

Health-Care Reform under the Eagle Proposal In , the Salinas economic cabinet considered any IMSS health-care reform to be untenable because of political events, which included an uprising in Chiapas and the assassination of the PRI’s presidential candidate (Sales ). The IMSS healthcare system had a history of financial deficits, and, according to both the IMSS and CEDESS, several challenges were threatening IMSS health-care services and benefits. Concerns about global competitiveness constrained contribution rates, and pension reserves could no longer subsidize the health-care sector (IMSS , –). Other problems included a disconnect between contributions and the cost of services, the provision of unfunded health-care services to the uninsured population, a restrictive IMSS labor contract with excessive employment in some roles, and consumer dissatisfaction with the quality of service and the inability to choose family doctors (CEDESS , –; IMSS , –). The Eagle Proposal separated services financing and provision in anticipation of labor resistance to the privatization of services, which the CEDESS acknowledged would be politically difficult (CEDESS , ). The proposal set forth a contribution structure that provided more of a link between contributions and the cost of services as well as a shift toward a flat-rate contribution for medical services. Cash benefits (or sick pay) would continue to be funded with a proportional contribution of workers’ wages. Workers, employers, and the state would continue to make contributions, though the state’s share would substantially increase (CEDESS , –). A transition to a flat-rate contribution for medical services would enable the IMSS to expand the number of exemptions from participating in the IMSS to businesses that provided private health insurance for their workers without risking the likelihood that only highly paid employees would be exempted from contributing to the IMSS (CEDESS , –). As for IMSS services provision, the CEDESS recommended drastic changes, including a staff reduction of  percent, or nearly , employees. Central to the service reform were privatizing primary care and paying doctors according to the number of insured families choosing a particular doctor as their primary  \                     

care provider. As a consequence, approximately , doctors would leave IMSS employment and become private doctors.⁹ Approximately , support staff —including nurses, clerical workers, and unskilled staff—would also cease to be IMSS employees and instead work for private doctors in primary care. Secondary and tertiary care services, including hospitals and medical centers, would remain within the IMSS, but many diagnostic and support services would be privatized, eliminating another , IMSS positions. Tertiary health-care services at IMSS facilities would also be made available to the public at market prices (CEDESS , –).

The Public Reform Process While the CEDESS was developing the reform out of the public eye, a parallel but highly publicized reform process began. Recognizing the need to generate public support for an integral reform to the IMSS, Borrego Estrada (by his own account) suggested that President Zedillo undertake a formal diagnosis of problems facing the IMSS. President Zedillo made a public call for this diagnosis in January , and in March , officials presented the formal response, the “Diagnóstico.” The report detailed the financial and operational problems facing the institute but offered no suggestions for reform. This document was intended to create public concern over the state of the IMSS and to generate support for the reform process (Borrego Estrada ). Although the document officially originated within the IMSS, it cited CEDESS as the source of the tables and graphs outlining the institute’s shortcomings, and many of the figures are identical to those reproduced in the Eagle Proposal (see IMSS , , ). The muchdiscussed Diagnóstico was more important as a public relations tool than as an actual impetus for IMSS reform. Following the publication of the IMSS Diagnóstico, civil society actors began circulating their own proposals for reforming the IMSS pension system. Of these, the proposal published by the CCE, the peak business organization, was most similar to the Eagle Proposal. It even acknowledged the assistance of the CEDESS in its preparation (CCE ). The CCE proposal not only emphasized the importance of avoiding additional increases to contribution rates, which would hurt Mexico’s international competitiveness, but also advocated privatization of pensions and the creation of individual defined-contribution accounts. Unlike the Eagle Proposal, however, the CCE proposal would increase the minimum retirement age as well as the minimum contributions to receive a minimum pension (CCE , –).                      / 

The reform proposals of other business organizations echoed those of the CCE. The national employer organization, the COPARMEX, demanded that contribution rates not be increased (García , ). The COPARMEX also recommended raising the retirement age and adopting a mixed privatization scheme (Laurell , –), not unlike what the World Bank recommended for Mexico (World Bank a). A handful of regional organizations representing industry and capitalists, especially from northern Mexico, proposed Chileanstyle full privatization of IMSS pensions (Laurell , –). The financial and insurance industries likewise favored privatization (Laurell , –; Borrego Estrada ). As expected, organized labor unions initially opposed privatization of the IMSS pensions, though divisions between unions representing IMSS beneficiaries and those representing IMSS workers weakened their unity and resolve. Essentially, the CTM and the CT blamed the financial problems of the IMSS on high unemployment, low salaries, and insufficient government contributions, and they advocated increased government funding to the IMSS (Laurell , –). Unlike the proposals of the business representatives, the official proposals of these labor organizations lacked technical sophistication and merely reiterated demands for a minimum pension guarantee, the indexing of pensions to prices, and increased government contributions (see, e.g., Comisiones Técnicas . . . de la Seguridad Social [CTCTFSS] ). The IMSS workers’ union, the SNTSS, pointed out reasons for IMSS financial problems that were similar to those cited by the CTM and CT. It also opposed individual defined-contribution accounts (Laurell , –). Independent unions, including the powerful telephone workers’ union, joined the SNTSS opposition to the pension privatization (Sandoval ; Villalobos ; Saenz Garza ; and Rosado ). Despite its ideological opposition to pension privatization, the SNTSS had its own defined-benefit pension system; the system had been established through its labor contract and would not be affected by the reform. The SNTSS therefore viewed opposition to the privatization of pensions as the responsibility of the CT and CTM and of only secondary importance to its membership compared to its opposition to privatization of health-care services (González Balderán ; Guzman Garduño ). IMSS retirees and pensioners also opposed pension privatization, and they organized themselves as the National Unified Movement of Retirees and Pensioners (Movimiento Unificador Nacional de Jubilados y Pensionados, or MUNJP) (Laurell , –; García , ; Madrid ). However, MUNJP repre-

 \                     

sented only , members, few of which actively pay dues (Madrid ), so the organization has seldom held significant sway with policy makers (García , ). The health-care portion of the Eagle Proposal also prompted a flurry of alternative proposals from civil society. Again, the proposals circulated by business and employer organizations did not differ markedly from government proposals. The CCE’s proposal was identical to that of the Eagle Proposal, though it suggested that employers and the government share responsibility for the flat-rate contributions for health care and that employees be responsible for sickness benefits. This structure of financing would facilitate both subcontracting of services and the reimbursement of contributions when employers purchased private healthcare insurance for their workers (CCE , ). Health-care reform proposals offered by other employer and industry organizations did not differ markedly from those of the CCE, though the COPARMEX recommended that the state substantially increase its share of IMSS health-care financing. The COPARMEX also recommended the creation of a unified healthcare system that in the long run would mix public and private provision of services and would be stratified according to occupational categories. Regional industry, commerce, and employer organizations also generally favored some degree of privatization of IMSS health-care services (Laurell , –). In contrast to the proposals articulated by business interests, the CTM offered no formal health-care proposals despite its being the largest single representative of IMSS beneficiaries. Dissatisfaction with the quality of IMSS-provided services, especially primary care, ran high among covered workers, causing many of them to consult private physicians for primary care and to use the IMSS only for secondary or tertiary care or for required sick pay or disability paperwork (Sandoval ). Although the CTM had previously criticized waiting times for treatment and appointments, IMSS worker attitudes, and the quality of service at the IMSS, the labor confederation did not promote specific reform proposals in spring . Because the government’s proposal would reduce the size of SNTSS’s membership by  percent, the union strenuously opposed the privatization of healthcare and support services. It recommended instead that medical services not be provided to the uninsured and that hidden subsidies for the noncontributory IMSS-Solidarity program (formerly known as IMSS-COPLAMAR) and other modified schemes be eliminated (Laurell , ). Approximately  percent of those insured by the IMSS did not pay standard contributions but were subject to alternative or modified contribution schemes. Salaried workers were thus sub-

                     / 

sidizing the benefits provided to sugarcane workers, ejiditarios (communal farmers), tobacco workers, and so on (IMSS , ). The SNTSS insisted that the financial difficulties of health insurance were due to mismanagement or poor administration rather than excessive personnel or inefficiency. In early , private hospitals and medical associations were surprisingly silent on the issue of IMSS health-care reforms (Laurell , ). However, in , the insurance industry had supported an extensive study of health sector reform by a private health research foundation, the Mexican Foundation for Health (Fundación Mexicano para la Salud, FUNSALUD). The executive board of FUNSALUD included the secretary and undersecretary of health as well as the heads of the Central Bank and the Mexican statistical agency.₁₀ According to one official, the FUNSALUD’s health sector study was much more influential and more technically sound than that of the CEDESS (Sales ). The study proposed an integral and complete reform of the health-care sector, including the services provided by the IMSS, ISSSTE, and Secretariat of Health. It also called for the creation of national health-care insurance, with stratified benefits according to occupational category and state-funded minimum benefits for the poor (Frenk et al. ). The proposal advocated significant private provision of health care and transfers of state funds and responsibilities from the social security institutions to the Secretariat of Health. During the Zedillo administration, such a comprehensive reform never made it onto the political agenda. However, the lead author of the FUNSALUD study became the secretary of health during the Fox administration (–) and implemented some of the study’s recommendations with regard to national health insurance.

The Public Construction of a “Consensual” Reform Proposal In October , Borrego Estrada organized a series of highly publicized round table sessions that brought together labor, business, and government leaders to discuss IMSS reforms. The round table sessions were divided among the different types of IMSS benefits (pensions, health care, day care, and so on), and, with few exceptions, each round table session produced a document summarizing its recommendations (CTCTFSS ).₁₁ In November, the CT and CCE synthesized the findings of these round table sessions into a single document and formally it presented to Zedillo (Congreso del Trabajo [CT] and Consejo Coordinador Empresarial [CCE] ). The document was supposed to be the outcome of a concerted, tripartite effort to formulate a reform proposal to serve as the basis of a new law to be submitted to Congress.

 \                     

A careful comparison of the earlier documents from the different sectors with the formal document presented to Zedillo, which outlined a tripartite proposal for a comprehensive IMSS reform, shows that the latter reflected the preferences of the government and the business sector.₁₂ In addition to their joint proposal, the CT and CCE each sent Zedillo separate pension reform proposals. The CCE proposal was very similar to that of the Eagle Proposal, while the CT proposal was vague, thus suggesting that any reform must include guaranteed minimum pensions and automatic adjustments for inflation. In the area of health-care reform, the formal document included a joint proposal from the CT and CCE that was nearly identical to steps outlined earlier by the CEDESS and the CCE (see CCE , , and CTCTFSS , ). Even at the proposal stage, it was clear that the government had worked closely with business to discuss reform options while sidelining representatives of organized labor. This move is indicative of the general shift in the relative political power and capacity of business and labor within the cross-class coalition supporting the PRI regime that occurred in the late s and s. The shift in relative power and influence between labor and business that began during the Salinas administration accelerated during the Zedillo administration as economic and political liberalization continued to erode the mobilization capacity of organized labor in tradable sectors while augmenting the political leverage of business elites. Unlike the reform efforts in , however, those in  included additional bargaining, particularly between organized labor and the PRI administration, once the legislation was submitted to Congress.

The  Social Insurance Law in Congress Once the reform initiative was submitted to the Congress in late , negotiations with labor leaders affiliated with the PRI and with representatives of other political parties began in earnest. Congress made important changes to the new law in response to labor opposition. First, policy makers created the Afore Siglo XXI to provide a public sector alternative to the private pension account administrators. The IMSS manages Afore Siglo XXI, which is governed by the same regulations as are the private financial institutions created by the  reform. Second, Congress removed two key parts from the proposed law: expanding subcontracting of medical services to private parties and exempting from contributions those employers providing private health insurance comparable to that of the IMSS. Instead, Congress kept the existing system of negotiating exemptions on a case                     / 

by-case basis. These elements of the legislation were removed due to strong opposition from labor leaders, especially those from the SNTSS (Borrego Estrada ; Rosado ; González Balderán ; Saenz Garza ). Other elements omitted from the original CEDESS reform proposal due to labor opposition were privatization of the disability and life insurance programs and the use of private physicians to certify worker disabilities, both of which remained the responsibility of the IMSS (Borrego Estrada ). Opposition parties ultimately came out against the  IMSS reform, even with the labor concessions. The Party of the Democratic Revolution (Partido de la Revolución Democrática, or PRD) was steadfastly opposed (Laurell , –). Initially, the National Action Party (Partido Acción Nacional, or PAN) had promised President Zedillo that congressional members would support the IMSS reform (García Sáinz ; Borrego Estrada ; Aguilar Solís ). In fact, many PANistas did favor the reform in principle (Aguilar Solís ), but they were concerned about contributions and the commissions charged by the pension administrators (García Sáinz ; Borrego Estrada ). Nevertheless, despite the PAN’s pledge of support only days before the Chamber of Deputies was set to vote on the reform, party members voted against it, which infuriated President Zedillo (Borrego Estrada ). The PAN senator, José Angel Conchello Dávila, who had previously been a representative of CONCAMIN, headed the PAN opposition to the reform and was able to convince other PANistas to oppose the reform at the last minute (Borrego Estrada ; García Sáinz ). PRI officials attributed the radical change in the official PAN position to a lack of party discipline and party members’ fear of voting for an unpopular reform measure (Aguilar Solís ; Borrego Estrada ). Nevertheless, because PRI held the majority of seats in both houses, it was able to pass the legislation despite labor and PAN opposition. This outcome underscores the importance of negotiation within the ruling party and its class constituents and the declining influence of organized labor in tradable sectors within the coalition.

Pension Privatization in the New Law The Social Insurance Law approved by the Congress in December  reflected a partial compromise. Organized labor was unable to stop a full pension privatization, as it had in the early s. The only concession with regard to pensions that labor was able to extract was the creation of a public pension fund administrator—Siglo XXI, administered by the IMSS (Borrego Estrada ; Sandoval

 \                     

). The essence of the reform—the elimination of the public pension system and the creation of defined-contribution individual accounts—was more neoliberal and envisioned a more limited role for the state than the reform proposals suggested by employers or workers. With the new defined-contribution private pension system, transitional workers would be allowed to choose either an IMSS pension under the old rules or a pension based on the accumulated funds in their new individual accounts. All current and new workers covered by the IMSS legislation would contribute to mandatory individual retirement accounts managed by private financial institutions. The decision to avoid recognition bonds, or government payments for contributions made to the defined-benefit system, was made partly because of costs and the experience of a previous state-level privatization effort (Brooks , ). Early in the reform process, as a concession to the IMSS bureaucracy so as to facilitate its acceptance of the old-age pension reform, it was decided that disability and life insurance would not be privatized (Kroepfly Saury ; Dávila ). Otherwise, the IMSS bureaucracy as a whole had little to do with the development of the Eagle Proposal or the reform process, in part because the reform team was isolated in the CEDESS.₁₃ The IMSS still administers contributions for disability and life insurance and old-age health-care benefits. The reform kept the combined contributions of workers and employers at their existing levels but significantly increased the state’s responsibility for funding retirement, including the depositing of a “social contribution” in all individual pension accounts. The reform guaranteed a minimum pension equal to the minimum wage in the Federal District (indexed to inflation) to all workers who contributed for a minimum of approximately twenty-five years (up from ten years) to their individual accounts. The minimum pension guarantee, an important feature of the reform, is designed to protect low-wage earners. On the other hand, because the observed minimum wage is approximately one-and-a-half times the statutory minimum wage, workers receiving a minimum pension receive only about twothirds of the replacement value of the minimum wage. Workers who contribute at higher wage levels and whose accumulated funds do not exceed the minimum pension receive a pension with a low replacement rate. For the average IMSS beneficiary, who earns almost three times the statutory minimum wage, this rate is approximately  percent. Given the high levels of inflation in the past, this pension replacement rate is not much different from those of the late s and early s.

                     / 

Replacement rates in the new pension system depend on the real rates of return on worker accounts and the number of years workers contribute to their individual accounts. The minimum pension guarantee ensures that minimumwage workers contributing to their accounts for at least twenty-five years will have a  percent replacement rate (assuming a flat lifetime wage profile). Estimates of replacement rates calculated by economists are incredibly sensitive to the underlying assumptions about the real rates of return. For instance, assuming a flat lifetime wage profile, workers earning one or two times the minimum wage, contributing for even forty-five years with a modest  percent real rate of return, will still be eligible only for the guaranteed minimum pension (Espinosa-Vega and Sinha , ). According to estimates by Solís Soberón and Villagómez (, ), unless the real interest rate approaches  percent, even workers contributing for forty years will not achieve a  percent replacement rate. Workers contributing for twenty-five years will have a less than  percent replacement rate unless the real interest rate approaches an average of  percent. As of , the average real rate of return has been closer to  percent, according to the CONSAR (). In general, the new pension system offers higher replacement rates to low-income earners, especially with earnings equivalent to one minimum wage, but will provide only a minimal amount of retirement income.

Health-Care Reform in the New Law Labor opposition stymied the health-care services privatization. The  IMSS reform had allowed for medical services to be subcontracted, a move that was key to the formation of medical unions for care provision in the s. However, since medical unions were eliminated in , the IMSS resorted to subrogation only when it lacked the specialists or equipment necessary to provide care to the insured. The core provisions allowing for the subcontracting of medical services and the exemption from contributions for those companies providing their workers with private health insurance were not adopted as proposed. The SNTSS accepted only that a limited percentage of services could be subrogated, but only to other public health-care institutions, such as the ISSSTE or the Secretariat of Health, and not to private providers. The  reform proposal also would have required all primary care services, as well as most diagnostic services, to be subcontracted to private physicians. The IMSS employees’ union opposed this aspect of the reform because it would have eliminated more than fifty thousand union jobs. The ability of the IMSS workers’ union to block portions of the reform

 \                     

effort that were central to the union’s existence and livelihood is indicative of the political capacity and power unions in nontradable sectors were able to maintain and leverage vis-à-vis the ruling party. In the end, the main impact of the Social Insurance Law of  on health care was on the financing of IMSS health-care benefits. The reform divided the contributions for health-care services and cash benefits, as recommended by the Eagle Proposal. Cash benefits for illness/disability are financed by a contribution of  percent of the worker’s salary, and that sum comes from workers (. percent), employers (. percent), and the state (. percent). Health-care benefits are financed by the state and employers through a combination of a flat rate on the minimum wage in the Federal District and a percentage of wages that are at least three times the minimum wage in the Federal District, or the average wage of IMSS-insured workers. Workers who earn in excess of three times the minimum wage contribute an additional  percent of the excess, and employers contribute an additional  percent on the excess wages. The law specified that these contribution rates would be modified gradually until , when a fixed flat-rate contribution was put into effect for all workers. This contribution structure significantly reduced worker and employer contributions while increasing the state’s share, which is funded through general revenues. According to one estimate, worker and employer contributions decreased by  percent and  percent, respectively, while the state’s contribution increased by  percent (Sales Sarrapy , ). Under the tax system at the time of the reform, corporations could deduct from their taxes any social security contributions. The Eagle Proposal held that since employers would be contributing and deducting less, the state would collect more corporate taxes, which it could then use to finance its share of the IMSS health-care contribution (CEDESS , ). The  reform increased the state’s explicit share of responsibility for financing IMSS health care, which was not only an element of the CEDESS proposal but also a demand of labor, as well as employer and industry organizations. In addition, the original proposal submitted to Congress would have exempted employers from making contributions if they provided private health insurance with IMSS-comparable coverage. The existing system already allowed a few privileged groups that negotiated exemptions the option of using their legally mandated contributions to purchase private insurance—notably, the banking sector and a few corporations located in Monterrey. However, the SNTSS resisted the proposal to generalize this practice because it believed that such a policy would lead to adverse selection, with only the corporations employ-

                     / 

ing higher-wage workers (and thus making larger contributions to IMSS) opting to provide private insurance (González Balderán ). In effect, the transition toward a flat-rate contribution for all workers in  was intended to reduce the likelihood of the high-wage workers leaving the system (CEDESS ). In a concession to the IMSS union, the government still allows such exemptions but on a case-by-case basis.

Other Elements of the Reform Although most studies have focused on the pension and health-care reforms in the  law, the changes also affected other areas of social insurance. The new law significantly affected the financing of workers’ compensation for work-related accidents and illnesses by tightening the link between workplace risk and insurance premiums. In the past, businesses in the same category paid the same premiums regardless of actual accident rates or efforts to improve worker safety. The reform rewards businesses for improving the safety of working conditions and ties contribution rates to the claims history of a business, though there are limits within which contribution rates can change annually. Overall, the average contribution rate paid by employers decreased, though according to one government actuary, they are still too high in actuarial terms (Kroepfly Saury ). Like pension contributions, day-care contributions had been used to subsidize IMSS health and maternity benefits, and consequently, IMSS day cares were underfunded and provided little coverage. The  social security reform made two critical changes to this IMSS benefit. First, it extended coverage to widowers and divorced men with custody of eligible children. Second, IMSS was no longer allowed to use day-care contributions to subsidize maternity and health benefits. However, up to  percent of the revenues generated by the labor tax paid by employers to fund day-care services are used to fund IMSS social benefits, such as vacation centers, community centers, and retail stores. Pension reserves had previously been used for this purpose. Between  and , the number of children in IMSS-run day-care centers increased by  percent, yet in  only , children were enrolled. Clearly, the impact of the new policy has been limited, both by low levels of IMSS coverage in general and by a lack of sufficient day-care services to meet presumed demand. More recently (particularly during the Fox administration), efforts to expand day-care services for IMSS-covered workers have focused on subcontracting the service to third-party providers. The  reform also eliminated the practice of using pension reserves to subsidize noncontributory health care for the rural poor. According to the Social  \                     

Insurance Law of , IMSS-Solidarity benefits were to be funded by general revenue government monies, with IMSS reserves making up any differences. As chapter  described, however, program communities were encouraged to contribute in cash or in kind for the health-care services they received. In those states in which the IMSS operates and the federal government finances IMSS-Solidarity benefits, the IMSS is permitted to draw upon an unspecified amount of government funding for the program. However, in practice, the program still receives substantial subsidization (at least informally) from the IMSS due to its unfunded nature.

The Politics of Social Insurance Reform during the Zedillo Administration Given the high profile and far-reaching nature of the IMSS pension privatization, it has received considerable scholarly attention (e.g., Brooks ; Madrid ). Nevertheless, it is important to remember that additional reforms were proposed and then abandoned as a result of opposition from organized labor in concentrated, nontradable sectors. The other proposals—to privatize IMSS medical services and ISSSTE pensions—failed in part because economic liberalization had not affected unions in those nontradable sectors as much as it had unions in the tradable sectors. Consequently, government officials were not able to use competitiveness pressures as an excuse to privatize medical services, nor could they claim there was a need to reduce government employee pensions. Moreover, unions in these nontradable sectors tended to be more politically independent and could easily mobilize workers, which helped the unions maintain their political leverage as potential coalition partners within the PRI regime. Threats of strikes by the workers of the largest health-care system and the education system were enough to preclude reform of IMSS health-care services and the ISSSTE pension system. In contrast, by the beginning of the Zedillo administration, many of the structural reforms, including trade liberalization and privatization, had weakened the labor unions, especially in tradable industries, reducing their size, strength, and capacity to mobilize. Many labor contracts had become more flexible, despite the lack of a formal reform to the Federal Labor Law (Zapata ; ; Cook ). Democratization and resulting coalitional shifts within the PRI further marginalized the importance of the CTM, the largest labor confederation representing IMSS beneficiaries. This relative decline in the influence of the official labor unions representing IMSS beneficiaries alongside the growing                      / 

importance of business support for economic output and reform efforts illustrates the shifts in the class composition of the ruling coalition and explains the pattern of social insurance reform during the Zedillo administration. Meanwhile, aspects of the reform process were shaped by existing welfare institutions and their allocation of power to beneficiaries and class actors.

Labor, Employers, and Reform Although organized labor stalled pension privatization during the Salinas administration, by , the official labor organizations, including the CTM and CROM, had acceded to pressures to privatize, despite the unpopularity of the reforms. After the Social Insurance Law was amended in , CTM and CROM officials attributed this reversal to the growing belief that privatization was the best way to ensure the future of the beleaguered pension system and the pensions of workers (de la Vega ; Paleta ; Aceves del Olmo ). One labor leader suggested that the attitude was one of fatalism: the existing system was obviously problematic and the alternatives were limited. Instead, unions were left trying to ensure the best outcome possible for workers within the constraints of privatization (Sandoval ). However, other factors also influenced labor’s change in position. According to one former government official, the CTM became less resistant in the negotiations over the  reform once it became clear that the administration of the federal government housing program (INFONAVIT) would essentially be unaffected, despite the fact that workers’ contributions would be deposited into private individual accounts (confidential interview; see also Madrid ). In addition, even in their resistance to pension privatization, unions found it difficult to mount a united, coordinated, and effective opposition to reform. The labor unions representing IMSS beneficiaries did not coordinate their analysis and defense of social insurance prior to the  pension reform; in fact, they often disagreed among themselves (Freye Rubio ). In particular, the labor representatives of the IMSS Technical Council, which by law includes equal numbers of advisors from labor, employers, and the state, did not coordinate their analysis or approach to the  reform. In addition, the union designees to the seats on the Technical Council were often old-style políticos, some of whom had been active in politics when the IMSS was created in . While these individuals may have been astute politicians, they did not have the technical background necessary to evaluate and counter the reform proposals put forward by

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the administration or business (Palomino ). This lack of technical capacity was evident in the documents that the CTM created concerning the reform proposals.₁₄ Consequently, the official unions were unable to demonstrate why the pension system should not be changed (Moya Clemente ). Perhaps more importantly, by the time of the  reform the major official labor confederations (the CTM, CROM, and others) had been further weakened by changes in the labor market and in Mexico’s development model, which explicitly sought to make production more flexible at the expense of labor contracts and organized labor. In addition, democratization pressures eroded organized labor’s formerly privileged position within the regime as the ruling party turned to the unorganized rural poor and urban informal sectors for political support. One interpretation of the CTM’s acceptance of the  pension reform suggests that the CTM’s leadership had guaranteed the PRI that labor would support the reform and that party discipline was used to ensure that congressional labor representatives went along with the reform (Madrid ). Unlike the situation when reform proposals were made in the early s, the president was not seeking labor’s support for other liberalization measures. Overall, in comparison to the influence official unions had over the shape and future of social insurance prior to the debt crisis, by the mid-s, the official unions seemed both politically and technically unprepared to prevent further reforms. In addition to divisions and the lack of coordination among unions representing IMSS beneficiaries, those unions (i.e., those with seats on the IMSS Technical Council) had different priorities and political strategies compared to those of the IMSS employees’ union, the SNTSS. In the mid-s, the CTM criticized the generous benefits enjoyed by IMSS workers and suggested that the excessive demands of the SNTSS would bankrupt the IMSS. The CTM had also complained about IMSS customer service, citing workers’ poor attitudes and long waits for service. On the other hand, the SNTSS, though ideologically opposed to the proposed pension privatization (Sandoval ; Villalobos ; Saenz Garza ; Rosado ), was willing to accept pension privatization and changes to health-care financing as long as IMSS health-care services were not privatized and their generous labor contract benefits were protected (confidential interviews). Coincidentally, the STNSS had severed its official relationship with the PRI in the early s and begun organizing with the independent union movement.₁₅ So, in addition to representing workers with conflicting preferences, the CTM and SNTSS reflected different union strategies with regard to the PRI regime. Other labor leaders claimed that these independent unions (which tend to have

                     / 

more generous labor contracts) were willing to go along with pension reforms because their contracts protected them from the effects of privatization (confidential interview). These differences in policy interests and political strategy were compounded by the fact that globalization to that point had had little effect on the organizational capacity of government employee unions such as the SNTSS and the SNTE. In the enclaves where organized labor had maintained its political independence, militancy, or organizational strength, it effectively managed to stymie privatizing reforms to pensions and health care. The IMSS employees’ union (the SNTSS) was able to stop the privatization of IMSS medical services, which would have resulted in a  percent reduction in the size of the union. Politicians and policy makers were conscious of the power and influence of the SNTSS and saw it as an obstacle to reform (CEDESS ). Likewise, the federal employees’ confederation of unions (the FSTSE) was also able to prevent the retrenchment of the ISSSTE pension and health-care system in the mid-s. Policy makers were keenly aware of the militancy and organizational strength of the teachers’ union, which is the FSTSE’s largest member, and knew that including the ISSSTE in the reform efforts would ultimately stall or kill any type of reform. Overall, the failure to privatize IMSS medical services or the ISSSTE system reflects the uneven effects of economic liberalization on the political and mobilization capacity of organized labor in the s. However, these reforms did not disappear from the policy reform agenda, and both the Fox and Calderón administrations revisited these issues. In contrast to the significant disarray among organized labor, employers’ organizations coordinated their efforts through the CCE. While employers had opposed paying for the  SAR reform, they rallied behind the  reform efforts. In , to study problems facing the social security system and possible solutions, the CCE formed the Social Security Commission, which included representatives of the main business, commerce, and employer organizations, including the CONCAMIN, the CONCANACO, the COPARMEX, and the CMHN, among others. This commission hired economists and actuaries to research and prepare draft proposals. These draft proposals more closely resembled the final reform than did the vague alternatives suggested by labor organizations, and CCE representatives are quick to claim responsibility for the  pension reform, claiming to have had inside access to the CEDESS and the reform process from which labor representatives were excluded (Palomino ). Whereas divergent interests and long-standing rivalries divided labor organizations, the CCE was able to coordinate the work of all of the employer repre \                     

sentatives on the IMSS Technical Council, including three from CONCAMIN and one from CONCANACO. Unlike the labor representatives, these business representatives shared offices and an administrative staff, including a technical secretary who coordinated research and proposal development for the sector (Palomino ). As a result, the CCE proposals closely resembled the final reform, unlike those of the labor organizations. The coordination of efforts of the employer sector and the willingness of government officials to allow them to participate in the CEDESS discussions probably gave employers’ organizations more influence over the reform process than workers’ organizations had. Access to the CEDESS and the early policy reform process reflect the increased leverage and political clout employers and business organizations enjoyed during the Zedillo administration due to liberalization of the economic and political system.

Institutional Legacies and Reform The patterns of reform during the Zedillo administration illustrate some of the key ways in which existing institutions shaped the conflict over and outcomes of retrenchment efforts. First, the fact that private and public sector workers are provided benefits by separate welfare institutions complicated the government’s efforts to privatize pensions and health-care services. Such reforms would require sequentially modifying the IMSS and the ISSSTE laws, increasing the likelihood that one of the reforms would fail in the face of union opposition. In addition, the organizational division between the public and private sector unions increased the number of organizations with which the state would have to negotiate and convince of the need to reform. Second, the difference in the benefits provided by the IMSS and the ISSSTE shaped the incentives for collective action that workers covered by each institution would have. To be sure, the more generous pensions provided by the ISSSTE system meant that public sector workers had much more to lose from privatization than their counterparts covered by the IMSS. This motivation of government employees to defend their benefits, combined with their more unified organization, especially with regard to teachers, helps explain why they were able to block reform efforts. The conflict over the proposed privatization of IMSS health-care services illustrates the institutional reinterpretation that doctors initiated in the mid-s. As explained in chapter , doctors had originally resisted becoming employees of government health-care institutions, including the IMSS. By the mid-s, however, doctors were taking the lead in organizing workers in public health-care institutions, and they became defenders of public health services. The organiza                     / 

tion of a powerful union of health-care workers, the SNTSS, was an unintended consequence of the adoption and expansion of social insurance in Mexico, the full consequences of which became apparent when doctors blocked the privatization of IMSS services in the mid-s. Interestingly, the IMSS administration has since begun “reinterpreting” provisions in the IMSS law to increase the privatization of the IMSS without directly challenging the union. In the late s, in light of union resistance to health services privatization within the IMSS system, the IMSS administration took advantage of existing provisions in the IMSS law to increase the contracting of services with third parties. This strategy would later be used by the Fox administration to create pressure during contract negotiations with the SNTSS and to outsource medical services in the ISSSTE. This is an example of institutional reinterpretation to pursue de facto welfare privatization without pursuing a formal institutional reform. The progression of reforms during the Salinas and Zedillo administrations also illustrates the ways that partial reforms can be used to generate legacies that facilitate future reform. Specifically, the Salinas administration knew that privatization of pensions would be politically explosive. Instead of pursuing pension privatization, the administration introduced private individual accounts as an additional benefit for workers in , without reforming the existing system. This strategy had the advantage of sidestepping political opposition to private, defined-contribution accounts while simultaneously laying the institutional groundwork for later privatization. As indicated above, the experience with the SAR was so problematic that it almost hindered future privatization efforts, but, in general, it had the effect of enabling the government to establish new institutions, including CONSAR, that would become resources for the privatization effort. This gradual approach also gave government reformers some potential allies in the private financial institutions that responded to the opportunities provided by the creation of the SAR in .

Financing the Reform In contrast to other Latin American countries that were considering pension reform, by , Mexico’s public debt had been significantly reduced, placing the government in a favorable position for financing the transition costs involved in the shift to a private pension system. Although lower public debt may have made the privatization more feasible, it did not necessitate pension privatization. Estimates of the transition costs vary according to how the costs are financed and

 \                     

what future rates of economic growth will be (Solís Soberón and Villagómez , –). Assuming high levels of economic growth, the cost of the reform in  was estimated to total . percent of GDP. The cost will peak at . percent of GDP in  and then equal . percent of GDP in . The same model, assuming low levels of economic growth, estimates that the  costs of the reform were . percent of GDP, to peak at . percent of GDP in , and then total . percent of GDP in  (Solís Soberón and Villagómez , ). According to these numbers, the government could have used the increased costs paid in the middle term for the new privatized pension system to sustain the old pay-as-you-go system. However, that option was not considered feasible or desirable in the long run.

Diffusion of Reform Models and the Role of the World Bank Recent research suggests that after Chile privatized its pension system in , many countries in Latin America followed suit (Madrid ; Brooks ; Weyland ). In some cases, the mechanism of this diffusion is not explicitly identified (e.g., Madrid ), while others suggest that the World Bank and other international financial institutions sold the Chilean model throughout the region (Müller ). In Mexico, shortly after structural pension reform proposals first appeared on the policy agenda, the World Bank in late January and early February  completed a mission in Mexico to “provide analytic support to the policy reform program that the Mexican Government is planning to undertake in this important area” of contractual savings (World Bank a, n.p.). Members of the Secretariat of Finance collaborated on the World Bank report that came out of the mission; it was presented to Mexican policy makers in October  (Reynoso ; World Bank a).₁₆ IMSS and the ISSSTE directors, commercial banks, insurance companies, private sector enterprises, and trade associations also assisted in producing this report (World Bank a). The World Bank report recommended a three-pillar approach to pension reform, calling on the government to: () restructure the IMSS system into a flat-rate, minimum-pension benefit, possibly funded with general taxes; () provide fully funded, privately administered occupational pensions based on the current severance pay requirements; and () adopt a system of private, defined-contribution individual accounts. The Mexican government followed the World Bank’s recommendation to proceed in stages. Other recommendations that were implemented in either the  or  reforms included discontinuing the use of pension reserves to subsidize health insurance, significantly increasing minimum                      / 

contributions for a minimum pension, and depositing housing credits into individual accounts. Several of the World Bank’s recommendations were not implemented, however. For example, although the World Bank singled out the ISSSTE system as particularly in need of reform, the ISSSTE was not included in the  or  reforms. The government also did not consolidate the smaller public pension systems, such as the state government pension systems, with the national system nor did it privatize other programs and assets of the IMSS and ISSSTE (World Bank a). Recommendations to require full funding of severance pay as a form of occupational retirement were also not heeded. Throughout the reform process of the first half of the s, the World Bank was the most prominent of several international organizations that sought to influence social insurance reforms. Policy makers consulted the World Bank frequently—more than once a month—during the development of both the  and  reform proposals (Reynoso ; Dávila ). The World Bank actively sought reform of the IMSS pension and health-care systems and believed that its efforts were successful. In its Country Assistance Evaluation (CAE) for Mexico, the World Bank indicated that during this period, the Bank’s work on the reforms of the contractual savings (i.e., pension) system . . . has been largely successful. Several Mexican counterparts commented very favorably on the quality of the Bank’s substantive input. In FY and FY the Bank approved two single tranche adjustment loans of US$ million each. Agreed policy actions were taken in advance of the approval of each loan, and the Bank maintained an appropriately low profile on these politically sensitive issues. However, reforms of the National Worker’s [sic] Housing Fund Institute (INFONAVIT) that had been agreed as the basis of the second loan were only partially implemented. (World Bank b, ; emphasis added)

This statement implies that the World Bank promised financing for pension privatization but did so in a “low-profile” manner intended to avoid publicity and criticism that might jeopardize the reform. The World Bank approved both of the contractual savings loans in December  and June , well after the  law was formally approved (World Bank b, annex table ).₁₇ The failed INFONAVIT reforms that the CAE mentioned were abandoned in order to secure CTM support for the pension system reforms (Solís Soberón ; see also Madrid ). This statement by the World Bank makes it clear that, though not “conditional” in the normal use of the term, certain World Bank loans were

 \                     

granted with the proviso that reform measures were to be implemented before Mexico was to receive the funds. As mentioned above, the Eagle Proposal (CEDESS ) included recommendations to privatize IMSS health-care and support services and indicated that these proposals had to be abandoned because of union resistance. With regard to the IMSS health-care reforms, the World Bank also acknowledged that it contributed to the reform of the segment of the health care system that is the responsibility of the Mexican Institute of Social Security (IMSS). Following sector work that was well appreciated by government counterparts, the Bank approved in FY a US$ million Health Sector Reform Loan and a parallel technical assistance operation. The QAG Quality at Entry Assessment for both operations was satisfactory, although the QAG panel commented that the objectives of the reform program seem[ed] quite modest for the size of the loan. But institutional and political obstacles to full implementation could slow or undermine the complex reform program. To some extent, opponents of the reforms have publicized the Bank’s support as a means to discredit the reforms. (World Bank b, ; emphasis added)

This statement links the FY World Bank loan to the IMSS health-care system reforms.₁₈ The CAE statement also acknowledged that the health-care reform was incomplete due to institutional and political obstacles, which related to union opposition.₁₉ Again, the World Bank approved the loan in fiscal year  after it provided technical assistance and studies, suggesting that the World Bank provided financial incentives to promote reform. Although none of the reforms made turned out to be exactly what the World Bank had recommended, the promise of its financial support is likely to have increased the reforms’ feasibility, especially in the case of costly pension privatization. The World Bank’s CAE for Mexico (World Bank b) clearly suggests the influence and informal conditionality that can be involved in pension and healthcare reforms. Nevertheless, by the World Bank’s own account, its influence on domestic policy in Mexico is difficult to estimate “given a strong reluctance within the government’s bureaucratic culture to acknowledge the influence of outside parties and the fact that such impact may occur with a long lag” (World Bank b, ). Also in the World Bank’s CAE for Mexico is a discussion of the influence of formal reports, such as Averting the Old Age Crisis (World Bank ). The CAE indicated that these reports were not as useful or influential as “informal notes,

                     / 

confidential policy dialogue, or seminars and similar events” (World Bank b, )—which were just the type of contact that Mexican government reformers often had with World Bank officials in the mid-s (Teichman ; see also Weyland ). When directly asked in private interviews about their contact with international organizations during the reform development process, former government officials acknowledged that they “collaborated,” shared information, or met with World Bank officials but often insisted that Mexico’s reforms were purely indigenous.²⁰ Government officials in charge of drafting the reform also studied pension reforms in Chile and New Zealand, as well as the health-care systems in Canada and Spain, among others (Reynoso ; Borrego Estrada ; Dávila ; and Solís Soberón ). The ILO and the OECD also made suggestions or commented on the Mexican reform proposals in the early s (Cerda ; Dávila ). These organizations were not acknowledged as having “collaborated” or shared technical assistance.₂₁ Although the ILO had provided crucial technical assistance to the Mexican government in the s and early s, by the s, the World Bank had supplanted the ILO as the most influential international organization seeking to influence the way Mexico provided social insurance. The World Bank sought to influence policy outcomes through a combination of financial incentives for reform and technical assistance provided through formal and informal policy networks. Although other international organizations, including the ILO and OECD, used similar means to influence social insurance reform, the World Bank was more successful in gaining regular access to Mexican policy makers. It is unclear whether the bank’s regular access to government officials resulted from its offer of financial resources or from the similarity of its neoliberal approach to that of the Mexican officials. The World Bank’s influence on Mexico’s welfare reform in the s was not decisive in policy timing or content. Policy was principally shaped by domestic political considerations. Although the World Bank had some success in influencing domestic policy outcomes by sharing technical expertise and building policy networks, the effectiveness of this strategy was somewhat constrained by Mexico’s substantial domestic expertise, a situation that is consistent with Judith Teichman’s () finding that technical assistance has more influence cross-nationally when countries lack their own technical expertise (see also Weyland ). In addition, Kurt Weyland () suggests that the diffusion of pension reforms was more consistent and widespread than health sector reform in part because of the availability of a clear policy model—the Chilean reform—that policy makers could

 \                     

emulate and adapt to meet their local needs (see also Weyland ). Meanwhile, the availability of World Bank financing to support reform efforts may have increased the feasibility and range of reform options that Mexican policy makers could afford to consider.

Mexico’s Welfare Regime at the End of the s By the end of the s, neoliberal reforms to social insurance and social assistance policies had eroded some of the solidarity that had been built into these programs and made Mexico’s welfare system closely resemble that of most liberal regimes. In ,  percent of the economically active population was enrolled with IMSS for social insurance coverage (IMSS ). According to a  household survey, approximately  percent of the old-age population in Mexico received some sort of pension support, with IMSS and ISSSTE providing more than  percent of all pensions (Hernández Licona ). Meanwhile,  percent of workers contributing to IMSS made between one and three times the minimum wage, and  percent of all IMSS pensions were minimum pensions (Hernández Licona , ; Solís Soberón and Villagómez , ). One of the goals of the  reform was to provide incentives for self-employed and informal workers to enroll themselves in the social insurance system (IMSS ; Solís Soberón and Villagómez ). In fact, very few workers have voluntarily enrolled themselves in social insurance. In , slightly more than eighty thousand urban workers voluntarily continued their coverage, and about ten thousand were affiliated as self-employed. Approximately fifty thousand rural workers were voluntarily affiliated. As of , fewer than one thousand domestic workers had taken advantage of the provision allowing them to enroll for coverage (IMSS ).²² As a result of this limited coverage, the redistributive impact of social insurance has been limited as well. In the new pension system, the number of affiliates is less important than the percentage of those affiliated who are making regular contributions. In , between . and . percent of affiliates made at least one contribution to their individual account each month, compared to only . percent of affiliates in June .²³ As more workers open individual accounts, the percentage of them who actively contribute is likely to decline over the long term, as individuals enter and leave the work force but maintain an individual account. And, as discussed above, it is unlikely that the privatized pension system will provide significantly

                     / 

higher pensions and replacement rates for Mexicans in the future. Assuming a modest  percent real rate of return and a flat wage profile, minimum-wage workers would not accumulate enough to buy a pension in excess of the minimum pension guarantee, even after forty-five years of contributions (Espinosa-Vega and Sinha , ). The same pattern holds for high-wage workers earning ten times the minimum wage. After twenty-five years, they would be eligible for a pension only slightly higher than the minimum guaranteed pension, and after forty-five years, they would be eligible for a pension that would be almost three times the minimum pension guarantee. Perhaps the most obvious welfare regime shift in the s was the increased role of the market in managing and determining the level of social insurance benefits. Pensions are now likely to be most influenced by the market and the real rate of returns earned by retirement accounts. In addition, in the first decade of its operation, the private pension system has been criticized for having very little competition and charging high commissions and fees (Sinha and de los Angeles Yañez ). According to a World Bank (a) study, only about  percent of those workers covered by the IMSS have supplemental private pension plans, a figure that translates into less than  percent of the working population. According to household surveys in  and ,  to  percent of Mexicans have private pension plans (INEGI ). Although less than  percent of Mexicans have private health-care insurance, they have increasingly turned to private physicians for their primary health care since  (INEGI ). According to  and  household surveys, almost  percent of Mexicans had consulted a private physician during the preceding year (INEGI ). In this way, the market is providing a substantial part of health care in Mexico, but individuals are paying the expenses on an as-needed basis. The Fox administration adopted a national health insurance plan aimed at redressing this problem. Changes in social insurance in the s were intended to reduce the role of the family in welfare provision by allowing women workers to provide some benefits to their spouses and by offering some incentives, such as day-care services, for women to join the work force. Reforms sought to improve the availability of day-care services, principally by increasing the number of third-party day-care centers and allowing single working fathers to use IMSS day-care services. In the short to middle term, the Mexican family is likely to remain the centerpiece of welfare provision and the source for access to public welfare services. This is particularly true for elderly Mexicans, and particularly elderly women, who will be more likely to rely on family for old-age income and support after the reforms than they might otherwise have done (Dion ).  \                     

An important implication of these reforms for social insurance in Mexico since the early s is that they reflect a shift in Mexico’s welfare regime toward the liberal model found in advanced industrialized countries such as the United States. Not only has social insurance reform reduced the entitlements and levels of benefits (especially in pensions), but the administrations of Salinas, Zedillo, and Fox increasingly emphasized targeted or means-tested social assistance. The changes to social insurance—the core of Mexico’s welfare regime until the s —reflected the shifts in the balance of class power in the PRI’s coalition of support. The economic crisis of the s and subsequent economic and political liberalization had the dual effect of eroding the mobilization capacity and political power of organized labor in tradable sectors relative to business and employer organizations, which saw their capacity to influence policy grow. Meanwhile, unions representing public sector employees that were sheltered from the ill effects of trade liberalization on their political power effectively blocked some government and business reform efforts—the ISSSTE reform and privatization of IMSS health-care services. This pattern of partial reform highlights the uneven effects of economic liberalization on the ability of organized labor to defend social insurance institutions from retrenchment efforts. However, both the Fox and Calderón administrations would continue to pursue health-care and ISSSTE reforms, though some of the strategies would change.

                     / 

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MODELING W E L FAR E DEVELO PM E NT A Time-Series Analysis

O ,  its incorporation into the ruling cross-class coalition, played a pivotal role in the development of Mexico’s welfare regime until the s, and then its influence waned in the context of subsequent economic and political liberalization. Since some aspects of the analysis in earlier chapters diverge from the prevailing interpretations of the role of organized labor under the PRI regime, further quantitative evidence illustrates the robustness and internal validity of the argument developed in the qualitative historical account of welfare development in previous chapters. Several studies examine the effects of economic liberalization on social security and social assistance expenditures (Kaufman and Segura-Ubiergo ; Rudra ; Wibbels ). A limitation of these studies is that they rely on aggregate “social security and welfare” expenditures, which include expenditures on both traditional social insurance and social assistance (International Monetary Fund [IMF] ). The combination of employment-based and noncontributory programs in the expenditure data creates some measurement error. Normally, this



kind of error would not be worrisome as long as we could assume that it resulted from consistently overestimating social insurance expenditures. However, if many Latin American countries, like Mexico, are shifting their focus from social insurance to social assistance expenditures, combined expenditures may not accurately measure the state’s commitment to traditional employment-based social insurance. Moreover, though the s witnessed the beginning of a radical shift in economic policy throughout most of Latin America, many studies that include data from the s assume that the effects of trade openness (as measured by imports and exports as a percentage of GDP) are similar whether in the context of ISI or neoliberal economic development policies (Segura-Ubiergo ). While the economic institutions and practices associated with ISI, including the protection of domestic industry, are consistent with the public provision of social insurance, market liberalization and many economic reforms are in direct conflict with social insurance. Because social insurance institutions are embedded in the economic institutions of the prevalent development model, studies should not assume that trade openness will have similar effects on social insurance in all institutional contexts. In sum, studies should focus not only on expenditures but also on the extent to which workers are protected by social insurance institutions. In addition to having the limitations discussed above, expenditure data are imperfect estimates of the degree to which citizens have access to social protection in Latin America. Social protection coverage in the developing world is often uneven, and one can easily imagine a country with relatively high expenditures that benefit a narrow segment of the population. Further, in economies with mostly underdeveloped formal labor markets, social insurance may not reach a majority of the work force. Consequently, the model developed here uses as a measure of Mexican social insurance the percentage of the population covered by the IMSS and the ISSSTE, the primary public and mandatory social protection institutions in Mexico (see fig. .).₁ These institutions have generous definitions of dependent family members, providing beneficiary coverage not only for spouses and children but also for dependent parents and extended family members.²

Modeling the Effect of the Debt Crisis on Welfare Provision This analysis uses time-series data, which often have properties that violate the assumptions of ordinary least-squares regression. These properties require modeling of the pattern of growth in the dependent variable (welfare coverage) before

                          / 

PERCENTAGE OF POPULATION

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1949

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1954

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1959

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1964

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1969

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1974 YEAR

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1979

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1981

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1984

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Fig. .. Public social insurance coverage in Mexico, – (percentage of the population covered by IMSS or ISSSTE health insurance)

1944

0

5

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20

25

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1999

Table 6.1 Model of public social insurance coverage in Mexico, 1945–1999 ARIMA ARIMA (1,1,0) ARIMA (1,1,0) (1,1,0) ARCH (1) ARCH (1) AR (1)

0.503*** (0.114)

0.716*** (0.128)

-0.501** (0.156)

ARCH (1)

-0.131*** (0.022)

0.159 (0.234)

Constant

2.800*** (0.529)

Health insurance coverage (lagged difference)

0.864*** (0.096)

Debt crisis of 1982 intervention Log likelihood

1.605*** (.403)

-3.577 (25.479) -100.422

-93.242

-93.364

Notes: Dependent variable is first differences of social insurance coverage rate. Standard errors in parentheses. ARIMA: Autoregressive integrated moving average. AR: Autoregressive parameter. ARCH: Autoregressive conditional heteroskedasticity parameter. * p < .1; ** p < .01; and *** p < .001

estimating the effects of either the debt crisis or any other explanatory variables. The dependent variable and many of the independent variables have easily recognizable trends.³ Although the differenced coverage data are stationary, other types of problems can plague time-series data. In particular, autocorrelation is common, and the structure of the errors should be taken into account in further statistical analyses. The differenced social insurance coverage data for Mexico exhibit a first-order autoregressive pattern, which is suggestive of institutional memory or the effects of institutional legacies.⁴ Table . presents the results for the first-order autoregressive model. Note also that a visual examination of the errors reveals that they are heteroskedastic, exhibiting greater variance later in the series, so an autoregressive conditional heteroskedasticity (ARCH) model is used, which table . also includes.₅ The ARCH model applies a correction to the errors in order to mitigate the heteroskedasticity, or greater degree of variation in the errors observed later in the time series. In addition to modeling the error process of the dependent variable, the effects of the debt crisis on changes in insurance coverage should also be modeled. The debt crisis had a visible effect on the percentage of the population with public social insurance coverage (see fig. .), but it is not clear that it permanently al-

                          / 

tered the expansion of coverage. The debt crisis is modeled as a pulse intervention, or temporary event, that affected insurance coverage in , in order to assess its long-term impact on coverage (see table .). The results support the hypothesis that the  debt crisis adversely affected coverage.₆ Because temporary, or pulse, interventions have a permanent effect on the level of the dependent variable if it is difference-stationary, the coefficient for the debt crisis intervention should be interpreted as the long-term consequence of the crisis or the permanent change in the mean level of social insurance coverage following the debt crisis. The results indicate that the  debt crisis had the effect of reducing the subsequent average level of social insurance coverage by . percent.

Modeling the Effects of the Independent Variables Before the full model of public health insurance coverage was elaborated, restricted models were used to determine the appropriate model and lag structure for each of the independent variables.⁷ The complete model of social insurance coverage includes a temporary intervention variable for the debt crisis and coefficients for the independent variables before and after the debt crisis. The data exhibit a stochastic trend, and the differenced series are stationary, according to the results of augmented Dickey-Fuller and Phillips-Perron tests for unit roots and stationarity (see table .). The complexity of labor’s participation in the cross-class coalition supporting the PRI regime and data limitations create certain challenges for modeling the effects of labor mobilization on welfare regime development in Mexico. While analyses typically use union density or unionization rates to measure the power of organized labor, such measures are not reliable or available in Mexico for the entire time series. Furthermore, as the comparative historical analyses in preceding chapters emphasized, it is not the size of the labor movement but its role as a key part of the cross-class coalition that was essential to the dominance of the PRI regime in post-Revolutionary Mexico. In particular, the historical analysis showed that not only did the organized labor movement articulate demands for the creation of welfare or its expansion but often the expansion of coverage or benefits followed shortly on the heels of significant mobilization of the labor movement. The point here is not to assume or assert that every instance of labor mobilization was necessarily driven by an interest in expanding social insurance but that labor mobilization was often used to renegotiate the terms of labor par-

 \                          

Table 6.2 Stationarity tests for variables included in the full model Augmented Dickey-Fuller test (Phillips-Perron test) Variables

∆Health-care coverage

ACF zero at lag number

No constant & no trend

Constant only

Constant & trend

1

∆Strike petitions

-4.029 (-4.077)

-5.398 (-5.504)

-5.363 (-5.475)

1

∆GDP per capita

-8.644 (-9.904)

-8.595 (-9.915)

-8.513 (-9.791)

1

∆Trade openness

-6.826 (-6.858)

-7.453 (-7.453)

-7.377 (-7.377)

3

∆Federal government debt

-10.513 (-10.141)

-10.999 (-10.676)

-11.518 (-11.320)

1

∆Fiscal centralization

-5.827 (-5.664)

-5.778 (-5.604)

-5.763 (-5.584)

1

-9.814 (-9.882)

-9.757 (-9.837)

-9.921 10.123)

-1.950

-2.927

-3.496

Critical values for 95% confidence

Note: 99 percent confidence interval for ACF (autocorrelation function) not different from zero.

ticipation in the ruling cross-class coalition. The renegotiation of labor’s support for the regime often included petitions for an expansion of social insurance, sometimes among other demands, which then resulted in expanded welfare provision. The analysis of the politics of retrenchment since the s suggests that due to changes in the balance of class power between workers and employers, labor mobilization has been less effective since the s in promoting or protecting social insurance gains. Labor mobilization is measured by the number of strike petitions (in multiples of one thousand) filed by unions.⁸ According to national labor laws, a union must file a strike petition with the employer and the Secretariat of Labor six days in advance to announce the intention to strike as part of their regularly scheduled contract negotiations. In many instances, unions file petitions to strike even when they do not have a legal basis to strike, using the process as a means of registering a labor protest of government policies. For example, to demonstrate labor’s dissatisfaction with the government’s handling of the  debt crisis,

                          / 

several thousand unions coordinated their efforts and filed strike petitions that October. Strike petitions also have the added advantage of measuring actual efforts by unions to register their dissatisfaction with the ruling party rather than the possibility of union mobilization. Because the Mexican government ultimately controls whether or not workers can legally strike following the submission of a strike petition, actual strike data do not accurately capture labor militancy.⁹ (See fig. . for a graph of the trends in strike petitions and legal strikes.₁₀) It is hypothesized that increases in the number of strike petitions precede and cause increases in social insurance coverage, signaling that the state is responding to labor mobilization and efforts by labor to renegotiate the conditions of its support for the regime by increasing its provision of social insurance. This means that labor mobilization should have a stronger and more significant effect on social insurance coverage before the debt crisis, when the Mexican state was pursuing ISI development. It is hypothesized that after the debt crisis, however, increased labor protest will not be strongly associated with increases in coverage. Economic development, measured by GDP per capita in thousands of constant  pesos, should contribute to the expansion of social insurance prior to the debt crisis.₁₁ This relationship between economic development and social insurance growth is expected to be strongest during the period of ISI, as economic growth should be associated with the expansion of formal labor market employment and the constituency to be served by social insurance. After the debt crisis in  and following economic liberalization, including de facto labor market liberalization, economic development is not necessarily expected to result in the growth of formal labor market employment covered by social insurance. During periods of economic contraction in Mexico, informal sector employment grows, resulting in lower levels of social insurance coverage (Hernández Licona , –).₁₂ In addition, in the context of the neoliberal economic development model adopted after the debt crisis, economic growth may coincide with an expansion of the informal labor market and, therefore, with slower growth in the expansion of social insurance coverage. Since the debt crisis coincided with a paradigm shift in the development model embraced by the Mexican state, moving from ISI to a neoliberal model, the full models of social insurance coverage allow the coefficients for the independent variables to vary between the two periods. In the results that follow, the coefficients are those for each independent variable in each period (calculated from the regression results) and their respective statistical significance.₁₃ This statistical strategy isolates the effect of the independent variables before and after the debt crisis and change in economic policy.

 \                          

NUMBER OF STRIKE PETITIONS (Federal Jurisdiction Only)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

|

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|

|

1945

|

|

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|

|

1950

|

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1955

|

1954

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1965

1962

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YEAR

|

1970

———— Strike Petitions

|

1960

1958

|

|

|

1975

|

|

1976

|

|

|

1980 • • • • • • • Strikes

|

1973

Fig. .. Strike petitions and legal strikes in Mexico, –

|

1940

1944

|

|

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|

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1985

1982

|

|

|

|

|

1990

1987

|

|

|

|

|

1995

|

|

|

1997

|

–| 0

– 500

– 1000

– 1500

– 2000

– 2500

– 3000

NUMBER OF STRIKES (Federal and Local Jurisdiction)

Control Variables Several control variables are included in the statistical analysis to test alternative explanations of social insurance coverage. First, trade openness is measured by calculating the total of imports and exports as a percentage of GDP.₁₄ It is not expected that trade openness will directly affect social insurance coverage, but when it does, it should depress coverage. Second, the state’s dependence on foreign debt is measured by calculating the net amount of foreign debt held by the central government as a percentage of GDP.₁₅ The degree of dependence on foreign capital may be symptomatic of limited state resources and may constrain the state’s ability to expand social insurance coverage. Third, the centralization of state capacity should facilitate the expansion of social insurance coverage that is centrally administered, because a strong centralized state can coordinate and facilitate the expansion of coverage more easily (Skocpol ). State centralization is measured by calculating the central government revenues as a percentage of the total amount of revenue collected by all levels of government.₁₆ Fourth, centralization of decision making, or fewer veto points and players, may contribute to welfare state growth or slow welfare retrenchment efforts (Huber, Ragin, and Stephens ; Kay ; Huber and Stephens ; Madrid ). A separate measure of the centralization of decision making is included as an alternative to state centralization in the following analysis. Although the Mexican Constitution outlines a federal system of government with shared powers among the president, Congress, and judiciary, political decision-making power has historically been concentrated in the office of the president. Furthermore, the de jure institutions have changed only slightly in Mexico’s recent history. Throughout the period of analysis, the PRI has maintained control of the presidency, a majority in both chambers of the Congress, a majority of the state governorships, and a majority of municipal presidencies. However, the dominance of the PRI has been shrinking, especially since the s, when opposition began growing stronger. Thus, centralization of decision making is measured by the extent to which the PRI has maintained control of the Congress and the executive offices of state and local governments; higher values represent greater centralization of decision-making power by the PRI.₁₇ The full models of social insurance development are presented separately with the two measures of centralization. Table . presents bivariate models of social insurance coverage and each of the independent and control variables.

 \                          

0.866*** 3.311*** 0.005 -77.314

-.185*** 0.132*

0.079** 0.309***

-3.688***

1.056**** 2.033*** 0.029 -82.635

-1.680* -0.237

-1.475*** 0.661*

-4.982***

0.825*** 0.374 1.082*** -89.510

-0.324**

-0.247**

-3.523

0.937*** 2.818*** 0.102* -88.588

-0.064

0.041

-0.105*

0.964*** 2.208*** 0.099 -86.255

-0.078***

-.034***

-3.734***

0.768*** 0.674* 0.983*** -94.09574

-7.396

-0.362

-2.808***

6

0.041 .765*** .343 1.270*** -93.664

.162**

-3.166

7

Notes: Dependent variable is first differences of social insurance coverage rate. Coefficients for the period after the debt crisis are the sum of the coefficient prior to the debt crisis and the coefficient from the interaction of a post-debt-crisis dummy (1982–1999) and the variable of interest. The standard errors for these computed coefficients are the square root of the sum of the variances of both coefficients minus twice the covariance between them. * p < .1; ** p < .01; and *** p < .001

1982–1999 Strike petitionst-₁ Strike petitionst-₂ Legal strikest-₁ Legal strikest-₂ GDP per capitat-₁ Government debtt-₁ Fiscal centralizationt-₁ Centralization of decision makingt-₁ Trade opennesst-₁ AR(1) ARCH(1) ARCH constant Log likelihood

1945–1981 Strike petitionst-₁ Strike petitionst-₂ Legal strikest-₁ Legal strikest-₂ Government debtt-₁ Fiscal centralizationt-₁ Centralization of decision makingt-₁ Trade opennesst-₁ GDP per capitat-₁

Debt crisis

Table 6.3 Bivariate models of social insurance coverage, 1946–1999 1 2 3 4 5

Results for the Full Model The results for the full model of public health insurance are presented in table ..₁₈ Model  includes centralization of state fiscal capacity, and model  includes centralization of decision-making authority. For comparison purposes, table . presents an estimation of model  using ordinary least squares with a lagged dependent variable.₁₉ Overall, the full models predict the level of coverage with a fair amount of accuracy, though the predictions are less accurate later in the series (see fig. ., based on model , table .). Even when controlling for the effects of other variables, the temporary intervention of the debt crisis had a significant negative impact on the level of social insurance coverage after the crisis, resulting in slower growth of coverage.²⁰ This result is consistent with the univariate model of social insurance coverage. The results also support the argument that the state expanded social insurance coverage in response to labor mobilization prior to the debt crisis. Whereas policy change in Mexico has often been characterized as a preemptive move by elites to prevent labor mobilization, the results presented here suggest that it is more likely to be a response to existing mobilization. Further, statistical tests indicate that the relationship between strike petitions and changes in social insurance coverage is unidirectional; strikes cause coverage, not the reverse.₂₁ In the full models, increases in strike petitions by organized labor before the debt crisis resulted in increases in social insurance coverage. After the debt crisis, the relationship is either negative (see table .) or nonexistent (see table .). That the Mexican state responded to protests from organized labor by increasing social insurance coverage highlights two characteristics of the PRI regime: first, that the PRI regime was dependent on the support of organized labor to the extent that it felt compelled to respond to labor demands for social protections and, second, that the regime used social insurance as compensation to respond to labor discontent and as a means of solidifying organized labor’s support. Following the debt crisis, however, the ability of organized labor to influence policy through protest declined. Strike petitions have had no appreciable effect on changes in social insurance coverage. This outcome is not surprising given that neoliberal reforms and changes within the Secretariat of Labor during the s and s have weakened the bargaining position of labor vis-à-vis both employers and the state. Furthermore, the shift in emphasis to electoral politics is also likely to have made the PRI regime less beholden to the demands of organized labor and may have led the regime to seek a new basis for its popular support.

 \                          

Table 6.4 Changes in Mexico’s public social insurance coverage, 1946–1999 (AR-1 and ARCH-1) Model 1 Model 2 coefficient t statistic coefficient t statistic Debt crisis

-3.515

1946–1981 ∆Strike petitionst-₁ 0.058 ∆Strike petitionst-₂ 0.190 ∆GDP per capitat-₁ 0.123 ∆Trade opennesst-₁ -0.018 ∆Federal government debtt-₁ -0.031 ∆Federal government debtt-₂ ∆Fiscal centralizationt-₁ -0.031 ∆Centralization of decision makingt-₁ 1982–1999 ∆Strike petitionst-₁ ∆Strike petitionst-₂ ∆GDP per capitat-₁ ∆Trade opennesst-₁ ∆Federal government debtt-₁ ∆Federal government debtt-₂ ∆Fiscal centralizationt-₁ ∆Centralization of decision makingt-₁ AR(1) ARCH(1) ARCH constant Log likelihood

-6.134**

-3.973

-22.775***

1.192 4.086*** 2.582** -0.631 -0.314

0.041 0.331 0.041 0.008 -0.030 -0.067

1.696* 10.245*** 4.059*** 1.087 -0.179 -15.357***

0.031

0.055

-5.251***

-0.105 -2.882 -0.432 0.014 0.000

-0.940 -31.312*** -4.614*** 0.216 0.000

0.237

3.932***

1.012 3.083 0.001 -63.38631

14.49*** 3.64*** 0.04

-244.256 -341.691 -79.377 0.052 0.078 0.012

-9.788*** -11.550*** -5.210***s 2.957** 2.352* 1.544

-0.653 .830 10.382 0.000 -49.126

-0.522 23.829*** 3.455*** 0.000

Notes: Dependent variable is first differences of social insurance coverage rate. Bold coefficients indicate that the coefficient for the variable during the debt crisis is statistically different from the coefficient before the debt crisis (p < .05); in other words, the effect of the variable is different (to a statistically significant degree) in the second period. Coefficients for 1982–1999 are the sum of the coefficient prior to the debt crisis and the coefficient from the interaction of a post-debt-crisis dummy (1982–1999) and the variable of interest. The standard errors for these computed coefficients are the square root of the sum of the variances of both coefficients minus twice the covariance between them. The t values are for the null hypothesis that the coefficient is zero. * p < 0.1; ** p < 0.01; and ***p < 0.001

Table 6.5 Social insurance coverage, 1946–1999 (OLS-lagged dependent variable) Coefficient t statistic Percentage w/insurance coveraget-₁ 1946–1981 Strike petitions t-₁ Strike petitions t-₂ GDP per capita t-₁ Trade openness t-₁ Federal government debtt-₁ Fiscal centralization t-₁ Constant 1982–1999 Strike petitions t-₁ Strike petitions t-₂ GDP per capita t-₁ Trade openness t-₁ Federal government debt t-₁ Fiscal centralization t-₁ Constant Adjusted r² Durbin-Watson d

0.768

10.215***

0.237 0.340 0.336 -0.072 0.019 -0.059 2.054

1.441 2.364* 3.228*** -1.706* 0.270 -1.804* 0.696

-0.140 0.264 -0.019 0.154 0.045 0.094 -2.580 .9974 1.9889 (k = 15, n = 55)

-0.393 0.991 -0.088 1.622 0.309 1.145 -0.742

Notes: Dependent variable is percentage of population covered by social insurance. Coefficients in bold indicate that the coefficient for the variable during the debt crisis is statistically different from the coefficient before the debt crisis (p < .05); in other words, the effect of the variable is different (to a statistically significant degree) in the second period. Coefficients for the period after the debt crisis are the sum of the coefficient prior to the debt crisis and the coefficient from the interaction of a postdebt-crisis dummy (1982–1999) and the variable of interest. The standard errors for these computed coefficients are the square root of the sum of the variances of both coefficients minus twice the covariance between them. * p < .1; ** p < .01; and *** p < .001

The results of the full model also suggest that prior to the debt crisis, economic development contributed to the expansion of social insurance coverage. That is, economic development generated employment in sectors that were likely to provide social insurance coverage, such as urban industrial employment. Furthermore, as development increased, the state was capable of extending social insurance benefits to additional sectors and groups that might not otherwise

 \                          

PERCENTAGE OF POPULATION WITH COVERAGE

60 50 40 30 20 10 0 19

44

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

47 950 953 956 959 962 965 968 971 974 977 980 983 986 989 992 995 998 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

19

———— Actual Coverage

YEAR

• • • • • Predicted Coverage

Fig. .. Predicted and actual levels of coverage in Mexico, –

have received coverage. However, during the period following the debt crisis, increases in economic development were not followed by increases in social insurance coverage. Instead, the results of the model of coverage suggest that new economic development has not produced the types of employment opportunities that provide social insurance coverage. This effect is probably due to the growth of the urban informal sector and small and micro-sized enterprises in the last two decades. Employment in such sectors or enterprises is less likely to be accompanied by social insurance benefits. Consequently, economic development in the context of neoliberal economic policy after the debt crisis is not associated with social insurance coverage. In the full model, though, there is a statistically significant difference between the effects of trade openness before versus after the debt crisis in the full model. However, the effect of trade openness has not been statistically significant. This finding supports the argument that trade liberalization does not directly lead to

                          / 

changes in social insurance coverage. The state’s dependence on foreign capital has had no significant effect on social insurance coverage in Mexico, either before or after the debt crisis, despite theoretical evidence that would lead one to expect a strong relationship. Centralization of state fiscal capacity played a significant role in the development of social insurance according to the results of the statistical model, but in a manner that was the opposite of that which was originally hypothesized. Before the debt crisis, fiscal centralization was associated with lower levels of coverage, and the decentralization of fiscal capacity actually led to increases in social insurance coverage. In contrast, increased fiscal centralization after the debt crisis appears to be associated with increases in social insurance coverage, and recent efforts to decentralize the Mexican state may actually hinder social insurance coverage. The results for the full model, including the measure of the centralization of decision-making authority (table ., model ), are consistent with expectations and the theoretical argument developed above. Although the effect of the centralization of decision making was not statistically significant, centralization before the debt crisis was associated with social insurance growth and after the debt crisis it was associated with retrenchment.²² The effects of other variables were the same, though in many cases their effect was amplified when political centralization was included. Overall, the results of the full models demonstrate that the factors that contribute to social insurance provision differ markedly under different economic development models. During the period of ISI development prior to the debt crisis, economic growth and labor mobilization led to state expansion of public social insurance. In contrast, after the debt crisis, economic neoliberalism eroded the influence of organized labor and the link between economic development and social insurance. This statistical evidence supports the argument that the development of welfare in Mexico was the product of a political process in which organized labor played an important role within the context of its incorporation into a crossclass coalition supporting the ruling PRI regime and a diminished role in the context of economic and political liberalization. Beyond the evidence of “memory” suggested by the autocorrelation in the coverage series, statistical analyses cannot really assess the institutional argument developed in the qualitative historical analysis. The statistical analysis does illustrate, however, the differences in the relative influence of organized labor in the context of different economic development models before and after the debt crisis.

 \                          

This statistical analysis is also limited to coverage of social insurance benefits for the formal private and public sectors. Although social insurance was the core of Mexico’s welfare regime before the debt crisis, since then targeted social assistance for the poor as a complement and alternative to social insurance has increased in importance. The shift toward targeted social assistance reflects the change in both the economic development model and the political environment. In addition, the politics of social insurance have further evolved since the democratic transition in .

                          / 

\

7/

PAR ADIG M SH IF T Welfare Reform after Democratization

T   of President Vicente Fox Quesada of the PAN and the ensuing democratic transition combined with previous patterns of pension privatization in Mexico and elsewhere in Latin America suggested that further social insurance retrenchment in Mexico would be unlikely. Furthermore, divided government and an opposition party with formal ties to organized labor and veto power in Congress in both the Fox and then the Calderón administrations would seem to doom further social insurance retrenchment. Although the PRI had led unpopular privatization efforts during the Zedillo administration, observers might have expected that as an opposition party, the PRI would switch positions, back the interests of its affiliated unions, and oppose further retrenchment efforts in an effort to rebuild its popularity (see Murillo ). Instead, not only did the PRI support some of the retrenchment efforts of Fox and Calderón but it also became an active partner in some of the reform efforts. With the support of the PRI, the Fox administration reformed the pension system in the labor contract of IMSS workers. The administration also adopted



and enacted several reforms to improve the efficiency and returns of the privatized IMSS pension system. Then, though the Fox administration abandoned efforts to privatize the ISSSTE pensions of government workers in early , President Calderón surprised many by pushing through an integral ISSSTE reform within the first four months of his administration in . Comparing the ISSSTE reform efforts of the Fox and Calderón administrations will illustrate how democratization shaped ISSSTE reform outcomes by changing the political capacity of workers in the public sector. Initially, democratization, and the related divided government under Fox, helped government workers’ unions block the retrenchment of benefits. Fox also legalized the creation of a second government workers’ federation, which would not have been likely under a PRI administration. In addition, some rank-and-file workers and subnational union leaders took advantage of the democratic opening to either mobilize for change within their organizations or establish political independence from the PRI within their regional subnational union organization. In some instances, the new organizations that formed, though independent of the PRI, re-created some of the pernicious relationships formerly characteristic of the official labor movement under the PRI. During the initial months of the Calderón administration, however, democratization and the legalization of two federations representing government workers had the unexpected effect of facilitating reform efforts, as the administration could use the union rivalry to gain support for the reform from union leaders. These shifts in the role of organized labor in party and national politics are evident in the pattern of social insurance retrenchment during the Fox and Calderón administrations.

Tweaking the IMSS and Privatized Pension Framework to Enhance Efficiency During the Fox administration, a number of reforms to both the Social Insurance Law and the Retirement Savings System Law (Ley de la CONSAR) served to improve both the efficiency of the IMSS and the regulatory framework for private pensions. These laws engendered some debate and opposition, often from the Party of the Democratic Revolution (Partido de la Revolución Democrática, or PRD), but were largely passed by supermajorities in Congress and did little to challenge the interests of organized or collective interests. For example, the Social Insurance Law reform of December  clarified and updated some of the language of the

             / 

existing law. The reformed law approved the use of digital or magnetic media for storing health records centrally. More importantly, the new law improved the capacity of the IMSS to collect contributions from employers and impose penalties on those that underreported or failed to report worker salaries and that failed to enroll their workers in IMSS coverage. The reform also adjusted some survivor and disability benefits as well as the language regarding subcontracting of medical services to third parties, including to other public health-care institutions. The reform also stipulated that the national government would provide financial support to cover any services provided by the IMSS in support of anti-poverty initiatives. The one part of the reform that, at the time, seemed merely technical but came to play a central role in the conflict between the SNTSS, the IMSS, and the Fox administration in  and  was a stipulation that the reserve funds for each insurance fund could not be used to cover deficits or shortfalls in other funds. This new rule signaled the end of cross-subsidies from funds with surpluses, like that for day-care centers, to those with deficits, like health care. Twice in  (in April and December) and once in  (in August) additional reform laws were enacted to clarify definitions, the reimbursement of contributions for rural employers who provided benefits for their workers due to a lack of adequate local IMSS facilities, and other minor technical issues. Like the reforms to the Social Insurance Law, the reforms to the Retirement Savings System Law during the Fox administration sought to clarify ambiguities in the existing law or improve the efficiency of and competition in the private pension system. In December , the administration received approval for an extensive law that strengthened the regulatory, supervisory, and administrative powers of the CONSAR, including the capacity to levy penalties against private pension fund administrators (Administradoras de Fondos para el Retiro, or Afores) that violate the law. The most controversial aspect of the reform proposal was a provision that would allow pension fund administrators to invest in paper issued by Mexican companies in international stock markets or in other international instruments approved by the CONSAR oversight board. The original law had prohibited any investment abroad by pension fund administrators in response to concerns that pension funds should be used to create growth within the Mexican economy rather than abroad. As a result of the limited domestic investment opportunities for fund administrators, most invested nearly all of their assets in government paper. The lack of investment opportunities, low real rates of return, and lack of competition in the early years of the system led some to call the pension fund administrators a “widow’s business” in which very little effort is necessary to sustain profits. The proposal to fully liberalize the rules regarding overseas in \             

vestment was resisted by segments of the PRI and by the PRD, which argued that the pension funds should be used primarily to invest in domestic economic development, particularly the productive infrastructure to develop Mexico’s energy resources. The resulting reform was a compromise that allows pension fund administrators to invest up to  percent of their portfolio abroad in instruments approved by the CONSAR governing body. The implementation of this provision was delayed a year and even then had little immediate effect on the investment patterns and returns of the pension fund administrators. To improve competition and real rates of return in the private pension market, the Fox administration also approved two additional reforms in December  and . The  reform established fines and penalties for pension fund administrators who violated CONSAR regulations. To enhance competition, both the  and the  reforms adjusted the regulations for commissions that can be charged by pension fund administrators and made it easier for workers to change to Afores that offered lower commissions. The CONSAR hoped to promote more competition and a reduction in commissions among Afores. Though commissions charged by the Afores have continued to decline, they are still considered a source of the low real rate of return in the privatized pension system (Sinha and de los Angeles Yañez ).

Privatization of the IMSS versus Its Workers’ Pensions In contrast to the largely uncontested reforms described above, the August  reform to the Social Insurance Law was less technical than political and caused an intense clash between the SNTSS and the IMSS administration, other unions, and various political parties. The August  reform modified Articles K and D. Essentially, the reform charges the IMSS Technical Council, which was already empowered to make decisions regarding employment, with the responsibility to ensure that sufficient funds are available to sustain the benefits of any current and future workers. The reform also explicitly prohibits the IMSS from using funds from worker contributions to fund retirement benefits for IMSS workers. This change was in addition to language added in  that disallowed the use of reserve funds for anything other than their designated purpose. Finally, the reform required all new IMSS employees to be incorporated into the pension system covering private sector workers (i.e., the privatized pensions system) rather than be covered by the existing IMSS labor contract.              / 

The August  reform resulted from failed labor contract negotiations between the SNTSS and the IMSS administration in October . As one of the largest unified unions in a nontradable sector in the country, the SNTSS had been able to negotiate generous benefits for its workers in its labor contract, including an early retirement age and pensions that often exceeded  percent of workers’ salaries. Since at least , the SNTSS had been discussing revisions to the retirement benefits in its labor contract with the IMSS administration. Following negotiations in fall , the SNTSS leadership presented to their national congress a proposed labor contract that included a significant increase in workers’ contributions to their retirement fund (from  to  percent) and an increase in the retirement age and contributions for new workers. Although the SNTSS administration believed the proposal had support, the vote of the labor representatives at the congress narrowly defeated the new contract first in October and then at a special congress several months later. Between the two congresses, the SNTSS leadership worked hard to persuade the representatives of its member sections to accept the new contract but ultimately failed to do so (López González ; Perez Saucedo ; Vazquez Flora ). In response to the radicalization of the rank-and-file of the SNTSS and its unwillingness to approve the new labor contract, the IMSS administration, with the support of the employer and labor sectors of the IMSS Technical Council, decided in early  to seek a legislative reform to the SNTSS workers’ retirement schemes to achieve the objective of the labor contract revision through legislation rather than labor bargaining (Dávila Flores ; Calleja García ). The labor representatives on the Technical Council, all from official unions of the PRI, represent the beneficiaries of the IMSS. To fuel the legislative agenda, the IMSS administration, in its annual report on institute finances, singled out the retirement benefits of the SNTSS as a source of financial strain (IMSS ). In addition, the IMSS administration began a publicity campaign criticizing the IMSS worker union’s position on the labor contract, pointing out that the union’s workers enjoyed pension benefits that exceeded those of IMSS beneficiaries and blaming the union for the poor quality of IMSS services. In August , the reform was presented in Congress by representatives of the PRI who had links to the party’s official labor sector representing the IMSS beneficiaries. The official unions representing private sector workers, including their representatives on the IMSS Technical Council, publicly supported the reform because the SNTSS union’s benefits were threatening the benefits their workers were likely to receive from IMSS. The official unions characterized the SNTSS

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union as “privileged” because it had secured benefits at the expense of other workers. Some observers and members of the independent labor movement suggest that members of the Labor Congress (Congreso del Trabajo, or CT) and other unions affiliated with the PRI supported the law in order to deal a blow to the independent labor union movement (Raya ; Vazquez Flora ; López González ). Privately, the real need for such a specific law has been questioned, since the  reform prevents the IMSS from mixing the reserves from different benefit funds (Larrinaga ). The Technical Council could have issued regulations based on the  reform and produced the same impact. Instead, by submitting the reform to Congress, the IMSS administration and employer and union organizations directly confronted the IMSS workers’ union. The resulting law generated a public conflict between the SNTSS and the IMSS administration, the political parties, and the official unions. Following the adoption of the law, both the IMSS administration and the SNTSS adjusted their strategies for the upcoming contract negotiation in fall . The Technical Council used the reform to justify a freeze in hiring, claiming that it could not hire new workers, even to replace those that voluntarily left, until the conflict over the pension system for IMSS workers was resolved. The administration then blamed delays in medical treatment and processing of benefits on the stance taken by the SNTSS. Meanwhile, the SNTSS immediately filed a court challenge to the new law, claiming that legislation could not supersede the union’s right to negotiate its labor contract with its employer. The labor courts rejected the case, and it was transferred to the court responsible for matters related to public administration. The administrative court rejected the union’s claim that the law violated its constitutional rights in September  (Mendez Ortiz ). The Supreme Court refused to hear the case. During the October  labor contract revision, the issue of the SNTSS pension benefits was again the main point of discussion. Throughout late September, the bargaining stance of both the IMSS and the SNTSS hardened, and some observers thought a national strike was likely. The conflict did lead to the resignation of Santiago Levy Algazi as director general of the IMSS in early October. Just before the strike deadline, SNTSS leaders held a rapid vote that approved revisions to the pension provisions of future IMSS workers. Some rankand-file SNTSS workers were unhappy with the final outcome of the negotiations (Muñoz ). The new contract provided workers with a  percent wage increase and . percent benefit increase. The contributions to the workers’ pension scheme were to increase by  percent per year up to a maximum of  percent

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of wages for both current and new workers. Although the retirement benefits of current and retired workers did not change, new workers were required to work additional years and reach a higher minimum retirement age to receive a full pension capped at  percent of the last salary. The contract also included sixty-five thousand to seventy thousand new positions in the next five to six years (Muñoz Rios ; SNTSS ). The administration was able to successfully use the reform law and IMSS financial shortfall as leverage against the SNTSS leadership. During the course of the negotiations, the IMSS administration threatened the union by saying it would bankrupt the institute, a tactic often used in the early s to get unions to accept more flexible labor contracts in para-state firms prior to privatization. For the SNTSS leadership, the cost of approving the  contract despite strong dissent was further fragmentation within the organization. Although the SNTSS was a founding member of the National Labor Union (Unión Nacional de Trabajo, or UNT) in  and is officially an independent union, the secretary general of the SNTSS held a PRI seat in the Chamber of Deputies at the time of the  reform. As a consequence of the national SNTSS leadership’s support for the revised pension benefits in the  and  contracts, several subnational sections and delegations began seeking alliances with political parties other than the PRI, such as the PRD. In the run-up to the  presidential elections, the national SNTSS leadership tried to coordinate negotiations with both the PRI and the PRD for places on their proportional representation lists for Congress. Later that fall, the differences within the SNTSS leadership became apparent at the national congress, where the outgoing secretary general blocked others from running for his post and the conflict grew physical, leaving twelve people injured (Muñoz and Aguilera ). In , the new administration of the IMSS again raised the issue of SNTSS pensions for the labor contract that expired in mid-October, proposing to further raise contribution requirements and the contribution rate (Molinar Horcasitas ). In the contract revision proposal, IMSS director general Juan Molinar Horcasitas cited the  reform as a constraint on the institute’s ability to continue supporting the pension benefits outlined in the existing contract. The result was a series of parametric reforms to the pension benefits of current workers, which would be applied during every round of contract negotiations. Despite the intensity of the conflict over the pension system for IMSS workers, the immediate impact of the August  reform and recent labor contracts on Mexico’s welfare regime is negligible. Instead, the reform had the symbolic effect of re-

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trenching welfare gains that a powerful independent union had once achieved; it may also facilitate breaking union opposition to future IMSS reforms, especially the privatization of health care and nonmedical support services. Since the  reform applies only to new workers, the financial impact of the reform will not have an effect for thirty years. However, the precedent set in the courts may open the way for similar legislation to be considered in sectors (e.g., electricity and petroleum) singled out as having “privileged” labor contracts. The outcome of the SNTSS efforts to have the law declared unconstitutional is also likely to have influenced the strategies used by workers seeking to challenge the  privatization of ISSSTE pensions.

Revisiting Reform of the ISSSTE As explained in chapter , initial discussions of pension privatization in the early s referenced the need to reform the pension system for government employees, which was predicted to begin running larger deficits much sooner than the IMSS system. Both the Salinas and Zedillo administrations set aside the problem of ISSSTE pensions in order to avoid a direct conflict with the teachers’ union, the largest and potentially most powerful labor organization in Mexico. As early as , the Fox administration had already quietly begun gathering the data and analyses necessary to address the challenges of financing the ISSSTE system (Kroepfly Saury ).₁ According to most estimates, the ISSSTE pension system has been running a deficit since the late s, and in , the deficit grew to  billion pesos, or US$. billion (SHCP ). In addition, a December  report by an actuarial consulting firm estimated that the ISSSTE system’s implicit pension debt, which includes future pension liabilities, assuming a real interest rate of . percent, was more than . times the size of the government’s bank bailout fund (Fondo Bancario de Protección al Ahorro, or FOBAPROA) and twice the size of Mexico’s total public debt (LR&B Consultores ). International financial institutions were well aware of the future deficits likely to result from an unreformed ISSSTE system. The World Bank estimated that the ISSSTE’s pension deficit would approach  percent of GDP by  (World Bank b). In spring and summer , both the World Bank and Inter-American Development Bank (IADB) prepared Technical Assistance Loans and plans for larger implementation loans to support the government’s efforts to overhaul the ISSSTE system, which

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were slated to include profound reforms to both pensions and health care (World Bank b; Inter-American Development Bank ). The administration put together a reform team within the ISSSTE. Heading up the team was Enrique Moreno Cueto, the director of Economic, Social, and Cultural Benefits and a political sociologist who had previously held a post in the Secretariat of Foreign Affairs. The strategy of housing the reform team within the ISSSTE differed from the approach taken in  and  in the design of the IMSS privatization proposal, when an external think-tank and team had been created to isolate the proposal from the social security bureaucracy and labor leaders. The World Bank attributed some of the failure to achieve significant health care reforms and the delays in the implementation of the  reform project for the IMSS to the isolation of the reform team outside of the social security institute. In light of this experience, the World Bank recommended that the ISSSTE reform proposal be elaborated within the ISSSTE (World Bank b). In addition, the fact that the background and experience of the reform team leader at the ISSSTE, Moreno Cueto, was more political than economic or actuarial illustrates the perception that the challenges facing the reform project were themselves political rather than technical. At the same time that the reform team was physically located inside the ISSSTE, the Secretariat of Finance (SHCP) took the lead early in the development and coordination of the reform proposal and its presentation to interested parties. The Secretariat of Finance was also listed as the responsible party in international financial institution project documents (Inter-American Development Bank ). Likewise, when members of the Fox administration began meeting with labor representatives in late  to discuss the reform proposal, the presentation was often made jointly by personnel from the ISSSTE and the Secretariat of Finance (Alvarez Ramos ; Cepeda Salas ). The World Bank and IADB were also important contributors to the reform process. One ISSSTE official volunteered that for several months, the World Bank representatives essentially moved into the ISSSTE office area under the direction of Moreno Cueto. The World Bank officials worked closely with those in the ISSSTE to evaluate and study various reform options. Both development banks made clear to representatives of the ISSSTE that the credit necessary to fund the transition to a privatized pension system would be provided, and they pressured representatives of the Fox administration to formally commit to privatization. The relationship between ISSSTE and World Bank representatives cooled, however, when ISSSTE officials refused to formally agree to privatize

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the pension system, claiming that the reform had to be adopted through the democratic process. Following this disagreement, the interactions between World Bank officials and the ISSSTE team were cordial but less enthusiastic than before (confidential interview). Although the World Bank had begun the paperwork for a fiscal year  Technical Assistance Loan in the amount of US$ million to $ million (World Bank b) and internal World Bank documents included references to a Sector Adjustment Loan (SECAL) for US$ million, the former loan was “dropped” and the latter was never processed. At the time, the World Bank still had not signed a loan agreement with the Mexican government to support the reform, though bank documents indicate that it was willing to do so, “based on extensive analytic work over the past few years” (World Bank , ). The Mexican government did sign a US$, Technical Assistance Loan agreement with the IADB in March  (of which only approximately US$, was disbursed) and IADB documents indicated plans for a US$ million sector loan as well (Inter-American Development Bank ). The ISSSTE reform proposal is broadly consistent with the plans described in bank documents (see World Bank b and Inter-American Development Bank ). Although a draft pension reform proposal had been prepared by the end of December , the administration decided in  not to include it along with the ambitious fiscal reform package. Instead, the administration spent most of  through  discussing its ISSSTE reform proposal with stakeholders, including the National Conference of Governors (Conferencia Nacional de Gobernadores, or CONAGO) and various unions representing government workers. The reform team met with leaders and representatives of more than twenty labor unions and carried out “intense negotiations” with representatives of the FSTSE and SNTE (SHCP n.d. []). The strategy was to negotiate the details of the reform and come to an agreement with union representatives before submitting the initiative to Congress because reformers understood that once in Congress, the initiative had the capacity to become even more politically explosive (Enciso Martinez ). According to labor leaders, however, the interactions with representatives of the SHCP and ISSSTE were not discussions or negotiations but one-way presentations in which the government told union leaders the content of the proposal. Labor representatives insisted that there was no dialogue over the reform—that the government refused to concede any ground (Alvarez Ramos ; Cepeda Salas ). Meanwhile, the government increased pressure for reform by engaging in a media campaign that emphasized the need for reform and the costs of the

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ISSSTE system. In late , representatives of ISSSTE were interviewed in the media to discuss the challenges facing the ISSSTE system and to encourage Mexicans to visit the ISSSTE Web site, which had copies of diagnostic and reform documents. The media campaign was designed to generate popular support for reform among the public by emphasizing both the costs of the ISSSTE system and the fact that it benefits only a small proportion of the Mexican population. Official estimates suggest that as much as  percent of the population had access to ISSSTE benefits during this period. The media campaigns for reform occurred in waves, in which the government would periodically increase the pressure for reform and then back off to allow space for behind-the-scenes discussions. An ISSSTE official used the analogy of boiling water to describe this process, periodically turning up the heat to bring a pot to a boil and then reducing the heat (Moreno Cueto ). After prolonged meetings with union representatives, in December , Joel Ayala Almeida, a PRI senator and secretary general of the FSTSE, introduced the proposed reform initiative in the Senate. With regard to pensions, the proposal would in essence homogenize the ISSSTE and IMSS pension systems. The ISSSTE requirements for and value of the minimum pension guarantee would be changed to match that of IMSS, and the contribution structure would be made similar to that of the IMSS, though with a much higher workers’ contribution rate. Unlike the IMSS pension privatization, the ISSSTE proposal provided two different options for currently active workers: stay in a parametrically reformed version of the current system with gradual increases in the retirement age, contribution requirements, and contribution rates with a modified benefit calculation or accept a recognition bond and move immediately to the new privatized system with higher contribution rates and minimum requirements to receive the minimum pension guarantee.² The choice would have to be made within months of the reform, not at the time of retirement. The reform would also allow workers to combine their contribution credits under the ISSSTE system with those of the IMSS into one pension. In an effort to appease labor unions, which were critical of the high commissions and low real return rates of the Afores, the reform proposal included the creation of a nonprofit pension fund administrator, the PensionISSSTE. Various labor unions had demanded this option throughout the discussions of the reform proposal (Alvarez Ramos ; Cepeda Salas ; Alonso Raya ). PensionISSSTE would administer pensions for workers who chose not to migrate to the private account system and would have monopoly control over the accounts of

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workers covered by ISSSTE for the first eighteen months following the reform, after which workers could merge or move their accounts to one of the private Afores. In some respects, the creation of PensionISSSTE was not a surprising concession to organized labor; a similar bargain in  resulted in the creation of the Afore Siglo XXI, a nonprofit IMSS-based pension fund administrator. The more revealing aspect of PensionISSSTE is the composition of the oversight board, which reflects the government’s need to attract the support of labor leaders for the reform. The supervisory board was to include six representatives from government (the titular heads of ISSSTE, SHCP, SEDESOL, STPS, and the Central Bank), five representatives from labor (three from FSTSE and two from SNTE), and a final seat that would rotate between an independent labor union and a state governor whose state contracts with ISSSTE.³ In , the FSTSE and the SNTE seats would become a source of further negotiations and the focus of criticism from other union representatives. The reform proposal also included significant changes to the other insurance funds. In the initiative, beneficiary rules would enable working women to provide health-care coverage and other benefits to their partners (married or unmarried), which previously was possible only if the male partner was medically unable to work. The proposal also separated the financing and provision of health benefits like the  IMSS reform and would allow ISSSTE to offer its excess capacity to other health-care institutions. The reform would also partly privatize workers’ compensation for work-related illnesses and accidents.⁴ Changes were also proposed to the administration of the housing fund, FOVISSSTE, and the governing board for the ISSSTE would guarantee overrepresentation of the FSTSE and SNTE, two important PRI allies (Ayala Almeida ). Once introduced by Ayala in the Senate, the proposal was assigned to the relevant commissions but was not formally considered. Between December and February , additional discussions with those who stood in opposition to the reform led to some modifications. Despite some progress in the negotiations, the proposal was withdrawn from consideration in February because of the presidential elections set for July . In , the proposal was yet another casualty in Fox’s failed reform agenda—in this case not blocked by veto players but withdrawn by the PRI and PAN, both of which feared the potential electoral backlash of such a reform. The plan was withdrawn even though the leadership of the FSTSE, representing a large number of ISSSTE beneficiaries, had been effectively persuaded, or co-opted; it was even the secretary general of FSTSE who presented the proposal to Congress on behalf of the Fox administration.

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Although the Fox administration did not manage to achieve a reform of the ISSSTE system, it did facilitate changes in the corporatist institutions regulating labor organization in the public sector, which would prove useful for the Calderón administration’s efforts to revisit the ISSSTE reform. The labor legislation for federal government employees adopted by the Cárdenas administration in  had permitted the creation of only one labor federation for federal government employee unions, thus providing the FSTSE with a government-sanctioned monopoly on organizing government workers. The FSTSE was also a central source of PRI support as part of the National Confederation of Popular Organizations (Confederación Nacional de Organizaciones Populares, or CNOP), and as an “official” union, it required that all of its members also be members of the party. The FSTSE leadership, despite its potential capacity for mobilization and independence by representing workers in nontradable industry unaffected by economic liberalization, was surprisingly acquiescent and docile in its continuing support of the PRI. At the same time, the largest member of the FSTSE has for decades been the teachers’ union, the SNTE. Although officially a member of the FSTSE, the SNTE has since the late s claimed to be an “independent” rather than an “official” union. The union’s statutes proclaim the right of its workers to affiliate with or be a militant of any political party. As a result, members of the SNTE have been elected to national office not only as members of the PRI but also as representatives of the PRD. Meanwhile, the secretary general of the SNTE, Elba Esther Gordillo, was second in command of the PRI during the Fox administration, thus creating certain strains and contradictions within the teachers’ movement. Undemocratic tendencies within the SNTE and resistance to the leadership of Gordillo, in particular, have also been a nearly continuous source of internal strife within the union (see Cook ). Therefore, though the SNTE is the largest and potentially most powerful union in Mexico, its leadership, and Gordillo in particular, is divisive and unresponsive to the interests of the membership. These contradictions within the union and the drive of Gordillo to consolidate her political power led to an interesting series of maneuvers during the Fox sexenio. These maneuvers have ultimately transformed both the relationship between public sector unions and the PRI and the overall organization of public sector unions. For example, while Gordillo was still second in command of the PRI, her supporters within the SNTE led an exodus from the FSTSE, demanding the creation of a new “democratic” federation of government employees— the Democratic Federation of Unions of Public Servants (Federación Democrática

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de Sindicatos de Servidores Públicos, or FEDESSP). The new federation claimed to represent more than half of the workers affiliated with the FSTSE, including the SNTE and more than half a dozen other unions of government employees. The Fox administration’s secretary of labor approved the new federation’s application to form and officially represent the interests of the affiliated unions, despite the fact that Mexican labor law allows only one federation for public sector workers. The new federation then proceeded to sue the FSTSE for control of FSTSE assets, including buildings and other resources, claiming that they should rightfully be transferred to the new federation representing more than half of all government workers. The FSTSE responded by filing a claim that the Fox administration had violated federal labor law by authorizing the formation of a second labor federation. Ultimately, the Supreme Court ruled that the law was unconstitutional and upheld the recognition of the new federation. In February , a court determined that the FEDESSP has the same rights as the FSTSE to designate representatives to the oversight board of the ISSSTE (“Representatividad compartida” ). Critics of Gordillo claimed that the new federation was to be another vehicle for her personal political power; leaders of the new federation insisted that the organization was independent, democratic, and not beholden to the polemical leader of the teachers’ union (Alvarez Ramos ). In any event, the creation and recognition of the new federation was possible only because of the democratic transition in  and would not have been possible under a PRI administration. Meanwhile, over the course of the Fox sexenio, Gordillo publicly appeared to be growing politically closer to President Fox and the PAN, even while she remained in the leadership circle of the PRI. For Gordillo’s critics, this drift only reinforced concerns regarding her political motives and efforts to establish sources of political power independent of the PRI. In part, Gordillo sought alternative opportunities outside of the PRI due to her personal and political differences with the PRI’s president and future national presidential candidate in , Roberto Madrazo Pintado. The divisions within the PRI over Gordillo’s leadership role in the party and her relationship with President Fox became apparent when Madrazo wanted to step down as PRI president to run for the party’s presidential nomination. According to PRI statutes, were Madrazo to leave his post to become a candidate for the party’s nomination, Gordillo would automatically assume the party’s presidency, which was unacceptable to Madrazo and a significant portion of the PRI leadership. This conflict was so profound that it ultimately led to the expulsion of Gordillo from the PRI and led her (and her supporters) to

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establish a new political party prior to the  elections—the New Alliance Party (Partido Nueva Alianza, or PANAL). This background regarding the internal power struggles of the PRI, the creation of the FEDESSP, and the founding of PANAL is important for two key reasons. It illustrates one of the ways that democratization affected linkages between union leadership and political parties, which had important consequences for the ability of government workers to continue to block the proposed ISSSTE reform. Therefore, this background is also critical for understanding the adoption in March , only four months into the administration of President Calderón, of an ISSSTE reform nearly identical to that abandoned in February . Democratization facilitated the creation of both a new labor federation for government employees that established formal independence from the PRI and a new political party in which the leadership of the largest union in Mexico played a pivotal role. However, those changes did not enhance the likelihood that the teachers’ union would use its new federation and political party to block a pension reform that would significantly retrench the benefits of the rank-and-file. Instead, those changes enabled the leadership of the SNTE, specifically Gordillo and her supporters, to establish sources of organizational capacity and political power independent of the PRI that could be leveraged to maximize political influence through cooperation with the PAN. Rather than use the power of the new federation and political party to block the ISSSTE reform in the first months of the Calderón administration, Gordillo provided union support for the reform in exchange for expanded political influence for the teachers’ union in the new social security institutions, such as PensionISSSTE, and in education policy making in the Calderón administration. The fruits of the bargain between the SNTE leadership and the Calderón administration are evident in changes to the ISSSTE reform between the December  (Fox) and March  (Calderón) versions. For example, the composition of various oversight boards reflects the bargaining that occurred between the new administration and labor leaders: the ISSSTE oversight board (the Committee of Directors) was expanded to add additional labor representation. Even more dramatic were the changes to the Executive Commission of PensionISSSTE, which tripled in size to accommodate additional labor and government representatives. A similar expansion occurred in the definition of the commission charged with lesser oversight responsibilities for the ISSSTE. Rather than list which labor organizations can name representatives to these bodies, as in the  proposal and other social insurance legislation, the  reform law gives the executive

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(the president of Mexico) the right to determine which labor organizations may represent workers’ interests. On the one hand, the expansion in the number of seats represents the outcome of logrolling and the creation of additional resources that can be offered to labor unions in exchange for their support of the reform. On the other hand, by eliminating from the law reserved seats for specific labor organizations, the changes increased the capacity of the executive to promise seats, and thus power and influence, to multiple organizations. It also gives the president’s administration leverage over the labor unions that want to have influence and power.₅ Labor leaders were also able to double to thirty-six the number of months that PensionISSSTE will have a monopoly on the individual accounts of government employees with limitations on the ability of workers to transfer to a private administrator. In addition, the  version of the law transferred all current ISSSTE-SAR accounts (created in ) held by private financial institutions to PensionISSSTE for thirty-six months, though all of the funds had to be invested in government instruments. These provisions, combined with the expansion of labor influence (and the elimination of protected seats for independent unions) in PensionISSSTE’s oversight board, provoked criticisms from opponents of Ayala and Gordillo, especially within the independent labor movement. Independent unionists saw the reform as an exchange of workers’ benefits for increased political influence for the union leadership. In addition to these controversial differences, the  law included other new concessions to organized labor. For instance, benefits for dependent children were extended two years, to children up to eighteen years old. In addition, when medical services were to be subcontracted, other public institutions would receive first priority for the contracts. In order to encourage workers to support the new law and voluntarily save for their retirement through the new private accounts, the government would match at a ratio of . to  all workers’ voluntary contributions of up to  percent of wages to private individual accounts; workers could receive up to a total combined maximum rate of . percent of salary. The  law also delayed the gradual increases in contribution rates and retirement rates and provided higher replacement rates compared to the  proposal. Likewise, the reform law called for the government’s contribution rate to the health care fund to be phased in over time, though the government was expected to make a one-time contribution of  billion pesos to the fund upon implementation of the reform. The most significant concession to labor was an increase in the minimum guaranteed pension in the privatized pension system for govern-

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ment workers; the new level would be double that of private sector workers covered by IMSS. The December  proposal had proposed a minimum pension guarantee equal to that of the IMSS.₆ At the same time, however, this minimum pension is significantly lower than the minimum guaranteed by the unreformed defined-benefit system, should workers choose to pay the higher contribution rates and work longer to stay in the old system. The way in which the new law was presented is indicative of both the fragility of its coalition of support and the anticipated resistance. In early February , following a meeting of President Calderón with PAN legislators, a PAN senator acknowledged that they were working on a new ISSSTE proposal based on that of Ayala but that the PAN would pursue the reform gradually to build consensus with other parties and unions (Boffil, Herrera, and Garduño ). In midFebruary, members of the FSTSE reelected Ayala to another three-year term as secretary general, and he commented that the reform proposal that he had presented in  had been adjusted in response to demands of university and teachers’ unions (Garduño and Mendez b; Cruz Martinez a). By midMarch, the proposal had been formally submitted to Congress, and the PAN began pressuring other parties for an accelerated approval of the law. Although the PRI and the PAN both supported the reform proposal, the approval was delayed by about forty PRI deputies who were concerned about the creation of PensionISSSTE and the potential for Gordillo to assume control of the new institution. In essence, PRI deputies wanted to block Gordillo and ensure that the titular head of PensionISSSTE would be appointed by the president with the approval of the Senate, which would require a reform to the Retirement Savings System Law. These deputies wanted to approve both reforms nearly simultaneously in order to limit the ability of President Calderón to appoint Gordillo to head PensionISSSTE over the dissent of the PRI (Mendez and Garduño ). Representatives of the PRI secured an agreement from the PAN not to name the new head of PensionISSSTE until the reformed Retirement Savings System Law had been approved, and the PRI used party discipline to force reluctant PRI members of Congress to approve the reform to the ISSSTE law (Becerril a; González Amador ). In late March, the ISSSTE reform was rapidly pushed through both chambers of Congress with only minor changes. The vote in the Senate was  in favor and  against. The administration published the new law in a special Saturday edition of the Diario Oficial during the first weekend of a weeklong holiday, apparently breaking a promise to wait to publish the law until the Retirement Savings System Law had been approved (Muñoz ; Becerril b). When the reformed Retirement Savings System Law was pub \             

lished in June , the new regulations regarding who could hold the highest post in a public or private pension fund administrator, or Afore, reflected the concerns of PRI and PRD legislators: the person must be a Mexican resident, have five years’ related experience, have no criminal record, and have not in the last two years held a post in a government regulatory agency, political party, labor union, or employer organization. The rapidity with which the two reforms were adopted in the first months of the Calderón administration reflects both the strategic alliance formed between segments of the PRI and the new administration and the tensions within the PRI over such an alliance. Ultimately, the reforms were passed with both the PAN and the PRI (particularly the latter) exerting a significant amount of party discipline within Congress.

The ISSSTE Reform Episode of  versus  A comparison of the outcome of the two reform proposals—of the first from December  and the second from March —provides insight into policy making in newly democratic Mexico. While divided government and multiple parties in Congress may be blamed for the failure to pass the ISSSTE reform proposal during the Fox administration, the Calderón administration faced a similar configuration of divided government and fragmentation in Congress. This is not to imply that democratization does not matter. Instead, the point is to emphasize how democratization created unlikely political bedfellows, such as Gordillo and Calderón. The PRI, and particularly Ayala of the FSTSE and Gordillo of the SNTE, were willing to support the ISSSTE reform in exchange for union leaders’ influence in the reformed institutions, including PensionISSSTE. In addition, Gordillo in particular was willing to form an alliance with newly elected Calderón because she had had a very public falling out with the PRI leadership and sought to gain teachers’ union influence on the Calderón educational reform agenda. Gordillo and other leaders acknowledged that she and Ayala were the principal labor leaders with whom the administration and members of Congress had negotiated the reform, even prior to the  elections (Garduño and Mendez a; “Acepta Gordillo” ). For Gordillo, leadership on the oversight boards of the reformed institutions of ISSSTE or PensionISSSTE and the ability to shape Calderón’s education reform provided sources of political power. Her critics within the PRI and SNTE feared she would use that power to stymie further internal fragmentation of the union that accelerated after . In this sense, the SNTE leadership exchanged political support for              / 

Calderón’s ISSSTE and education reform agendas in order to gain a seat at the national bargaining table and bring the teachers’ union, the largest in Mexico, into the PAN’s governing coalition. The politics of the failed reform in  and the successful reform in  are not that unlike the politics of the failed effort to establish social insurance in  and the successful bid later in  (see chapter ). Both comparisons illustrate the central role that organized labor played, not just in the politics of social insurance but also in national, presidential politics, even though the historical and political contexts were quite different. In the late s, political elites were consolidating a new authoritarian regime and expanding social insurance. In the middle of the first decade after , the political elites were consolidating a new democratic regime and retrenching social insurance. In both instances, the role played by organized labor in electoral politics and, more importantly, its support of the ruling cross-class coalition were central to the social insurance policy reform. In both periods, the policy also revealed divisions within the organized labor movement, as some dissidents within labor organizations took advantage of the policy to mobilize workers and criticize the labor aristocracy. In the case of the ISSSTE reform, the opposition from dissident sections and members of the SNTE and of organizations in the independent labor movement was immediate and fierce. However, unlike previous reclamations over social insurance policy, protests took two forms—typical work stoppages, which included mobilization in the streets, and atypical legal challenges in the courts. Throughout the spring and summer , various sections of the SNTE, including the National Coordinator of Education Workers (Coordinadora Nacional de Trabajadores de la Educación, or CNTE), announced work stoppages, road blockades, and protests in the capital and throughout the country, especially in the southern states. Teachers were joined in their opposition to the new law by the National Autonomous University of Mexico Workers Union (Sindicato de Trabajadores de la Universidad Nacional Autónoma de México, or STUNAM), one of the three main members of the National Labor Union (Unión Nacional de Trabajo, or UNT), an organization representing a variety of independent unions, mostly in nontradable sectors (e.g., higher education, communications, aviation, health care, and public transit). STUNAM workers would be directly affected by the reform, though many other union members of the UNT would not. The UNT often took the lead in organizing protests and criticizing the administration and leadership of the FSTSE and SNTE for their support of the ISSSTE reform. Unions throughout the country, including subnational units of the FSTSE and SNTE and independent unions represented by the FEDESSP, also quickly  \             

organized to help their workers file court petitions (amparos) for exemption from the new law. According to Mexican law, to claim an exemption from the law, each worker would have to file an individual petition of amparo within a short time of the law’s adoption. Workers from throughout the country, with the help of their unions, began filing the paperwork to request exemption from the law. Of the estimated . million workers insured by the ISSSTE, approximately ,, or almost  percent, filed petitions for exemption.⁷ To accommodate the petitions, in May , the judiciary established a new district court to process them; a second court was added in October . In September, a subset of the Supreme Court determined that the petitions would be treated as labor disputes rather than administrative challenges (Aranda and León ). Thus, challenges to the ISSSTE reform would be handled according to different criteria than the challenge mounted by the SNTSS in  and  against the reform of its pension system. Although the special district court had begun to issue rulings on the petitions, the Supreme Court announced that it would determine the constitutionality of the law by reviewing fifty to sixty typical petitions. In June , the Supreme Court ruled, in a divided vote, that the ISSSTE law was constitutional, though it also improved the protections for workers who had contributed to the old system and were near retirement. The dissenting opinions came from members of the court who argued that the ISSSTE reform violated Mexico’s ratification of international agreements and standards in social insurance established by the ILO (Aranda ). The unions’ increased use of the court system to challenge legislation or the hegemony of official unions in addition or as an alternative to more traditional mobilization through street protests or strike petitions during the PRI era reflects an important shift in union strategy that has accompanied democratization.

The Politics and Future of Social Insurance in Mexico During the Fox and Calderón administrations, the retrenchment of social insurance benefits for government employees, whether of the SNTSS or those covered by the ISSSTE, represents a continuation of retrenchment and neoliberal reform efforts begun by the final PRI administrations. For a country that has already adopted significant structural reforms, the benefits of government employees represent one of the last sources of significant government expenditure and financial liability. At the same time, neither the  privatization of pensions for future IMSS employees nor the  privatization if ISSSTE pensions will              / 

significantly reduce state expenditures in the short term. The state maintains liabilities for current SNTSS and ISSSTE pensioners and for some of the current workers nearing retirement. The total cost of the recognition bonds for the ISSSTE privatization is estimated to total about  percent of Mexico’s  GDP (SCHP n.d.). The savings generated by the new system compared to the old, unreformed system are expected to begin in  (SCHP n.d.). Meanwhile, internal calculations by the ISSSTE team suggested that a parametric reform to the retirement age and contribution rate would have been less expensive than the privatization with recognition bonds (confidential interview). Clearly, the goal was to curtail expenditure commitments and financial liabilities of the state in the long term, not the short or medium term. The reforms to social insurance during the Fox and Calderón administrations also reflect the continuing pressure of globalization. While benefits and employment for the nontradable sector of government employees were not the focus of the first round of social reforms, increasing concerns over the costs of this employment and the benefits for the national government moved social insurance reform for government employees (both IMSS workers and ISSSTE beneficiaries) higher on the reform agenda. In a global economy, the Mexican government is increasingly concerned about its fiscal deficit and the size of its budget because these factors have effects on interest rates and foreign investment. As the cost of benefits for government employees and government employment become the main expenditures in a state that has otherwise trimmed costs (through privatization, the end to some subsidies, etc.), employment costs (including benefits) increasingly became the focus for reductions. To this end, the reforms to the IMSS law in  and  and to the ISSSTE law in  have laid the groundwork for future social insurance reform—the privatization of medical and related support services. As explained in chapter , the Zedillo administration had originally sought to privatize IMSS health-care services. Those efforts were blocked by the SNTSS. By  and , privatization was no longer on the public IMSS reform agenda. Service provision had improved through the administration’s efforts to make better use of technology for managing beneficiary files, thus reducing beneficiaries’ demands for reform. IMSS officials and employer representatives, who only a few years earlier had lamented the failure to privatize medical services in , were also no longer concerned with privatizing IMSS medical services. Instead, they focused on privatizing the SNTSS pension system (Larrinaga ). In part, the IMSS administration and employers began putting less emphasis on formally privatizing

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health care and support services because the institute began taking advantage of the legal clause allowing subcontracting of services when existing facilities were not sufficient. In  and , the IMSS spent . billion and . billion pesos, respectively, on subcontracted services (IMSS ). By –, those numbers had nearly tripled (IMSS ). This strategy for reform is another example of institutional reinterpretation, or actors using existing institutions to pursue new ends. Whereas provisions allowing subcontracting were originally used to address the institutional weakness (or underdeveloped medical infrastructure) of the IMSS, now the IMSS is using it to privatize medical services without engaging in a formal reform effort. This effort to change the provision of medical services within the existing legal framework was supported with a Sector Adjustment Loan from the World Bank. According the World Bank’s assessment, the implementation of the health-care reforms within the IMSS did not meet expectations, in part because the project was “politicized early on” and hampered by efforts to keep a “low profile” for the project (World Bank , , ). Critics of the ISSSTE reform claim that subcontracting of services in that system has quadrupled since  and that the recent reform is designed to further facilitate the de facto privatization of ISSSTE health-care services (Cruz Martinez b). Descriptions of the ISSSTE reform project in bank documents are consistent with this claim (World Bank b; Inter-American Development Bank ). Through the reinterpretation of existing legal institutions, the Fox and Calderón administrations used existing subcontracting provisions to bypass union resistance to the formal privatization of IMSS and ISSSTE services. The institutional legacies and lessons of the IMSS privatization in the mids also influenced the strategies and shape of the ISSSTE reform effort. For example, policy makers learned from the experience of designing the reform outside the social insurance bureaucracy and chose to house the ISSSTE team within the organization; the World Bank specifically mentioned this learning process and change in strategy (World Bank b). Furthermore, one of the goals of the ISSSTE reform was to harmonize its institutional framework with that of the IMSS. The original ISSSTE pension proposal in  would have made the ISSSTE pension system nearly identical to that of the IMSS, including the minimum guaranteed pension. Likewise, the ISSSTE health sector reform strategy was similar to that of the IMSS. The contribution structure was changed to match that of the IMSS in order to facilitate future reforms to service provision. The long-term goal of the health-care reforms, both in the IMSS and the ISSSTE

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and in the creation of the Popular Insurance program (Seguro Popular) in the Secretariat of Health (see chapter ), is to unify the public health-care infrastructure and move toward unified public health insurance. That was the goal of the proposal developed by Fox’s secretary of health, Julio Frenk, when he was a lead researcher at FUNSALUD (Frenk et al. ). It was also a goal explicitly discussed in World Bank and Inter-American Development Bank documents (World Bank b, ; Inter-American Development Bank ). In this sense, the resistance of organized labor to integral health sector reform efforts has caused government to proceed with reform efforts in a fragmented and piecemeal fashion. The conflicts over and outcomes of the IMSS and ISSSTE reforms (in  and , respectively) also provide a window into the politics of institutional change following democratization. On the one hand, only the names have changed. Now the PAN is leading the reform efforts, with the support of the PRI and its union allies. In some ways, the fact that union leadership, whether of the SNTSS, the SNTE, or the FSTSE, either supported or did little to oppose reforms that would reduce benefits for rank-and-file workers while maximizing the political payoffs for union leaders is not surprising. In addition, Ayala sought to co-opt and silence the labor leaders who opposed privatization by offering them seats on the new PensionISSSTE oversight boards (Muñoz and Norandi ). Some would say this is the way Mexican unions have been doing business for years (e.g., Murillo ). On the other hand, the motives union leaders had for agreeing to these reforms, especially in the case of the ISSSTE, may have changed because of democratization. Leaders, like Gordillo, began using their support for reforms to create a source of power independent of the PRI and to generate opportunities or resources that can be used to maintain a union structure being eroded by defections from below to alternative political parties. While union leaders are not using their potential veto power in Congress to block reforms, they are using it to logroll more opportunities for union influence and power into reform proposals. The consequence of such strategies by leaders, however, is further fragmentation of the union from below. In , the violent conflict over the election of the SNTSS leadership and the mobilization and disaffection of growing segments of the SNTE are clear evidence of this backlash against union leadership. Whether these internal union conflicts will lead to union democracy or affect the national political influence of unions remains to be seen. In contrast, the increasing tendency for unions to turn to the judicial system to resolve disputes is likely to become a permanent feature of democratic politics in Mexico. Although the specific legal strategies have evolved, the increasing re-

 \             

liance on the court system signals an important shift. Unions have turned to the courts to challenge the creation of new federations that challenge their monopoly, just as FSTSE sought to block the creation of the FEDESSP. New federations like the FEDESSP have used the courts to claim the property of the federation from which they departed and to stake a claim to their seats on government advisory boards. In these ways, the courts are playing a central role in redefining both federal labor laws and the relationships between unions and political parties in post- Mexico. The courts are also playing a central role in union efforts to challenge social security reforms. The SNTSS sued to challenge the constitutionality of a law that superseded their right to negotiate retirement benefits in their labor contracts and lost. Hundreds of thousands of workers affected by the ISSSTE reform sought legal exemptions to the law, and ultimately the Supreme Court ruled the core of the law constitutionally valid. These are strategies that were not used by union representatives who opposed social insurance retrenchment prior to .

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8/

TARGETED ASSISTANC E Two Decades of Welfare Expansion

S   Mexico since  have sought to reshape and retrench the welfare regime by privatizing and reforming the social insurance provided by the IMSS and ISSSTE (see chapters  and ). These privatization efforts reflect the abandonment of a movement begun in the s to universalize and expand access to social insurance benefits. Although in some instances organized interest groups, particularly labor unions in nontradable sectors, blocked formal retrenchment, the privatization of pensions and de facto increase in the subcontracting of services have fundamentally reshaped the existing welfare system. Each administration between  and  also expanded the use of noncontributory, or targeted, welfare benefits. The Salinas administration (– ), for instance, inaugurated a stand-alone targeted poverty alleviation program, the National Solidarity Program (Programa Nacional de Solidaridad, or PRONASOL); one of its purposes was to rebuild the ruling party’s popularity. The Zedillo administration (–) later transformed parts of PRONASOL into the Program of Education, Health, and Nutrition (Programa de Educación,



Salud y Alimentación, or PROGRESA), narrowing the program’s focus and improving transparency and targeting in the process. Upon assuming office, President Fox (–) rechristened PROGRESA Opportunities (Oportunidades) and further expanded coverage and improved transparency. Later in his administration, Fox implemented the Popular Insurance (Seguro Popular), a national health insurance program that is largely a means-tested, noncontributory insurance program for the poor. The economic crisis of the s and the economic and political liberalization policies of the s and s that shifted the balance of class power away from organized formal sector workers also expanded the ranks of the rural and urban poor, many of whom do not participate in formal labor markets and are not covered by social insurance institutions. In particular, the economic crisis and restructuring increased poverty and informality, which slowed social insurance coverage growth and expanded the constituency in need of a social safety net or compensation for market risks. (See table . for general trends in federal spending on social assistance from  to .) While economic liberalization had a significant impact on the labor market and class structure, political liberalization heightened the importance of electoral success and fueled fierce competition for electoral support. While the PRI had always used congressional and presidential elections as opportunities to renew its popular support, the significance of elections increased once the party faced new competition. These changes that accompanied economic and political liberalization help explain the expansion of social assistance and noncontributory welfare benefits since . At the same time, the ways that new compensation for the urban and rural poor was adopted, through layering of new social assistance and health insurance institutions alongside existing social insurance institutions, highlights the role of policy legacies and the tendency toward institutional layering as a mode of institutional change when powerful actors block institutional reform.

A New Strategy for Coalition Building via PRONASOL The  presidential election highlighted a dramatic change in the influence of the traditional corporatist organizations that had formed the basis of support for the PRI regime: these groups were losing their ability to mobilize the electoral support necessary to sustain the regime’s electoral charade. Increased electoral competition forced the regime to compete with opposition parties on a territorial

                  / 

5.506 19.970 26. 344 30.363 40.689 51.410 61.123 69.293 85.634 92.177 109.344 123.963 146.376

65.6 217.7 282.9 321.4 424.8 529.4 620.9 694.9 848.6 903.7 1,061.6 1,192.6 1,395.9

0.7 1.1 1.0 1.0 1.1 1.1 1.1 1.2 1.4 1.3 1.4 1.5 1.7

4.7 6.9 6.5 5.7 6.8 7.2 7.1 7.5 8.1 7.6 8.3 8.5 10.4

100 100 99.7 98.8 58.9 56.2 57.8 55.9 59.1 60.2 65.2 66.1 69.1

0.3 1.2 17.6 18.5 17.7 18.2 17.0 15.7 13.4 12.5 11.5

23.5 25.3 24.5 25.9 23.9 24.1 21.4 21.4 19.4

Source: Fox 2006. Note: Includes spending on all anti-poverty programs, including Opportunities, targeted food subsidies, school lunches, temporary employment programs, and so on.

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Table 8.1 Federal spending on all poverty alleviation programs, 1990–2006 Budget execution by each level of government (percentage) Total spending Per capita Percentage Percentage of total (billions of pesos) (pesos) of GDP programmatic spending Federal State Municipal

basis, causing the PRI to change the basis of its claim to legitimacy. To generate greater support and legitimacy for the presidency, President Salinas implemented PRONASOL, a bid to generate electoral support on a territorial rather than sectoral basis, as had formerly been the case. Whereas previous administrations had offered organized labor various inducements, including social insurance benefits, for its support of the ruling regime, the Salinas administration offered PRONASOL to the unorganized urban and rural poor. At one point, it was even believed that PRONASOL would provide the basis for a new political party to replace the existing structure of the PRI (Centano , ).₁ In particular, this new program was designed to include the rural poor and the growing unorganized urban popular sectors, which had largely supported the Cardenista opposition (Dresser ; Fox and Moguel ). The distribution of the program’s benefits bypassed the PRI’s traditional clientelistic infrastructure that had become increasingly ineffective during the previous decade (Fox ; Fox and Moguel ). Initially, the program was administered directly out of the president’s office without congressional oversight (Dresser ; Fox and Moguel ; Bruhn ). PRONASOL was an umbrella for a variety of different programs in three broad categories: social and family welfare, production subsidies, and local infrastructure. Social and family welfare included subsidies for health and education, including a continuation of the health benefits provided by the IMSS under IMSS-COPLAMAR. Production subsidies included programs for particular industries such as mining, fishing, or coffee cultivation. Infrastructure programs were usually confined to particular localities and included programs such as those to build roads or expand access to public services like electricity or water. Officially, funds were to be targeted to marginal areas most affected by economic liberalization. Within individual communities, new organizations formed to determine the best use of program resources. Following the steady decline in social spending that had taken place during the de la Madrid administration, PRONASOL expenditures spurred an increase in overall social spending, both in absolute terms and in relation to total government spending in  and  alone. Nevertheless, in comparative terms, PRONASOL funding was very modest. At their peak in , total PRONASOL expenditures were still less than  percent of GDP. In actuality, PRONASOL did little to reduce poverty in Mexico, but Nora Lustig () suggests that if the government had provided direct transfers of funding to the poorest sectors, it could have at least eliminated extreme poverty. Despite its label as a targeted poverty alleviation program, PRONASOL had  to  percent of its expenditures categorized as basic infrastructure improvements from  to  (Zedillo ).                   / 

Municipal expenditures during the six years of PRONASOL were largely devoted to local public goods, averaging  percent of municipal program receipts (Diaz-Cayeros, Estévez, and Magaloni ). These expenditures were for such things as infrastructure and urban development projects that benefited targeted communities and that were nonexcludable within the community. In contrast, only  percent of expenditures for private goods, such as excludable transfers, and  percent of extensive public goods, such as hospitals and highway projects, benefited more than one community (Diaz-Cayeros, Estévez, and Magaloni ). PRONASOL expenditures reflected the increased electoral competition that the ruling PRI faced at the end of the s, and the geographic distribution of PRONASOL resources can be explained in such terms. The program’s pattern of geographically targeted spending is consistent with efforts by the ruling party to deter support for opposition parties and cultivate support in areas of intense competition (Molinar Horcasitas and Weldon ; Bruhn ; Dion ). Studies of highly disaggregated political and spending data document a sophisticated pattern of distribution based on maintaining existing political support and buying new votes in competitive areas (Magaloni ; Magaloni, DiazCayeros, and Estévez ; Diaz-Cayeros, Estévez, and Magaloni ). In particular, clientelistic PRONASOL expenditures, providing private rather than public goods, increased in election years throughout the Salinas administration (Diaz-Cayeros, Estévez, and Magaloni ). Further, clientelistic expenditures were more often directed toward areas with strong PRI support, while local public goods, or “pork,” were targeted toward areas where the PRI faced electoral competition (Diaz-Cayeros, Estévez, and Magaloni ; Magaloni, Diaz-Cayeros, and Estévez ). If one views PRONASOL within the broader context of state welfare provision, the program clearly sought to generate support on a territorial basis among voters beyond the reach of the PRI’s ties to popular organizations, including labor and peasant unions. As explained in chapter , economic liberalization and labor market flexibilization eroded union membership, particularly in tradable sectors, and contributed to unemployment and the growth of the informal sector (Zapata ; Kurtz ).² These changes in the labor market simultaneously reduced the size of the sectors formerly incorporated into the PRI and expanded the constituency in need of compensation for displacement and underemployment caused by liberalization. Therefore, as the profile of the labor market changed due to economic liberalization and reforms, so did the nature of the demand for compensation and the types of compensation likely to satisfy that demand. Although

 \                  

urban and rural informal workers were not organized into traditional class-based organizations, the ruling party sought a way to compensate this growing population and incorporate it into a new cross-class coalition. In many ways, it seemed during the Salinas administration that PRONASOL would form the basis for an extensive organization that would mobilize the poor and create formal relationships between poor communities and the ruling party. Moving from a focus on social insurance to social assistance also served the government’s strategy of shifting spending and policy priorities away from its traditional core supporters among the popular classes—organized labor and peasant unions—toward new swing voters in marginalized communities and regions. Critics have questioned the effectiveness of PRONASOL at reducing poverty, but the program was certainly very effective at rebuilding support for the ruling party in both the  midterm elections and the  presidential elections (Magaloni ). PRONASOL was a product of economic liberalization not only because it met the increased demand for social assistance from those adversely affected by economic reform but also because its very design, by seeking efficiency in spending, was consistent with neoliberal economic principles (Dresser ). In addition, since the bulk of the revenue to fund PRONASOL came from the privatization of state enterprises (Cornelius, Craig, and Fox ; Salinas de Gortari , –), the expansion of spending on the program would have been impossible without structural economic reforms. The World Bank, which participated in the program’s development, provided additional funding for its implementation in the poorest states (Cornelius, Craig, and Fox ; Salinas de Gortari , –; World Bank b, ). Targeting marginal areas was consistent with globalization pressures on the government to minimize expenditures and with policy recommendations from international financial institutions, such as the World Bank and Inter-American Development Bank (World Bank b; Levy ; Graham ; Lustig ; Laurell ). In sum, that PRONASOL grew out of economic liberalization is evident in Salinas’s words: the program was “how the political consensus in favor of the [new economic] strategy was constructed” (Salinas de Gortari , ; trans. by author). PRONASOL is also an example of institutional change through layering of new institutions alongside old. Institutional layering happens when new constituencies or new demands for institutions or policies develop in a context with little possibility for significant change to existing institutions. Rather than continue the existing practice of providing noncontributory social insurance to the poor through IMSS-COPLAMAR, the government created PRONASOL partly

                  / 

because organized labor objected to the continued use of social insurance reserves to subsidize or provide noncontributory benefits and services to the uninsured (see CTM ). Meanwhile, changes in the labor market and electoral landscape prompted the ruling party to seek the support of the growing poor and informal sectors. Existing social institutions, which provided benefits to formal sector workers, were not ideally designed to meet the political needs of the Salinas administration in targeting marginalized voters and communities. New institutions needed to be created to serve this new political purpose. This configuration of existing institutions and constellation of actor interests contributed to institutional layering of new welfare institutions in the form of noncontributory, territorialbased social assistance and infrastructure investment. Although some of the services that PRONASOL provided relied on social insurance institutions for the delivery of benefits—the IMSS, for example, delivered PRONASOL-covered health-care services—in , the government created a new ministry-level department, the Secretariat for Social Development (Secretaría de Desarrollo Social, or SEDESOL), to oversee PRONASOL and related programs. The SEDESOL became an important institution that would facilitate the future development and growth of noncontributory social assistance during future administrations.

Social Assistance during the Zedillo Administration To some extent, President Zedillo Ponce de León owed his election to the support that PRONASOL generated for the PRI. However, rather than embracing the program after he took office, he transformed it into the Program to Overcome Poverty (Programa para Superar la Pobreza) and cut spending. In addition, he transferred responsibility for infrastructure programs to state governments (Trejo and Jones ; Laurell , –). The administration continued to fund many of the social assistance benefits that PRONASOL provided, including health-care and education subsidies as well as scholarships for the poor, but these programs languished in the first years of the Zedillo administration. As the preceding section explained, most PRONASOL expenditures went to local public goods, including infrastructure projects. In , the administration partly decentralized these funds and distributed them to state governments as the Fund for Municipal Social Infrastructure (Fondo de Desarrollo Social Municipal, or FDSM) according to a transparent formula based on a poverty index. By , the government had further decentralized a larger proportion of the funds, in

 \                  

part as a response to demands from the PAN in exchange for support of the proposed budget (Ziccardi ; Diaz-Cayeros, Estévez, and Magaloni ). The transformation of the FDSM into the Fund for Contribution for Social Infrastructure (Fondo de Aportaciones para la Infraestructura Social, or FAIS) in  required that states distribute the majority of funds to municipalities as part of the Fund for Municipal Infrastructure (Fondo para la Infraestructura Municipal, or FISM). This decentralization of infrastructure funding had important implications for its effectiveness and welfare effects. While infrastructure expenditures under PRONASOL did little to improve general welfare, the decentralized public expenditures of the FDSM/FISM were welfare enhancing (Diaz-Cayeros, Estévez, and Magaloni ). One can explain both the abandonment of PRONASOL and the decentralization of its infrastructure expenditures into FDSM/FISM in terms of policy legacies and the effects of increased electoral competition. By all accounts, Zedillo distanced his administration from PRONASOL because of its reputation for political manipulation and a lack of transparency (Trejo and Jones ; DiazCayeros, Estévez, and Magaloni ). In this case, the negative public perception of PRONASOL created a policy feedback that led Zedillo to distinguish between targeted social assistance and infrastructure spending. Using a strict formula, he began to decentralize the largest part of PRONASOL, the local infrastructure funds, even before , when he lost control of the Congress. By , the expansion of electoral competition and loss of the PRI congressional majority had led to further decentralization of local infrastructure funds. In short, policy feedback and growing electoral competition contributed to PRONASOL’s dismantling and transformation in the first years of the Zedillo administration. These same issues also shaped the creation of PROGRESA, Zedillo’s primary anti-poverty program.

PROGRESA as a New Welfare Model In August , only a month after the PRI had lost its congressional majority for the first time in its history, the Zedillo administration created a new targeted poverty alleviation program, PROGRESA, which did not need congressional approval. On August , , the Diario Oficial published a presidential decree announcing the creation of PROGRESA. PROGRESA (and later its successor, Opportunities) was subsequently approved as part of the federal budget bill the

                  / 

president submitted to Congress. Beginning in , the administration was required to publish the operational guidelines used for government transfer programs (Pérez-Yarahuán ). PROGRESA is often described as the successor to PRONASOL because both programs included education subsidies and health care for the poor. However, PROGRESA was both programmatically and geographically narrower than PRONASOL and was limited to individual benefits and transfers for human capital development. The health benefits and scholarships were a continuation of PRONASOL (and even COPLAMAR), but conditioning benefits on school, clinic, or seminar attendance was new with PROGRESA. Its education benefits included scholarships and school supplies that were conditional on school attendance. The scholarships were intended to counter some social inequities. For example, they were graduated by age to deter older students from leaving school for the work force. In addition, scholarships for older girls were larger than those for older boys to counter the tendency of families to underinvest in girls’ education. A typical scholarship would replace approximately  percent of the wages a working child would likely contribute to the household (Scott ). PROGRESA’s health benefits included health care for poor families at public clinics, which were most often Secretariat of Health or IMSS clinics, conditional on the mothers’ attendance at health and nutrition classes. Nutrition benefits were distributed to families with young children (under five years old) and pregnant or nursing women (Fox ). Mothers were also given money to purchase food and other family necessities. The average monthly benefit was about US$, or the equivalent of  percent of the monthly income of beneficiary families. The maximum was approximately US$ (Ferreira , ). Like PRONASOL, PROGRESA benefits were targeted to regions and families in need. However, unlike PRONASOL, PROGRESA targeting was more transparent and in the beginning occurred in three phases. Officials first identified marginal communities with sufficient infrastructure—health clinics and schools —to support the program.³ They then carried out surveys in these communities to measure poverty in socioeconomic terms rather than simply measuring family income. Finally, they held a public assembly to announce the beneficiary families. The selected families had to be recertified after three years. Those families excluded from the program could appeal their cases to PROGRESA officials (Ferreira ). Later in the program’s implementation, families could self-select and apply for inclusion in the program. Zedillo claimed during his introduction of PROGRESA to the public that spending on social programs in  and  would surpass spending during the  \                  

previous decade.⁴ However, PROGRESA spending during Zedillo’s administration never reached the levels it had in the late s and early s. In , program expenditures were . percent of GDP and included , families. By , expenditures had increased to . percent of GDP with . million families, or  percent of the rural population and one-ninth of the total population (Skoufias and McClafferty ; Coady ). Expansion slowed in , a national election year, to protect the program from criticism and charges of political manipulation. By the end of , nearly . million families were receiving PROGRESA benefits, and expenditures amounted to . percent of GDP (Fox , , , ). In other words, as a percentage of GDP, PROGRESA was still a modest welfare program. (See table . for a summary of the growth of PROGRESA—and of its successor, Opportunities—from  through .) Most external evaluations of the PROGRESA have been largely positive (Ferreira ; Scott ; Skoufias and McClafferty ; Skoufias ). In particular, evaluations conclude that PROGRESA modestly reduced rural poverty rates. In addition, the program increased investment in human capital among rural poor families, which resulted in higher school enrollment rates, higher calorie consumption, more visits to health-care providers, and fewer young children suffering stunted growth. Studies also suggest that PROGRESA’s targeting mechanisms were highly effective at identifying the needy families in the rural communities that the program served. Some other benefits that PROGRESA brought to these communities included an improvement in women’s sense of security and empowerment as well as the spillover effect of stimulating local markets and economic activity (Ferreira ; Skoufias and McClafferty ). Despite the generally positive evaluations, some limitations and criticisms of PROGRESA emerged during the Zedillo administration. In part, PROGRESA’s effectiveness was limited by its rural focus and inadequate funding. Furthermore, approximately  percent of marginal communities lacked sufficient health care and education facilities to participate in the program, which meant that the program could not meet the needs of the most marginal communities and families. In addition, the program was accused of being overly concerned with efficiency in its rigorousness to avoid errors of exclusion instead of ensuring welfare improvements (Boltvinik ). Targeting based on available welfare infrastructure is one of the limitations of poverty alleviation programs that focus on stimulating demand for human capital when infrastructure supply is still insufficient. PROGRESA had some funding to support educational infrastructure. However, to the extent that the quality and distribution of the supply of human capital infrastructure are unevenly distrib                  / 

3.399

6.890

9.587

12.394

17.004

22.331

25.652

29.964

33.526

36.087

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

n/a

0.36

0.36

0.33

0.32

0.27

0.21

0.17

0.15

0.09

0.01

11.0

15.9

21.5

20.3

37.3

44.1

37.5

52.6

135.9

745.9

7,217.4

6,705.1

5,992.8

5,130.3

5,266.8

4,010.3

3,828.0

3,871.3

2,987.5

2,130.0

1,549.0

Sources: Fox 2006; Calderón 2007. Figures for 2007 are estimates.

.466

1997

Year

7,711.6

6,947.9

5,992.8

4,933.3

4,837.7

3,523.7

3,202.0

3,044.4

2,141.7

1,312.4

823.2

11.0

15.9

21.5

2.0

37.3

10.0

5.2

42.1

63.2

59.4

300.7

5,000.0 3,462.0 854.0

5,000.0 3,462.0 854.0

5,000.0 3,440.9 861.3

5,000.0 3,452.5 870.2

4,240.0 3,010.6 747.4

4,240.0 3,090.8 616.1

3,237.7 2,524.5 599.4

2,476.4 2,129.8 341.6

2,306.3 2,306.3

1,595.6 1,595.6

300.7

684.0

684.0

697.8

677.3

482.0

533.1

113.8

5.0

Table 8.2 Expansion of PROGRESA/Opportunities, 1997–2007 Total expenditures Average expenditure per family Beneficiary families (thousands) Current Real Real pesos Percentage percentage Current 2005 percentage Semi(billions) of GDP increase pesos pesos increase Total Rural urban Urban

2,441.0

2,441.0

2,435.0

2,429.0

2,360.0

2,354.0

2,317.0

2,166.0

2,155.0

1,743.0

456.0

92,672.0

92,672.0

86,091.0

82,973.0

70,436.0

70,520.0

67,737.0

53,232.0

53,055.0

40,906.0

10,769.0

Municipalities Localities

Geographic coverage

uted, demand-side programs like PROGRESA actually expand the gap between underdeveloped and extremely underdeveloped areas. Moreover, the program’s actual effect on education was not as great as its intent. Although enrollment rates increased, the program did not significantly change attendance rates (Skoufias and McClafferty ). Despite the program’s emphasis on transparency of targeting and its efforts to eliminate political exploitation, recent studies have raised suspicions that even PROGRESA expenditures were manipulated for partisan purposes. For instance, municipalities that supported the PRI but that were technically ineligible to participate still managed to receive benefits, thanks to lobbying by local officials (Green ; see also Rocha Menocal ). The evidence regarding the effects of PROGRESA expenditures on turnout and support for the PRI in  are mixed (Green ; De La O ). In general, the implementation of PROGRESA reflected or reinforced three important changes in Mexico’s poverty alleviation policy. First, the Salinas administration began the shift toward targeting and providing means-tested benefits through a separate social development ministry rather than expanding social insurance through existing institutions. Second, PROGRESA’s emphasis on social investment and stimulation of demand for human capital through targeted and conditional transfers was a change from earlier efforts that had been directed toward increasing the supply of education and health-care infrastructure. Instead of emphasizing the building of new schools or clinics to meet existing demand or to reach marginal communities, PROGRESA sought to expand demand for welfare among the poor in marginal areas.₅ Third, PROGRESA’s efforts to achieve transparency and accountability in both the targeting process and the program outcomes were indicative of both the policy feedback effects of criticisms of PRONASOL and the new demands for accountability in an increasingly competitive political context. PROGRESA was created in response to growing rural poverty and therefore also to growing demand for targeted poverty alleviation spending. The debt crisis of the s had increased rural poverty, which continued to worsen between  and  in the southern regions, which were excluded from effective integration into international markets (de Janvry and Sadoulet ; Ros and Lustig ). The uprising of the Zapatista Army of National Liberation (Ejército Zapatista de Liberación Nacional, or EZLN) on January , , in protest over NAFTA was a clear consequence of deteriorating conditions in the countryside, especially in southern and southeastern Mexico. The  peso crisis further exacerbated income inequality and poverty (de Janvry and Sadoulet ; Teichman                   / 

). Since most of the rural poor are not engaged in formal labor relations, social insurance would have limited reach compared to noncontributory or targeted anti-poverty benefits. Rather than relying on traditional social insurance or universal income support programs to alleviate the situation, the Zedillo administration, with PROGRESA, targeted benefits and investment toward health and education. Such targeted investment in human capital is consistent with expectations for efficient social spending in a globalized economy because of its emphasis on cost containment and human capital. In one sense, demand for PROGRESA signaled a failure of economic liberalization to effectively reduce rural poverty, as some rural regions fell further behind in terms of economic development. Although international financial institutions since the late s have promoted programs similar to PROGRESA, the Zedillo administration shunned technical and financial support from these institutions and avoided their endorsement of or support for the program. In fact, the World Bank protested its exclusion from the development or funding of PROGRESA (World Bank b). Bank officials believe that the Mexican government did not ask for assistance because it wanted to make sure that PROGRESA was “publicly recognized as the initiative and policy of the government rather than of external development agencies” (World Bank b, ). Interestingly, the World Bank subsequently touted PROGRESA as an example of effective targeting of social policy to promote development (e.g., World Bank ) and endorsed it as a model for similar programs in other developing countries.

Social Assistance Strategies of Fox and Calderón As chapter  explains, the Fox and Calderón administrations both continued the trend of social insurance retrenchment, particularly with regard to pensions. These administrations also continued to expand targeted poverty alleviation, or means-tested, noncontributory benefits, and to refine and expand PROGRESA. Their expansion of PROGRESA is hardly surprising since all of the presidential candidates prior to the  election embraced the program, with each articulating his own vision for its future growth. In addition, Fox created a new voluntary public health insurance program to provide coverage to those not incorporated into social insurance through formal labor market participation. These policies reflect not only the ad hoc transformation of Mexico’s welfare regime but also the consolidation of important changes in Mexico’s economic development model and in its democratization.

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PROGRESA becomes Opportunities President Fox continued to operate PROGRESA throughout his first year in office and generally supported efforts to provide assistance to the needy or poor in marginalized regions. However, in , he transformed PROGRESA into Opportunities. Like PROGRESA, Opportunities, along with its operational guidelines, was approved as part of the president’s annual proposed budget law rather than as stand-alone social policy legislation. Although the program had informally begun covering some semi-urban and urban families in , PROGRESA officially expanded into urban areas throughout the country in . By the end of that year, the program had expanded so much that it was providing benefits to more than half a million semi-urban and more than , urban families in addition to . million rural families. By the end of Fox’s sexenio, the number of covered families had leveled off at  million, more than double the number covered at the beginning of Fox’s term in  (Oportunidades ). During this period, total program expenditures also grew appreciably; from  to , they tripled in real terms. During the same time period, the total average spending (including the costs of both benefits and administration) per family almost doubled in real terms. The percentage of GDP devoted to the program also more than doubled, rising from . percent of GDP in  to . percent of GDP in . President Calderón continued to support Opportunities, and program expenditures are projected to continue to grow, albeit at a slower pace. Although Opportunities grew during the Fox administration, its expenditures remained quite small, accounting for less than half a percent of GDP. Considering that  million families are now covered by the program, the per-family benefits (including administration costs) are still quite low, which reinforces the modest nature of program benefits. (See table . for details of the expansion of PROGRESA and Opportunities.) The Fox and then Calderón administrations’ continued support and expansion of PROGRESA into Opportunities is not surprising given the program’s popularity within Mexico and abroad. It is remarkably popular within Mexico in part because of the government’s concerted efforts to maintain the program’s reputation for transparency and fairness. Despite accusations by the PRD that Opportunities expenditures and beneficiary rolls prior to the  elections had been put to electoral use (González Amador, Muñoz, and Aviles ; Perez Silva ), most observers have lauded the program for its transparency and lack of political manipulation. Still, some have raised concerns about the effects of the program as it has expanded into urban areas (see, e.g., Boltvinik ). For ex                  / 

ample, some studies suggest that in urban areas children in beneficiary families have higher school attendance rates but often continue to work (Escobar Latapí ), which suggests that the program may have the unintended consequence of creating a double burden for some school-aged children. Others worry that even efficient targeting can have negative effects on social solidarity and social capital in communities where the program operates (Adato ). Nevertheless, the program continues to be widely cited by international financial institutions as a model poverty alleviation program (World Bank ). In fact, the expansion of Opportunities to urban families was supported in early  by a twentyfive-year, billion-dollar loan from the Inter-American Development Bank, that bank’s largest loan ever to Mexico (Coady ). The continuation and growth of PROGRESA/Opportunities signal the consolidation of this new form of welfare based on noncontributory social assistance targeted to the poor rather than on efforts to integrate the poor into existing social insurance programs. The program is popular with politicians because it targets the rural and urban poor most hurt by economic openness or slowdowns. The consolidation of Opportunities as the centerpiece of Mexican poverty alleviation policy also reflects the positive policy legacy of the PROGRESA program. The high-profile evaluations and widespread publicity of PROGRESA as a successful anti-poverty program increased the likelihood that President Fox would continue the program without making significant changes (Coady ). The Fox administration did relatively little to rebrand the program beyond changing its name. Likewise, President Calderón has done little to alter the program.

Popular Health Insurance In addition to expanding Opportunities to include the urban poor, the Fox administration increased access to health care for those not in the formal labor market and thus not covered by social insurance. Technically, the Secretariat of Health provided access to health care to those not covered by social insurance institutions. However, the ministry historically has had insufficient resources to meet the needs of the uninsured, especially in rural areas, which explains why programs like PRONASOL, PROGRESA, and Opportunities have relied on IMSS clinics to provide health care. Prior to his appointment as secretary of health in the Fox administration, Julio Frenk had advocated comprehensive

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health sector reform to extend coverage (Frenk et al. ), but such a wholesale reorganization of the health services provided by the IMSS, the ISSSTE, and the Secretariat of Health proved politically problematic during the Fox administration, as it had during the Zedillo administration. The social insurance institutions and their beneficiaries resisted efforts to pool their health-care resources for the uninsured with the Secretariat of Health. In the case of health sector reform, unlike pension reform, unions representing social insurance workers (e.g., the SNTSS or the National Union of ISSSTE Workers [Sindicato Nacional de Trabajadores del ISSSTE, or SNTISSSTE]) were unified with unions representing social insurance beneficiaries (e.g., the CTM, the FSTSE, and the UNT) in their opposition to merging social insurance and public health institutions and leveraging social insurance resources to extend coverage to those outside formal labor markets. In light of such opposition, the Fox administration created a new voluntary public health insurance program for the uninsured instead of seeking an integral health sector reform. After the  IMSS reform, self-employed workers had the option of enrolling in IMSS. However, very few workers chose this expensive option, which requires them to pay both the worker and employer contributions. Reducing further or eliminating the contribution requirements to encourage more uninsured workers to contribute voluntarily to the IMSS would not only require another reform to the IMSS law but also would likely encounter resistance from the IMSS workers’ union or IMSS beneficiaries. Consequently, the Fox administration created its new voluntary public health insurance program through the Secretariat of Health, which began subcontracting with the IMSS or the ISSSTE to provide health care for beneficiaries. This arrangement achieved the same result of giving uninsured workers access to health care provided by IMSS and ISSSTE institutions (or even private medical care providers) without directly confronting the IMSS union, the ISSSTE union, or their beneficiaries. In , the administration began a pilot program in five states for the Popular Health Insurance program (Seguro Popular de Salud). By , the program covered almost , families in fourteen of the thirty-one Mexican states. The administration finally made a formal proposal to inaugurate the Popular Insurance program in November —just before the  midterm congressional elections—by reforming the General Law on Health. A large multipartisan majority passed the reform in April .₆ Opposition to the program came from leftist legislators who objected to the copayment required of families to enroll in the program (Alonso Raya ).

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When program regulations were adopted in April , Popular Insurance was made noncontributory for families in the lowest two income deciles, with a progressive premium scale for higher-wage workers. Because the program is voluntary, families must apply for coverage. When they do apply, program officials assess their income to determine their premium. If a family can provide evidence of enrollment in any of the federal government’s targeted poverty alleviation programs, including Opportunities, they are automatically exempt from any contribution requirement. In December , the administration eliminated contributions for families in the third lowest income decile if the family has at least one child under five years of age. Since its official creation, Popular Insurance has grown significantly. By the end of , the program was providing benefits to more than , families in twenty-one states. In , the number of beneficiaries more than doubled, to . million (or nearly  percent of the population), and the program operated in all but one state and the Federal District. The following year, the program achieved national coverage. By the end of the Fox administration, it was providing health-care insurance to more than  million families (Calderón ). In the first half of , the program enrolled almost half ( percent) of those estimated to lack health insurance. More than a third ( percent) of the program’s beneficiaries are also beneficiaries of Opportunities. Of the families enrolled in Popular Insurance,  percent are urban and  percent are rural residents. The program largely covers the health-care needs of the poor. In , . percent of enrolled families were in the bottom income decile, . percent in the second, and . percent in the third (Comisión Nacional de Protección Social en Salud [CNPSS] ). The number of ailments and medicines covered by the insurance program also grew during the Fox administration, with the number of covered illnesses tripling during the period from  to . By , the plan covered more than three hundred different medicines. After taking office, President Calderón announced changes to the operating rules of the Popular Insurance program. He also started a new initiative called Medical Insurance for a New Generation (Seguro Médico para una Nueva Generación), promoting it as an indication of the government’s commitment to provide health insurance to all those born in Mexico on or after January , , who do not have coverage through the IMSS or ISSSTE. Although the program promises an increase in the range of illnesses covered and includes catastrophic care coverage, it is not otherwise much different from the existing Popular Insurance. Benefits are still open only to those families not covered by existing social insur-

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ance, and families who exceed the income levels of the lowest three deciles must pay premiums to receive the insurance. Congress approved the health-care reform legislation that was necessary to formally implement Popular Insurance when the Fox administration was otherwise facing significant resistance to its legislative agenda, especially with regard to tax reform. That lawmakers supported the creation of Popular Insurance reflects how the expansion of welfare benefits can actually be facilitated by electoral competition and the presence of multiple political parties in Congress. Comparing the successful creation of Popular Insurance to the failures of other reforms on Fox’s legislative agenda reveals how the diffuse costs and potential electoral benefits of noncontributory welfare benefits contribute to the expansion of such benefits. One can also explain the demand for a program like Popular Insurance in terms of the changes in the labor market that resulted from economic liberalization. The growth of Mexico’s formal labor market has slowed in recent decades, making it less likely that a larger proportion of the working population will receive social insurance coverage. The  IMSS reform allowed workers to enroll in IMSS voluntarily to receive health care and other benefits—an effort to improve coverage for the self-employed and informal-sector workers. With discouragingly low take-up rates for self-enrollment, however, the Fox administration, in response to its failure to expand coverage through voluntary, contributionbased health insurance, created Popular Insurance. Its noncontributory design for the lowest income deciles was designed to expand coverage to the uninsured, who tend to be concentrated in low-wage sectors. In this way, the program’s creation was a response to the growing demand for health insurance in a context where the liberalization of the economy eroded opportunities for formal labor market participation and access to contributory social insurance. In addition, the Popular Insurance program grew out of the resistance of existing social insurance institutions and their beneficiaries to incorporating informal sector workers into social insurance on a noncontributory basis. The IMSS and its beneficiaries throughout the s were skeptical of government promises to fully fund the expansion of health care to the uninsured, and they resisted efforts to reform the health-care sector. In this way, the existing configuration of institutions and interests also shaped future institutional development. The Secretariat of Health administers the Popular Insurance and establishes contracts with other public health-care institutions, such as the IMSS, and with private health-care providers to serve insured families in regions where the ministry does not have sufficient infrastructure to meet demand. Like the design of other

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noncontributory social assistance programs since the s, the development of Popular Insurance is another instance of welfare regime transformation through institutional layering.

Trends of the Fox and Calderón Sexenios The expansion of Opportunities and the creation of Popular Insurance during the Fox administration illustrate Mexico’s ongoing transformation of welfare through institutional layering. Both programs target benefits to the rural and urban poor, most of whom are excluded from traditional social insurance due to their work in low-productivity or informal sectors. Rather than promoting formal sector employment and the development of universal social insurance, the government provides benefits for informal sector workers and the poor through targeted human capital investment. This welfare strategy is largely consistent with expected effects of economic liberalization. It is also popular among politicians who want to cultivate political support among the unorganized urban and rural poor. Interestingly, the most vocal opposition to expanding targeted welfare programs came from the left-leaning groups—particularly the PRD—which would prefer universal social insurance. Further, because systematic reform of existing welfare institutions was politically infeasible and blocked by vested interests, new institutions were created to address rising demand for benefits and services for those not covered by traditional social insurance. In addition, the positive feedback effects and perceived benefits of PROGRESA helped ensure that the Fox and Calderón administrations would continue to support and invest in the program.

Explaining the Expansion of Social Assistance in Mexico The expansion of social assistance and noncontributory welfare benefits since  reflects a shift in Mexico’s welfare regime toward a residual welfare model. The dual processes of economic and political liberalization that accelerated during the second half of the s both undermined the ruling party’s existing cross-class coalition and prompted the party to begin building a new coalition after its near loss of the presidency in . The ruling party had historically used social insurance to generate support among the organized working class, but as

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the organized working class shrank, it was forced to develop new forms of welfare benefits to attract the support of the growing informal sector. Noncontributory social assistance became a core strategy of the party in rebuilding its cross-class coalition; the party began seeking the support of the unorganized rural and urban poor to replace the declining support of the old corporatist pillars of the regime (see the above discussion on PRONASOL). Although PROGRESA and Opportunities were subject to less political manipulation and were more transparent in their execution than was PRONASOL, these two programs continue to be popular with politicians because they target a growing segment of the unorganized voting population, which is important in the context of fierce electoral competition. In the meantime, globalization pressures, of which economic reforms were a part, constrained the state’s capacity to use social insurance to compensate workers dislocated by liberalization. As discussed in chapter , policy makers pointed to globalization pressures as a reason to constrain social insurance reforms. Qualitative and quantitative studies of social insurance in the region have emphasized the tendency toward social insurance retrenchment in economies with the greatest economic openness (Kaufman and Segura-Ubiergo ; Wibbels ). Because the retrenchment versus compensation debate often focuses on traditional social insurance, it misses the tendency, especially in Latin America, to replace and or augment social insurance with targeted or noncontributory social assistance.⁷ Further, economic liberalization in Latin America increased not only demand for compensation but also the size of the informal labor market—characterized by precarious and low-quality employment—so the constituency needing targeted social assistance has grown. Because most Latin American countries, including Mexico, do not have funded unemployment insurance and because reforms have increased informal-sector employment, traditional contribution-based social insurance is ill equipped to address the new risks and demands for safety nets. Resisting pressures from stakeholders of existing social insurance, who oppose the expansion of services to noncontributors, governments have turned to noncontributory social assistance rather than social insurance to compensate citizens in a global economy. Indeed, President Salinas used PRONASOL specifically to compensate the rural and urban poor likely to be hurt by economic liberalization (Salinas de Gortari ). To the extent that globalization constrains the social policy options of governments and creates retrenchment pressures (Mosley ), targeted social assistance has the added advantages of being more efficient and more consistent with the neoliberal economic model. The World Bank and other international insti-

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tutions have widely promoted the efficiency of targeted social assistance (e.g., World Bank b). Since the Salinas administration, the Mexican government has made support for human capital development part of its targeted assistance, and human capital has increasingly become the focus of such programs. For some, such investment in human capital is also critical to maintaining competitiveness in a global economy (World Bank b, ). The design of targeted social assistance in Mexico, especially the conditional cash transfer programs in place since the Zedillo administration, reflects a concern not only with mitigating poverty but also with developing human capital in the medium to long term. While the globalization literature predicts welfare regime transformation, including social insurance retrenchment and a shift toward means-tested targeted social assistance, the politics of welfare expansion are fundamentally different from the politics of welfare retrenchment because of the influence of institutional legacies. The costs of retrenchment are often concentrated among beneficiaries, while the benefits, such as economic efficiency and growth, are dispersed (Pierson ). On the other hand, the costs of expansion are often dispersed while the benefits are concentrated among new recipients. Cost and benefit concentration or dispersion is important because it affects collective action costs. In Mexico, the costs of social insurance retrenchment are concentrated among the workers of social security institutes who face privatization and the formal private and public sector workers covered by these benefits. While the potential benefits of retrenchment include increased economic efficiency, improved services, economic growth, and reduced budget deficits, they are highly uncertain from the workers’ point of view. Furthermore, if these benefits are realized, they are distributed among a broad, unorganized segment of society. On the other hand, the expansion of means-tested, noncontributory social assistance benefits the growing population of unorganized urban and rural poor, particularly those not in the formal labor market. The costs, too, are distributed widely because general government revenues fund targeted social assistance. In short, while the costs of social insurance retrenchment are narrowly concentrated among highly organized sectors and the benefits are dispersed, the costs of expanding noncontributory social assistance are widely distributed across society and the benefits are concentrated among unorganized rural and poor sectors. This configuration of costs and benefits facilitates the expansion of noncontributory social assistance. It also explains why the social insurance retrenchment described in chapter  was only partial, whereas the expansion of social assistance since the s has been more consistent and sustained.

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The process of political liberalization, or democratization, that accelerated in the late s also contributed to the expansion of noncontributory social assistance. Democratization was driven by increased political competition, which first emerged as electoral competition and later could be seen as veto players increasingly influenced the policy-making process. Both of these aspects of Mexican democratization—increased electoral competition and influence of veto players —created incentives for politicians to provide welfare for the growing unorganized poor. On the one hand, clientelistic benefits, or selective or excludable benefits targeted to voters, are likely to be more common with low levels of electoral competition, when parties with monopolies or near-monopolies use clientelism to deter defection (Diaz-Cayeros, Magaloni, and Weingast ). On the other hand, higher levels of competition are likely to reduce clientelism in favor of providing nonexcludable goods, either universal or geographically concentrated “pork,” especially when such goods are distributed by a centralized authority.⁸ When the intensity of electoral competition varies geographically, as it has in Mexico since the s, politicians are likely to provide more geographically distributed public goods, especially to areas where they face increased competition (Diaz-Cayeros and Magaloni ; Hecock ), and are more likely to shift allocation of resources from core constituents to swing voters, as occurred in the pattern of PRONASOL expenditures (Diaz-Cayeros and Magaloni ; DiazCayeros, Estévez, and Magaloni ) and in the tendency to improve implementation transparency, especially of the nonexcludable transfers in PROGRESA and Opportunities over the course of the Zedillo, Fox, and Calderón administrations. Increased political competition also multiplies the number of partisan veto players and increases the importance of institutional veto points. As a result, social insurance retrenchment is likely to be more difficult given the concentration of costs among a highly organized group that can block reform efforts when no single party controls Congress. In contrast, multiple partisan veto players and the lack of a single party majority in Congress may actually contribute to the expansion of social assistance due to logrolling. This is especially likely to be true for noncontributory, means-tested social assistance, for which political parties can claim credit in local and state elections. The balance of power among the political parties in the Mexican Congress has equalized since the late s, and the effect has been increased transparency in social welfare programs like PROGRESA/Opportunities and in the allocation of targeted welfare infrastructure funding. This is evident in the new requirements adopted in : rules that the executive uses for transfer programs must be published, and subnational distribution of infrastructure

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funds must occur according to a fixed formula. The increase in decentralization of infrastructure funds was also a result of opposition influence in Congress. The expansion of social assistance in Mexico since the late s also highlights the role of existing institutions in shaping future welfare regime change. In general, existing institutions, and their stakeholders, resist dramatic institutional changes that would challenge their privileges or benefits, as illustrated by efforts to block comprehensive health sector reform. In addition, a backlash against the political manipulation involved in PRONASOL influenced the development of its successors, including both FAIS for infrastructure development and PROGRESA; these programs are recognized for their transparency and efficiency in improving welfare. Likewise, the positive political feedback on the success of PROGRESA has guaranteed its survival through the democratic transition, with only a name change by the Fox administration. Since the late s, policy makers have created new institutions to meet the demands for welfare in Mexico’s liberalized economy and democratized polity. While economic liberalization has increased demand for new forms of welfare, democratization has created pressure for reorganization of welfare delivery and ultimately the transparency of social assistance. When juxtaposed against the partial retrenchment of traditional social insurance during the same time period, this layering of new social assistance and noncontributory insurance institutions has now been sustained by at least three administrations and is beginning to consolidate significant changes to Mexico’s welfare regime. The comparison highlights the importance of looking at social policies across multiple domains— including pensions, health care, and social assistance—to understand and explain the overall pattern of welfare regime change. In Mexico, the pattern of change that has emerged is one in which the definition of social citizenship rights continues to differentiate between those in the formal and informal labor markets. Although programs like Opportunities and Popular Insurance may potentially enhance equity by providing the urban and rural poor with access to benefits, to the extent that the benefits are means-tests and less comprehensive than those provided by social insurance, Opportunities and Popular Insurance create new forms of stratification within a more liberal Mexican welfare regime.

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M EXICO IN COM PAR AT IV E PERSPEC T IV E Welfare Development in Chile, Argentina, and Brazil

A   of the twenty-first century, Mexico’s welfare regime is a patchwork of both social insurance policies for those in the formal labor market and social assistance for the poor, often in rural areas or outside the formal labor market. In this first decade of the century, social insurance provided by the IMSS or the ISSSTE covers about half of the population, or an estimated . million persons (Calderón ). Of the total population, about  million are estimated to be living in poverty and of those,  million are in extreme poverty (Secretaría de Desarrollo Social [SEDESOL] ).₁ The largest anti-poverty program, Opportunities, provides conditional cash transfers to  million urban and rural households, which leaves a significant number of poor families out of the program. Thus, while the expansion of social assistance provides social protection to more Mexicans, it falls short of universalizing social protection coverage. At the same time, replacement rates for social insurance have been eroded by reforms, and many pensioners in the future will likely receive minimum pensions. Social assistance benefits are even more meager, so as not to provide disincentives for



work. Overall, the pattern of policies and benefits suggests a less generous welfare regime that covers a larger percentage of the population. The net effect reflects an abandonment of efforts to expand access to social insurance through formal labor market employment and an alternative strategy intending to ameliorate poverty and the consequences of the growing informality of labor markets. This new pattern of social protection also perpetuates and even formalizes some of the stratification of rights and benefits that characterized Mexican welfare throughout the twentieth century. Although the ISSSTE reform sought to homogenize rights and benefits between public and private sector workers, there remains a large gap between those who are covered and those who are not covered by national social insurance institutions.² This stratification between those employed in the formal labor market and those working in the informal labor market or not employed at all continues to be a major challenge to the establishment of universal social citizenship rights and a progressive welfare regime. To the extent that the Popular Insurance program provides minimum health insurance to families in the lowest two income deciles, it is a step toward universalizing the right to health insurance. This advance should not be understated; it has the potential to improve the health outcomes for a large minority of Mexicans. On the other hand, the program leaves uninsured about  percent of those with no coverage from any of the social security institutes, which probably includes informal workers who fail to meet the means test for free enrollment and those beyond even informal labor markets or in communities without sufficient public health resources to support the program. At the same time, the decision to expand Opportunities and similar programs rather than programs to foster formal sector employment and social insurance expansion indicates acceptance and formalization of the gap between the formal and informal labor markets. So, although the efforts to provide noncontributory benefits to the poor have the potential to enhance welfare and potentially equity, these programs do not address the underlying structural inequalities in the labor market and in the development model. All of these structural problems contribute to persistent poverty and social inequality. Recent changes to Mexico’s welfare regime also redistribute the burden for welfare provision among the public sector, the private sector, and the family. Reforms to public pension systems and changes in the provision of public health care have enhanced the role of the market. Not only does the private sector administer pension funds for private sector worker pensions, but in the future it will also administer most public sector pensions. Further, the values of future pensions will be determined by the performance of Afore market investments. The state’s role

 \                             

is restricted to regulating the privatized pension system and providing funds necessary for minimum guaranteed pensions. Since the government has not formally privatized the health-care services provided by the IMSS and the ISSSTE, both organizations have instead increasingly contracted with the private sector to provide health care to beneficiaries and support services for the institutes. Even social assistance programs have increasingly used market provision of goods rather than government distribution. President Fox, in particular, sought to reduce government distribution of foodstuffs and other benefits and emphasize instead cash transfers as part of Opportunities. The substantial proportion of Mexicans not covered by social insurance, Popular Insurance, or social assistance programs must rely on the market for their welfare needs. Often the Mexican family will be expected to provide for the welfare of members who are neither eligible for social protection from the state nor can afford to buy services in the market. In some ways, the structure of benefit rules for the social security institutes often acknowledges the role of family in welfare provision by enabling workers to provide insurance coverage not only to children but also to adult relatives who are financially dependent on the worker. Studies suggest that many elderly Mexicans rely on family support in addition to pension income and that the privatization of pensions may increase the need for families to support their elderly members (Parker and Wong ; Dion ). The family will likely remain a central source of welfare for many Mexicans, either by providing access to social insurance or by direct intrafamily transfers.

Theoretical Implications of Workers and Welfare in Mexico This book has argued that the politics of welfare have been shaped by both the role that organized labor has played in the ruling cross-class coalition and the impact of institutional legacies in shaping class power and thus endogenous institutional change. The analysis offers three principal theoretical contributions. First, the application of a class coalition approach to explain policy making in Mexico highlights the usefulness of class-based analyses, even within an authoritarian regime. In general, the capacity for organized labor to articulate and mobilize on the basis of demands for welfare benefits may be constrained in an authoritarian regime. However, to the extent that an authoritarian regime, like that in twentieth-century Mexico, relies upon the organization and participation of subordinate classes to maintain its political legitimacy, organized labor may be

                             / 

able to use its position in the cross-class ruling coalition as leverage to promote the expansion of welfare benefits. The political capacity of organized labor in such a situation is never absolute, and as the Mexican case illustrates, an authoritarian regime may combine welfare benefit concessions with selective repression. This interpretation of the role of organized labor under the PRI regime suggests that organized labor has had considerable political capacity and leverage, but such an interpretation is nonetheless largely consistent with recent analyses that highlight the dynamic nature of labor-state relations in Mexico (see Collier ; Middlebrook ). Second, the comparative historical analysis of the relationship between class coalitions and welfare outcomes spotlights the ways in which such coalitions and welfare institutions are embedded in broader economic development models and institutions. The constellation of class support that sustained the PRI regime was also central to the import substitution industrialization or ISI development model. As long as ISI continued to expand industrial employment and sustained economic growth, both organized workers and industrialists were willing to lend their political support to the authoritarian regime—a typical “authoritarian bargain” (Haggard and Kaufman ). The s debt crisis and subsequent economic restructuring changed the structure of the labor market and therefore the size of the organized labor movement and its capacity to demand the same role in the ruling coalition that it had previously enjoyed. In addition, the liberalization of the economy and coincident globalization of markets and capital further increased the relative leverage and political influence of capital and employers within the coalition. Although democratization, in theory, should have created the potential for increased policy influence among the popular sectors, globalization has weakened formal organizations, like labor and peasant unions, and swelled the ranks of the poor rural and urban informal sectors. Instead, Mexican governments since the s, including the democratically elected governments of the s, have expanded targeted and noncontributory social assistance and health care in an effort to attract these poor voters. The shifts in the class structure as a result of economic restructuring thus affect the composition of the ruling coalition and its strategies for maintaining popular support, which is reflected in shifts in social policy outcomes. Third, the analysis of the historical development of welfare institutions in Mexico provides a window through which to better understand processes of institutional change. In particular, welfare institutions can affect the distribution of political power in ways that shape future welfare change. For example, benefits

 \                             

outlined in labor contracts for some central government employees in the s created an expectation and demand among other government employees for similar benefits in the new social insurance system for public sector workers. As a result, rather than incorporate government employees into the existing social insurance system as originally planned, the regime was pressured to create the ISSSTE, which met the raised expectations of government workers. The creation of new, powerful interest groups by welfare institutions can also affect institutional change by increasing the likelihood of layering as a mode of change. For example, the expansion of public health insurance and public provision of health-care services in the s had the unintended effect of creating a large national union of health-care workers and support staff in the IMSS. When policy makers sought to unify the national health infrastructure in the s, their efforts were blocked by the IMSS employees. In order to extend health insurance protections to the poor not covered by social insurance, the Fox administration created a new institution, Popular Insurance, to be layered alongside existing benefits. Similarly, workers who contribute to social insurance have resisted government efforts to deliver welfare benefits and health care to the poor through social insurance institutions, prompting the government to instead create new targeted social assistance programs to meet those needs. Policy legacies created by welfare institutions can also contribute to institutional stability through both resistance to change and reinterpretation. For instance, efforts to privatize health-care services have been repeatedly rebuffed by social insurance workers. At the same time, the government has been adept at reinterpreting existing institutions to pursue new ends; in response to privatization resistance, the government has increasingly subcontracted for services, thus creating de facto privatization without changing existing laws. .

Implications for Understanding Recent Trends in Mexican Politics Recent welfare politics in Mexico illustrate two important and relatively new trends: a transformation in the relationship between labor organizations and political parties and the growing importance of Congress and the judiciary as loci for policy making. The book’s discussion of welfare during the PRI regime provides a window into the transformation of corporatism in Mexico by demonstrating the ways that labor unions used their participation in and support for the PRI’s ruling

                             / 

coalition to influence the provision of social insurance. The explanation of social insurance retrenchment and social assistance expansion since the s then provides insight into the redefinition of labor’s role in the PRI coalition during economic and political liberalization and in national politics after the  transition. While economic and political liberalization weakened the relationship between organized labor unions and the PRI, those changes also provided unions with new opportunities for organization, mobilization, and alliances. The process of political liberalization provided new opportunities for labor unions to redefine their relationships with the PRI and each other. For example, in the s, several unions formally declared themselves “independent” of the PRI; they reformed their statutes to eliminate provisions that had required all union members to be party members. In practice, however, many of the “independent” unions, such as the SNTSS and the SNTE, maintained close, informal relationships with the PRI. Throughout recent history, one member of the SNTSS Executive Committee has usually held a PRI proportional representation seat in the Chamber of Deputies. This arrangement continued even after , when the SNTSS helped found the UNT, the national independent union federation led jointly by the SNTSS, the STRM (Sindicato Telefonistas de la República de México, or Telephone Workers Union of Mexico), and the STUNAM. Even after assuming a leadership role in the UNT, the secretary general of the SNTSS served as PRI deputy for – in the Chamber of Deputies. At the same time, democratization has created opportunities for unions to diversify their political alliances. In , the SNTSS sought to negotiate deputy candidacies with both the PRI and the PRD (López González ). The SNTE underwent similar organizational changes even though its leadership was still intimately connected to the PRI. Although the SNTE officially changed its statutes to become independent of the PRI in the s, the union’s secretary general, Elba Esther Gordillo, was second in command at the PRI until late  but was expelled from the party after the  elections. Like the leadership of the SNTSS, the SNTE historically claimed seats in Congress under the banner of the PRI and continued to do so even after becoming “independent.” Official independence from the PRI has allowed some dissident teachers or leaders of subnational delegations of the organization to seek alliances with other political parties. The result was the election in  of at least fourteen SNTE members to the Chamber of Deputies, nine of which have held leadership positions in the union organization. Of these fourteen, five represent PAN, three each represent PRD and PRI, two are from PANAL, and one is from PT (Partido

 \                             

de Trabajo or Labor Party).³ The SNTE also led in – to an exodus of more than half the member unions from the FSTSE—an official PRI organization —to form the FEDESSP. Fox’s secretary of labor granted the new organization legal status, and the Supreme Court upheld the registration. The new federation was officially independent, but given the role of the SNTE in its formation and Gordillo’s role within the PRI, it was expected to either work closely with the PRI or become a political vehicle for Gordillo. In the months before the  election, a new party did emerge, PANAL, made up of Gordillo’s supporters within the SNTE and the FEDESSP, though Gordillo herself did not run for national office. The democratic transition in Mexico has opened the way for organized labor to distance itself from the PRI, create new organizations, and seek new political alliances to influence policy making. What remains unclear in the short term is whether the fragmentation, decentralization, and reorganization of the labor movement will help labor regain its waning influence in national politics and policy making. On the one hand, as parties compete for voters and seek alliances, even informally, with union leaders and union organizations, the potential exists for unions to capitalize on those relationships and demand more influence on policy. The danger, of course, is that some of the new relationships or alliances between union and party leaders may be recreating some of the pernicious patterns of the past. On the other hand, these changes in labor organization may dilute labor’s political voice and facilitate divide-and-conquer strategies to undercut their ability to influence policy outcomes. The politics of welfare also exemplify the growing importance of Congress and the judiciary. Political liberalization has shifted the balance of power between the executive and Congress toward the Congress. The Congress historically provided rubberstamp approval for executive proposals, and the important political bargaining would happen within the PRI and outside formal political institutions, like Congress. Since the PRI lost its majority in the Chamber of Deputies in , Congress has become a focal point for bargaining between political parties and thus has begun playing a bigger role in shaping policy outcomes. Notwithstanding the growing role of Congress in policy making, it is still hampered by limited access to information, expertise, and resources compared to the executive. For example, Congress members regularly complain that the executive branch does not share sufficient information or does not do so in a timely manner that would allow them to evaluate certain legislative proposals, such as proposals to reform the energy sector. Individual legislators and congressional committees also often lack sufficient staff or expertise to effectively challenge ex-

                             / 

ecutive legislative proposals. Legislators, unless they also hold leadership positions in external organizations, often have only one personal assistant and may share a receptionist with other legislators. Legislative committees may have several staff members, but these staffers do not always have advanced degrees or specialized qualifications. For instance, the Commission on Social Security of the Chamber of Deputies is directed by a former leader of the SNTSS and employs only one actuary. Although the commission can hire external consultants, it finds itself understaffed compared to the teams of actuaries in the IMSS and the ISSSTE (Alonso Raya ). In addition, the Mexican Congress lacks extensive institutional resources to provide independent research and expertise to support legislators. The Superior Auditor of the Federation (Auditoría Superior de la Federación) is an entity that provides some support and research along the lines of the Government Accountability Office and the Congressional Budget Office in the United States, but Mexican legislators lack a resource comparable to the Congressional Research Service. In Mexico’s Senate, the Institute for Legislative Investigation (Instituto de Investigaciones Legislativas) provides research support for senators, but it is directed by a group of senators that sets the research agenda for the institute. Similarly, the Chamber of Deputies has several centers organized around legislative issues that provide research reports for the Chamber. The institution most comparable to the U.S. Congressional Research Service is the Chamber of Deputies’ Service for Investigation and Analysis (Servicios de Investigaciones y Análisis, or SIA), which, as part of the Chamber’s library, provides nonpartisan support, research, and analysis as needed by deputies. Though the Service for Investigation and Analysis is directed by a researcher with an advanced degree, its staff is small and responsible for writing most of the research reports. Some of these research institutions have either been created or been granted more independence since the democratic transition, but they still lack the resources and capacity to effectively provide a counterweight to the executive branch, especially regarding highly technical issues. Like the Congress, the judiciary has recently become more important in policy making. In part, this shift derives from judicial reforms adopted in ; the entire Supreme Court was also replaced at that time. These reforms increased the qualifications for Supreme Court justices, changed the appointment process, and established constitutional review prerogatives in certain situations. In situations not covered by the reform, the Court establishes jurisprudence only after five consecutive rulings on the same issue; otherwise, decisions apply only to the

 \                             

plaintiff in any given case (Domingo ). The result has been an increase in judicial independence and an apparent willingness to decide political or potentially controversial cases. The decision to allow the formation of multiple government employee federations is just one example. Political actors, including unions, have also turned to the courts to try to block unpopular policies, instead of or in addition to taking to the streets in protest. Following the August  reform of the SNTSS pension system, the union filed a lawsuit challenging the legality of the legislation’s effect on the union’s ability to negotiate its labor contract; the Supreme Court upheld the legislation. Likewise, the FSTSE challenged the secretary of labor’s decision to register the FEDESSP as a new labor federation, and the Supreme Court ruled against the  law that limited government employees to only one federation. In an effort to challenge the constitutionality of the ISSSTE reform law of , workers filed more than , petitions asking to be exempted from the law. The Supreme Court upheld the constitutionality of most provisions in the reform law in . In sum, this study provides both an insight into the role of organized labor in the twentieth-century Mexican politics of welfare and a glimpse of recent changes in the policy-making process. It shows in particular that Mexican corporatism is being redefined informally through organizational changes within and among unions and their alliances with political parties. In addition, the Congress and judiciary are playing increasingly important roles in the definition of policy. To the extent that unions seek representation in Congress and appeal directly to the judiciary, unions acknowledge and have tried to adapt to the changing institutional landscape. The effectiveness of these strategies for replacing the political influence lost with the decline of PRI hegemony or for blocking unpopular reforms remains to be seen.

Mexican Welfare in Comparative Perspective Like the existing literature on the origins and early development of Mexican welfare (e.g., Spalding ), many studies of welfare in Chile, Argentina, and Brazil make similar claims about states’ preemptive adoption of social insurance policies to forestall the demands or mobilization of workers (see Malloy  on Brazil and Isuani  on Argentina).⁴ In addition, general discussions of twentieth-century Latin American politics often set aside Mexico as an exception to general tendencies in the region such as military intervention in government and regime instability.

                             / 

However, Mexico’s experience is similar to that of Chile, Argentina, and Brazil in terms of the role of cross-class coalitions and policy legacies in welfare policy development. Chile, Argentina, and Brazil were chosen for the comparison study for several reasons. First, these countries reflect a variety of corporatist arrangements in Latin America. Collier and Collier () characterize Chile and Brazil as cases of state incorporation of labor into national politics with little labor mobilization, and they view Argentina and Mexico as cases of party incorporation where labor was mobilized for political support. Second, the countries vary with regard to their labor endowments and social homogeneity. Chile and Argentina are relatively small, with more limited indigenous populations and less abundant labor, compared to Brazil and Mexico, which are large countries with abundant sources of labor available from large rural or indigenous populations. Third, Mexico and Chile were predominantly mineral export economies, while the Argentine and Brazilian economies depended largely on primary sector agricultural exports at the time social insurance was introduced. Fourth, the countries also exhibited differing types of party systems and political regime over the course of the twentieth century. Finally, these countries exhibited variations in their welfare regime development throughout the period of study, including differences in coverage, benefits, degree of stratification, degree of public versus private provision, and defamilialization. Despite these variations, in these cases organized labor articulated demands for social insurance prior to its adoption; the role organized labor played in the existing class coalition shaped initial social insurance institutions; policy legacies affected the power of organized labor and thus the future development of policy; and economic and political liberalization of the s and s, through its impact on labor markets and the political influence of organized labor, contributed to the partial retrenchment of social insurance and expansion of social assistance.

Chile The antecedents to social security institutions in Chile go back to the mutual aid societies of the eighteenth century (Bergquist ; Mesa-Lago ). Over time, the mutual aid societies developed into modern labor organizations. Strikes became more common in the late nineteenth century, and the first federation of workers, representing primarily railroad workers, was founded in  (MesaLago ). In the late s and early s, union and leftist party memberships

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grew rapidly. Although nitrate production had once dominated the economy, by  manufacturing had surpassed mining in importance (Loveman , ). At the same time, the socialists, who dominated labor organizations in the nitrate production industry, leveraged their position for national influence in labor organization (Bergquist , –). The Worker Federation of Chile (Federación Obrera de Chile or FOCH), which had been formed in  by railroad workers with the support of conservatives, later purged its moderates and in  joined the Red International of Labor Unions and formed links to the Democratic Party and the Socialist Worker Party (Loveman ). Although the election of President Arturo Alessandri Palma in  is often attributed to the rise of the middle class (see, e.g., Oppenheim , ), Alessandri had appealed to the working class for support in the context of a post–World War I recession and an increase in labor protest and unrest (Mesa-Lago ; Loveman ). The labor unrest did not abate after Alessandri took office, and instead, in , labor organization and protest grew again as the economy improved (Bergquist , ). In the context of labor mobilization and unrest between  and , two proposals for social insurance were introduced into Congress: one from the Liberal Party and one from the Conservative (Borzutzky , ). Like other welfare and labor legislation, the proposals were set aside, and, instead, the Congress considered a law to pay legislators salaries, even though the government was behind in wage payments to civil servants and the military. In late August , a group of junior military officers protested both the proposal to pay legislators and the Congress’s “failure to pass social legislation in the midst of growing labor conflict” by filing into the chamber gallery to watch deliberations (Loveman , ). Shortly thereafter, in September, officers submitted a list of demands to President Alessandri that included social security laws and pension, salary, and promotion laws for the military. Alessandri vetoed the congressional salary law, the Congress then passed all of the legislation requested by the military, and Alessandri went into exile until a constitutional convention was organized in  (Loveman , –; Borzutzky ). Thus, Chile’s first national social insurance and labor legislation was adopted by democratically elected officials, but they did so only under pressure from military leaders who were concerned about ongoing labor unrest and conflict. The legislation adopted in  and  provided a range of social insurance coverage and benefits to white- and blue-collar workers, including workers’ compensation, old-age pension, and sickness benefits (Mesa-Lago ; Borzutzky

                             / 

, ). Like the labor regulations adopted at the same time, the social insurance provisions were segmented by occupation, with different laws for white- and blue-collar workers (Mesa-Lago ; Borzutzky ). Despite the new laws, implementation was limited because enacting legislation was not immediately adopted (Loveman ). Some segments of organized labor used the provisions of the social security law that required workers to contribute to their own benefits as a means to mobilize workers and expand their organizations; they also lobbied the government to make employers fund the new benefits (DeShazo , – ). In , President Carlos Ibañez del Campo (–) incorporated some of the social reform laws of  into a new labor code but also increased restrictions on the ability of labor groups to organize autonomously and strike. This combination was not unlike the inducements and constraints in Mexican labor law or the Social Insurance Law of . The reform aimed to establish control over the labor movement and purge it of extreme elements (Loveman , ; Loveman ; Borzutzky ). Early- to mid-twentieth-century corporatist and political institutions shaped the strategies that unions used in seeking the expansion of social insurance benefits. Because corporatist institutions limited the unions’ ability to mobilize and demand benefits using traditional means, organized labor sought alliances with political parties and democratic institutions that could apply pressure on their behalf. Because corporatist institutions fragmented the labor movement and democratic political institutions created a number of potential political party allies, unions often sought clientelistic relationships between workers and parties to gain access to the state. Unions used these relationships to pressure for “stategranted benefits to compensate workers for the decrease in the standards of living and the structural inequality” (Borzutzky , –). Thus, corporatist and political institutions contributed to labor movement strategies that expanded the social security system by enshrining particularistic benefits for particular unions in a web of legislation. The number of unions and of unionized workers tripled during the s (Bergquist , ; Loveman , ). Political pluralism, established by the Constitution of , enabled the most organized unions to use political alliances with various parties to demand the expansion of particularistic social security benefits. Between  and , social security expanded through the adoption of approximately , laws, decrees, or regulations and an additional , collective agreements containing social security provisions (Borzutzky , ). Many of these new laws were adopted after mobilization or strike activity by the

 \                             

very unions the laws would benefit (Mesa-Lago ). According to Silvia Borzutzky (, –), once one union received a particular benefit or social security concession, other unions would use the benefit or concession as the basis for their claims to receive a similar or more generous benefit. This pattern of sequential negotiation and expansion by successive unions reflects a policy feedback process—in which unions base their own demands for welfare on observed gains by other unions with similar political resources. Because the unions as a whole had widely varying political capacities and access to parties, the expansion of benefits was fragmented and unequal, and a highly stratified system of benefits was the result. The labor laws of the s also institutionalized a separation between bluecollar and white-collar workers that was to shape the future development of welfare policies. A  law granted blue-collar workers the right to health care, and a  law required all insurance, or social security, funds to provide preventative care and illness benefits (Borzutzky ). Later, when the state created public institutions to provide health-care benefits to workers, the new institutions reinforced the existing stratification between white- and blue-collar workers. Whitecollar workers received preventative care from the National Medical Service for Employees (Servicio Médico Nacional para Empleados, or SERMENA) in  and curative care later in . Blue-collar workers received health care (preventative and curative) from the National Health Services (Servicio Nacional de Salud, or SNS) beginning in ; it also provided curative care to indigents (Barrientos and Lloyd-Sherlock ; Borzutzky ). The funding for pensions, health care, family allowances (almost half of all social insurance expenditures), and other benefits was initially based on tripartite contributions from workers, employers, and the state, though pressure from workers and employers for exemptions led to the proliferation of different financing schemes. By the s, approximately fifty financial subsystems financed more than two thousand different benefit schemes due to the adoption of more than two thousand laws, regulations, or decrees in response to worker demands (Borzutzky ). For example, the Eduardo Frei Montalva administration (–) sought to organize rural workers, passing the Peasant Unionization Law in , which gave rural workers—or approximately  percent of the population—the right to organize, strike, and negotiate contracts. The organization of rural workers led to a “tidal wave of new demands” in Congress, as exemplified in the twenty-five hundred articles, of which a thousand were social security benefit concessions, added to the  wage readjustment bill (Borzutzky , ).

                             / 

Given the expansion of benefits and exemptions from contributions, by the late s the state had to make significant financial contributions to the system to keep it afloat. President Frei also sought to reform both the social security and health-care systems; he hoped to remove inequities between social security funds and universalize contributions and benefits for social security and health care in unified national systems. Both the social security and health sector reform efforts, however, were blocked by groups that had accumulated generous benefits or a privileged position relative to other workers. For social security, the administration could only partly equalize benefits; it did so by raising the benefit floor and adding minor amendments to a series of related laws. The physicians’ organization opposed the health-care reforms; they lobbied instead to expand public subsidies for private care (Borzutzky , –). Likewise, the Salvador Allende administration (–) advocated integral reforms to social security and health care but had to settle for increasing minimum benefits and increasing focus on public health issues (Borzutzky , , –). The inability of both the Frei and Allende governments to adopt comprehensive social security or health-care sector reforms reflects the ability of organized labor, through their allies in Congress, to block changes to institutions in which they had become invested. In that context, the administrations could promote equity only by expanding benefits for those at the bottom of the system. Social security and health sector reform remained on the political agenda even after the installation of the military government in September . Efforts as early as proposals in  to privatize the pension system were blocked by generals in the junta who were opposed to neoliberal reforms. By , General Augusto Pinochet Ugarte had removed the more progressive military leaders, paving the way for the adoption of more neoliberal reform proposals, including pension privatization (Kurtz ; Borzutzky ; Castiglioni ). Social security reforms adopted in  accomplished many of the goals that were politically untenable under President Frei: equalizing benefits, eliminating some of the most costly benefits, and increasing minimum retirement ages and contributions (Borzutzky , ). The more dramatic reform was privatization of the public pension system for all workers, except those in the military. The reform, implemented in , replaced the defined-benefit, pay-as-you-go public collective system with a definedcontribution, individual account, fully funded pension system administered by private pension fund administrators. Employers’ contributions were eliminated, and the state guaranteed a minimum pension for workers making the required minimum contributions.

 \                             

In contrast to the pension reform, the military government’s health-care reform proposal was delayed and diluted not only by resistance within the junta prior to  but also by the national organization of doctors, the College of Physicians (Colegio Médico, or CM). In , the military merged the two largest public health providers—the SNS and the SERMENA—and regionally reorganized and decentralized health care (Castiglioni ). Faced with continued resistance from the CM, in February  the regime decreed changes to the legislation regulating professional associations such as the CM. The changes eliminated mandatory membership and the CM’s prerogatives to participate in health-care policy making (Castiglioni ). Having significantly undermined the primary opposition to the regime’s health-care reform, the regime then adopted a sweeping reform of health care later that year. The reform unified the healthcare system and allowed workers to use their contributions to receive benefits either from the public health care system or from private health-care funds (known as ISAPREs, for Instituciones de Salud Previsional). Most low-income workers remained in the public system, while higher-income workers would use their contributions and additional funds to buy better coverage from the private system. The Pinochet pension and health-care reforms were some of the most extensive reforms made in Latin America. To some extent, they illustrate the idea that authoritarian regimes are able to adopt more extensive reforms because they are unhampered by the veto players that are abundant in democratic systems (see Tsebelis ). At the same time, the comparison of pension and health-care reforms under Pinochet demonstrates that even authoritarian regimes may face veto players, including members of the junta (as in pensions prior to ) and societal organizations (as in health care). The comparison of pension and healthcare reforms also highlights the ways in which the two policy areas differ. As in Mexico, the health-care reforms in Chile were diluted by resistance from organized doctors, and therefore, the reforms were less neoliberal or extensive than the pension reforms. Even in the context of the highly centralized and repressive Chilean military regime, doctors were able to function as a veto player and demand some concessions on health-care reforms (Castiglioni ). The policy reforms of the Pinochet regime also highlight its understanding of the ways in which welfare institutions can create policy legacies or feedback that can then become the focus of state-directed action. The regime not only adopted reforms to the labor code in  and the professional association code in  in an effort to defuse civil society organizations but also viewed privatization of social security and decentralization of health care as a way of insulating the state

                             / 

from social demands. Quite explicitly, the pension reform was designed to remove the state as a target for social benefits and to neutralize workers’ demands for pensions. Likewise, by decentralizing public health-care services to municipalities, constituencies would be fragmented and the central state would no longer be a target of mobilization (Borzutzky ; Castiglioni ) Since the democratic transition in Chile, successive Concertación (Concertación de Partidos por la Democracia, a coalition of center-left political parties) governments have done little to abandon or change the core welfare institutions inherited from the military regime. In the pension system, Concertación administrations in the s and early s increased the minimum pension guarantee and reformed the regulations dealing with the investment options of private pension fund administrators (Castiglioni ; Taylor ; Oppenheim ). In March , the Michelle Bachelet Jeria administration (–) succeeded in adopting a pension reform package that would increase minimum pensions, provide noncontributory pensions to those over sixty-five with incomes in the bottom four deciles (increasing to the bottom six in ), allow women to provide survivor benefits to male companions under certain circumstances, and give women contributions to their pension accounts for each child born or adopted (Rodríguez ). In health care, Presidents Patricio Aylwin Azócar (–) and Eduardo Frei Ruiz-Tagle (–) both continued the decentralization of services begun by the military regime (Castiglioni ). President Ricardo Lagos Escobar (–) sought an extensive reform that would have required the private ISAPREs and the public system to provide coverage for a uniform group of ailments and medicines, created a solidarity fund to subsidize care for lowincome workers, women, the sick, and elderly, and increased the value-added tax to cover some of the costs (Borzutzky ). ISAPREs opposed the solidarity fund, while the CM wanted more wholesale reform with greater state provision of benefits and fewer regulations on treatment. The Plan AUGE (Acceso Universal de Garantías Explícitas or Plan of Explicit Guarantees of Universal Access), approved in early  was a diluted version of the original proposal; most notably, the final plan did not contain the solidarity fund (Borzutzky , –). Although Plan AUGE, like Popular Insurance in Mexico, was an ambitious attempt designed to provide universal health insurance to all, including those not covered by social insurance, it left a gap by not providing coverage to informal sector workers whose incomes exceed the means test for coverage (Huber, Pribble, and Stephens , ). In , the government established a new unemployment insurance (UI) program based on an individual account  \                             

model with a solidarity fund. In this program, benefits decrease rapidly over time, and the entire system is administered by a private insurance company (Borzutzky ). Employers supported the new UI program because they believed it would eventually replace severance pay and enable them to more easily dismiss workers (Haagh with Bravo ). Therefore, even when the Concertación governments have expanded benefits, they have done so largely within the core framework established by the military regime. While democratically elected governments have tried to reverse the retrenchment of the Pinochet regime, their success has been hampered by opposition from powerful private welfare institutions, including the private pension fund and health insurance administrators. Furthermore, democratic governments have not fully overturned the Pinochet reforms that weakened the political capacity of labor unions and the CM (Castiglioni ; Taylor ). Thus, workers and doctors have not regained the welfare policy influence they held prior to the military regime, and they have been unable to effectively support Concertación government reform efforts. Although presidents Frei and Allende had both used targeted social spending, the Pinochet regime greatly expanded it. The regime used a politically motivated and highly restrictive definition of poverty and eliminated many general subsidies; they replaced those subsidies with targeted assistance (Taylor , chap. ). Pinochet also cut social expenditures dramatically, such that the expansion of spending during the first Concertación governments was largely a restoration of spending cut by the military regime. Concertación governments have also continued the military regime’s emphasis on targeted, mean-tested social assistance. For instance, the Aylwin administration created the Solidarity and Social Investment Fund (Fondo de Solidaridad e Inversión Social, or FOSIS), which provided targeted anti-poverty benefits and was funded through tax reforms (Oppenheim , ). The program was not aimed at raising incomes of the poor but at reducing indigence (Taylor ). New targeted social programs proliferated in the s, with an estimated  different programs in , most of which were created after  and two-thirds of which were for targeted assistance (Raczynski ). For example, the Frei administration (–) created the National Plan to Overcome Poverty, which had a territorial, rather than sectoral, organization. The program was discontinued due to a lack of political legitimacy in  (Raczynski ). In , Chile Solidario was adopted as a targeted poverty alleviation program to address the needs of the extreme poor. Although the program had some success in reducing extreme poverty, its overall budget and impact remained small (Huber, Pribble, and Stephens , ).                              / 

The net result has been a transformation of Chile’s welfare regime, one that evolved in ways similar to the changes in Mexico, in the sense that privatized and retrenched benefits exist alongside an expansion of noncontributory benefits for the poor. That is, retrenchment and privatization of social insurance functions have occurred alongside a growing emphasis on noncontributory benefits and targeted social assistance, and this shift has coincided with the disarticulation of organized labor as an effective advocate for welfare policies. At the same time, however, there has been a much more sustained effort to introduce equity-enhancing reforms into the social insurance system in Chile, particularly due to the reform efforts of the Bachelet administration.

Argentina Like elsewhere, in Argentina the precursor to labor unions and social insurance was the formation of mutual aid societies, particularly at the end of the nineteenth century (Isuani ).₅ Around the same time, the Socialist Party emerged and articulated demands for workers’ rights, including state- and employerfunded workers’ compensation for work accidents and illnesses. Although the Socialist Party did not have formal ties to unions, party sympathizers were common within the unions (Isuani ). In the first years of the twentieth century, labor conflicts escalated, especially in – and –, and new labor organizations and federations formed, including the General Union of Workers (Unión General de Trabajadores, or UGT) in , which sought new laws to protect workers (Isuani , ). The first proposals for labor regulation—to create corporatist institutions and institute compensation for work-related accidents—also began circulating between  and , though none were adopted. Those proposals called for employer compensation for work accidents, recognition of unions, and government control over union recognition. The proposals have been characterized as including a number of worker and social security benefits that had been demanded by unions for some years (Isuani , –). Indeed, as early as , unions in several industries had demanded that employers pay workers’ expenses for work-related accidents (Marotta , ). While the majority of the UGT approved of the proposals, some of the more extreme elements of organized labor, including the Argentine Regional Workers’ Federation (Federación Obrera Regional Argentina, or FORA), opposed such legislation on the grounds that the state should not have control over the movement (Isuani ). The labor code

 \                             

and compensation for work-related accidents remained on the agenda through the  elections, which were the first to include mandatory voting and a secret ballot. Both the Radical and Socialist parties competed for working class support, and both parties presented new labor legislation after the elections in  and . The minister of justice in  attributed labor conflict to the lack of social insurance provisions for workers and argued in favor of adopting social security (R. Munck , –). However, the law that required employers to be financially responsible for work-related accidents was not adopted until . While unions demanded employer compensation for work accidents, they rejected proposals that would have made the benefits conditional upon accepting control or regulation by the state. Unions also began incorporating workers’ compensation demands into their labor contract negotiations (Marotta , ). The expansion of the first mandated retirement pension benefits was a response to labor demands and mobilization or protest. For example, railroad workers demanded retirement benefits as early as , but legislation was not proposed until , in the midst of a railroad workers’ strike. While the workers supported the proposal in principle, they opposed any requirement that they contribute a portion of their wages to their retirement benefits and any restrictions on their right to strike (Isuani ; Marotta , –). A version of the law providing retirement benefits but also restricting strike activity was passed in , but it was opposed by employers because of the new benefits and by workers because of the strike restrictions. New railroad strikes occurred in , leading ultimately to the adoption of a new retirement law in  that lacked the strike provisions opposed by workers (Isuani ; R. Munck ). The pension system for railroad workers had a demonstration effect for powerful unions in transportation and public services, which also began to demand pensions and were the next group to receive them (Alonso , ). Following several years of union growth, the number of FORA-affiliated unions had increased from  to  in  and to  in . At the end of , FORA reported nearly , members, a figure that increased to , in  (Marotta , –). This growth coincided with a period of intensifying conflict between unions and employers. In , more than , workers were involved in  strikes (Isuani , –). In response to the conflicts, Congress proposed pensions for private sector workers who provided public services (transportation, telephones/telegraphs, gas, electricity, etc.) in order to stave off more unrest (Isuani ). On the heels of the proposals, however, the government instituted a labor code that would regulate labor contracts

                             / 

and restrict organization and strikes; the proposal was blocked by labor organizations (Marotta , –; Isuani , –). The iterative pattern of congressional proposals for both benefits and restrictions and large-scale labor mobilizations continued throughout the first years of the s. In the fall of , Congress considered several pension laws, including one that would create four pension funds—for merchant marines, industrial firms, journalists, and commercial establishments. The proposed legislation was the political parties’ attempt to attract voters in the run-up to the March  congressional elections. However, the legislation was met with resistance by both employers, who thought employees should fund benefits, and workers, who thought that employers should fund benefits (Isuani , –). Unions did not reject the notion of state-mandated pension benefits; indeed, they had been demanding them for years. The unions rejected any attempt to require workers to fund benefits or to control union organizations. Some of the more privileged unions supported the pension law, despite having to contribute. A general strike was organized in mid- to protest the deduction of worker contributions, and the government delayed collecting worker contributions. By , the law had been repealed (Isuani , –; Godio a, –). In , several existing confederations came together as the General Confederation of Labor (Confederación General del Trabajo de la República Argentina, or CGT) and adopted a more moderate position vis-à-vis the state. Although it maintained official independence from political parties, it lobbied for a range of state policies, including social insurance (Collier and Collier , ). Between  and , the negotiating capacity of labor waned due to unemployment and state repression, only to rebound in the second half of the s thanks to economic growth, particularly in industry (Murmis and Portantiero ). In , the state began to intervene more often in labor conflicts, often siding with workers (Korzeniewicz , –), and the CGT acquired a new, more militant leadership (Murmis and Portantiero , –). Estimates suggest that the growth in unionization between the mid-s and mid-s also led to a tripling in the size of the CGT’s membership (Rock , ). The result was an increase in strike activity (Isuani and Tenti , ), and fringe benefits, such as vacation, sickness benefits, insurance, and workers’ compensation, became the primary strike issue after  (Rock , ). There thus developed a pentup demand for welfare benefits that governments of the s did not meet. The situation created the opportunity for Juan Perón, after the  coup, to respond to labor demands for social insurance benefits.

 \                             

Though Peronism is typically characterized as the driving force behind the rapid growth in unionization and the expansion of social security in the s (see, e.g., Isuani ), labor historians argue that the growth in unionization— having occurred in the late s, not the s—preceded the rise of Perón (Murmis and Portantiero , –; see also Bergquist ). While social security tripled between  and  and again by  (Collier and Collier , –), some claim that this increase was the military regime and the Perón government’s response to the pent-up demands of a previously mobilized labor movement (Murmis and Portantiero , ). This distinction is important because the most prominent explanation of the origins of social insurance legislation in Argentina claims that social insurance benefits were not a demand of workers but a preemptive offer from a government concerned about labor unrest and protest (Isuani ). However, evidence suggests that several unions did demand the implementation of social insurance prior to its adoption and that proposals for workers’ compensation, pensions, or social insurance often coincided with or followed labor union mobilization and conflict. The CGT issued manifestos in  and  listing the adoption of a national social security plan among its demands (Alonso , ; CGT March , , Manifesto reproduced in Torre , ). Therefore, the rapid expansion of social security during the s—from covering  percent of the working population in  to five times that in  (Isuani and San Martino , ; Godio b, )—should be understood as an effort to appease and attract to Peronism the support of a rapidly growing and mobilized labor movement rather than a preemptive effort to use social insurance to promote unionization or labor union control (see Belmartino and Bloch ). Meanwhile, Perón, like Mexican government leaders, had little difficulty in simultaneously replacing union leaders with whom he disagreed and declaring strikes illegal to contain unrest (Rock , ; Collier and Collier , –). The result was a proliferation of pension funds stratified by occupation, though not to the same degree as those in Chile. During Perón’s first government (–), the administration also established the basic health institutions that continue to shape health care in Argentina today. On the one hand, the administration rapidly expanded free and universal public health care, largely through the rapid expansion of public hospitals (Pérez Irigoyen , ; Isuani and Tenti , ; Lloyd-Sherlock ). On the other, the administration promoted union-based health insurance funds, or obras sociales, through which unions had access to contributions to be used for healthcare coverage. Over time, the old system of public hospitals was decentralized and

                             / 

suffered from underinvestment (Lloyd-Sherlock ), while the obras sociales, with strong union support, became the centerpiece of government-mandated health care. Perhaps equally important was the role that obras sociales played in securing union support for the Peronist government and its incorporation into national politics (Belmartino and Bloch ). The obras sociales had become so central to union survival, in terms of resources and power, that unions blocked several efforts in the s, even proposals by medical unions, to reform and unify the health-care system (Belmartino and Bloch ). Similarly, efforts to unify pension funds were also abandoned (Isuani and Tenti , –). Therefore, while the CGT declared its support in  for social welfare policies, its focus was on better enforcement of employer contributions to pension funds, pension fund autonomy, and opposition to unification of social insurance programs (Godio , , –, ). The military regime of – overcame union resistance to reforms and implemented both health and pension reforms. The Juan Carlos Onganía Carballo regime (–) adopted a pension reform in  that sought to unify the system, increase requirements to qualify for a pension, equalize benefits, and remove union influence from system administration. While contribution requirements increased, benefits were not equalized much and some groups maintained preferential regimes (Isuani and Tenti , –; Golbert and Lo Vuolo , –; Isuani and San Martino , –). Although the reform did reorganize the pension system, in the final months of the regime, in the context of growing unrest and instability, the government reinstated union participation in the administration of the pension system (Alonso , –). In , the regime also adopted unpopular reforms to the obras sociales system that facilitated the expansion of private health-care provision and scaled back the public health-care infrastructure (Isuani and Tenti ). These reforms, which labor unions in particular initially resisted (see, e.g., Godio , ), came to shape health policy and to earn the “active support” of various actors (Belmartino and Bloch , ). Because the military regime had been weakened by the popular uprising in Córdoba in , the unions were able to demand concessions—particularly some that would protect their role in administering obras sociales—from the regime (Pérez Irigoyen , ; Golbert , –; Alonso , –). Essentially, the reforms expanded the ability of union-run obras sociales to contract with private health-care providers to provide care for covered workers. In addition, the military government expanded access to health care for pensioners in  (Golbert , ; Lloyd-Sherlock , ). The partial reforms to health and pension policy and the ability of unions to extract concessions from  \                             

the military government reflect the role that unions and social welfare policies played in national politics, even during the authoritarian regime in place from  to . Argentina’s next military regime (–) would prove much more extreme in its reform of welfare institutions, chiefly in its alteration of unions’ role in welfare. After the  coup, the military suspended nearly all union activities except those related to social services and the obras sociales, and even these were constrained (G. Munck , n; Golbert , ). The military government also further decentralized the public health-care system, promoted the expansion of private sector health care, cut welfare benefits, and shifted the burden of contributions to workers (Rock , ; Pérez Irigoyen , ; LloydSherlock a, ). Although in April  some unions mounted a general strike (one demand was to reinstate obras sociales), the military responded in November  by passing a law that was the first step in removing the obras sociales from union control. In , another law separated the obras sociales from unions and allowed workers to choose among health insurance institutions (G. Munck , ; Pérez Irigoyen , ; see also Alonso , –). The net effect was to increase even further the role of private providers of health care. By the s, Argentina had an extensive social insurance system that provided coverage to all workers, though coverage was lower in certain sectors and regions (Golbert and Lo Vuolo , –). Following the  transition to democracy, social security reforms remained on the national political agenda, including reforms to both the public pension system and the obras sociales. In the mid-s, the government sought an integral health insurance reform. Unions resisted the reform because it would cost them control of obras sociales and reduce the government’s contributions to the program. The reforms adopted in mid- reflected compromises between the government and the CGT. The unions maintained control of the obras sociales, contributions were increased, and the government managed a solidarity fund to redistribute among obras sociales (Pérez Irigoyen , –). In the early s, reforms increased the latitude of obras sociales to negotiate contracts with private health-care providers (Barrientos and LloydSherlock , –). At the same time, while negotiating the public pension reform (see below), the Carlos Menem Akil government (–) repeatedly threatened to deregulate the obras sociales in order to win union acquiescence to the government’s pension and labor reform proposals (Godio b; Alonso ; Lloyd-Sherlock ). In , the Argentine government began requiring all obras sociales to offer a basic package of benefits, including health-care coverage (Barrientos and Lloyd                             / 

Sherlock , –). The following year, the government adopted a plan to allow workers to choose freely among obras sociales and private insurance companies. Unions fiercely resisted implementation of this plan, even though obras sociales received subsidies funded by World Bank loans; obras sociales argued that they were not yet competitive enough to face a liberalized health insurance market. At the same time, private insurance companies have been reluctant to enter the market, preferring to contract with obras sociales rather than directly with workers (Barrientos and Lloyd-Sherlock ). The result was a delayed or incomplete implementation of the reform (Lloyd-Sherlock ; Nelson , –). In May , the Fernando de la Rúa administration (–) again tried to introduce competition and private insurance into the health insurance or obras sociales market, but the reform was repealed in March  by the Eduardo Duhalde administration (–) (Lloyd-Sherlock , ). Not surprisingly, unions continue to resist liberalization of the health-care market because obras sociales have long been a repository of union resources and power (LloydSherlock , ; Etchemendy , ). As it has in Mexico, health insurance has undergone a de facto privatization process in Argentina. Although unions have blocked formal efforts to require unions to compete with private insurance and health-care providers, liberalization of the health insurance market and regulations has actually encouraged obras sociales to contract with private insurers and health-care providers. According to some, this subcontracting enables private insurers to enter the social insurance sector without being regulated by the state and may become the dominant form of health-care insurance if recent trends continue (Barrientos and Lloyd-Sherlock , ).₆ Meanwhile, the government had to make a number of parametric reforms to the public pension system in the s to keep it financially afloat. However, these various efforts failed to forestall the financial crisis facing the pension system; there were defaults on pension payments and lawsuits by pensioners (Golbert and Lo Vuolo ; Isuani and San Martino , –; Golbert ; Demarco ). The financial crisis of the pension system prompted a proliferation of reform proposals in the mid- to late s, including proposals from the secretary of social security, the Association of Argentine Banks (Asociación de Bancos Argentinos, or ADEBA), the Foundation of Latin American Economic Research (Fundación de Investigaciones Económicas Latinoamericanas, or FIEL), and members of Congress (for proposals, see Isuani and San Martino , –). In , most unions, pensioners, and Peronists in Congress preferred parametric to structural reform, while retirement insurance companies, employers, and Radical Party (Unión Cívica Radical, or UCR) members in Congress preferred a more  \                             

comprehensive reform, including a mixed system (Isuani and San Martino , –).⁷ In mid-, the Menem administration submitted a structural pension reform proposal to Congress. The proposal met resistance from various actors, including union leaders affiliated with the Peronist party. After several rounds of negotiations and concessions to labor organizations, the Congress adopted a structural pension reform package in  that established a mixed publicprivate system.⁸ The new system provides a universal basic pension (prestación básica universal, or PBU) for all workers with at least thirty years of contributions at age sixty-five for men and age sixty for women. Pensioners also receive a supplementary pension from a second pillar, which comes from either a privately managed, definedcontribution individual account or from a defined-benefit public pillar (prestación adicional por permanencia, or PAP). There are compensatory pensions (prestación compensatoria, or PC) for transition workers and a reduced universal basic pension for workers over seventy with at least ten years of contributions. The original law also included a state guarantee that pensions from all sources would equal at least  percent of the average covered wage. Although unions were not able to block the structural reform, they were able to negotiate several concessions, including the calculation of benefits for transition workers, restrictions on pension fund administrators’ investment instruments, tighter penalties for pension fund administrator malfeasance, worker choice of pension fund administrator, the public option for the second pillar, and tripartite representation of the board of the regulatory agency of the pension fund administrators. Unions also negotiated the right to form nonprofit pension fund administrators to compete with the private administrators (Isuani and San Martino , –; Vittas ; Golbert , ; Demarco , ). Follow-up reforms in  and  lowered employer contributions, adjusted contribution calculations, eliminated the state minimum guarantee, limited maximum public pensions, ended the automatic indexing of public pensions to inflation, and changed coverage rules (Vittas ; Golbert , –; Demarco , ). In December , a reform by decree changed the flat basic pension and gave a means-tested basic pension even to those with insufficient contributions to be eligible for a basic pension (Demarco , –). The net effect is a reformed system with increased market provision and higher contribution requirements that has done little to reduce evasion or increase coverage. Like both Chile and Mexico, Argentina experienced more extensive retrenchment and reforms for pensions than health insurance. In Argentina, however, the unions that blocked the more extensive health-care reforms were not medical                              / 

unions but the unions representing workers who manage the obras sociales. In another example of institutional conversion, over time the unions grew to see the obras sociales not only as providing health care to their workers but also as central to the survival of the unions themselves. As such, unions were much more defensive of the obras sociales than the pension system and were willing to trade pension privatization for continued operation of the obras sociales (Godio b, , ; Lloyd-Sherlock , ; Etchemendy , ; Lloyd-Sherlock ). The Menem administration understood the importance of the obras sociales to the unions and repeatedly threatened to reform them in order to gain union acquiescence for other reform proposals (see Alonso ). In addition, economic liberalization and deindustrialization that began during the military regime had eroded union membership because there was less industrial employment, growing unemployment, and a rise in informal and low-productivity employment (Godio b, ; Levitsky ). Therefore, when the democratic governments sought pension and health insurance reforms to protect Argentina’s global competitiveness, unions had already weathered both a repressive military regime and economic liberalization and thus had to choose their battles carefully.⁹ While changes in the labor market and economic policy were eroding labor influence, reorganization of the Peronist party was diminishing union influence and representation in Congress (Godio b, ; Levitsky ). Further, when the CGT tried to assert its independence in the mid-s by leading strike actions, the Menem government responded with harsher insurance reforms (Godio b, –). The reorganization of the Peronist party included a new focus on forming clientelistic networks to distribute assistance to the poor and informal sectors, not through national government policy or unions but through “neighborhood brokers (punteros) and local party bosses who could deliver votes” (Levitsky , ). This reorganization along territorial rather than sectoral lines was not unlike the internal reorganization of Mexico’s PRI in the early s. The Peronist party used these clientelistic networks to distribute compensation to the informal sector, the unemployed, and the poor in exchange for political support and in lieu of targeted poverty alleviation or social investment funds, like those implemented in Mexico and Chile (Etchemendy ). For example, the National Nutrition Program (Programa Alimentario Nacional, or PAN) of the Radical Party government in the s was replaced by the National Emergency Solidarity Bonds (Bono Nacional Solidario de Emergencia, BNSE) at the start of the Menem administration. Shortly after unions began distributing the bonds to unemployed members, the program was criticized, decentralized to

 \                             

provinces, and abandoned (Midre ; Lloyd-Sherlock b).₁₀ According to Sebastián Etchemendy (), it was the side payments to political insiders (e.g., union leaders) and the failure to provide sufficient policies for the growing population of underemployed and unemployed workers that led to the growth of urban protest and union organizations unaffiliated with the Peronist party, such as the Argentine Workers’ Center (Central de los Trabajadores Argentinos, or CTA), during the s. The Argentine government did not implement national social assistance programs throughout the s and s comparable to those in other countries. Existing from  to , the Buenos Aires Province Historic Repair Fund (Fondo de Reparación Histórica del Conurbano Bonaerense, or FRHCB) was a large infrastructure project targeted to serve the poorest regions of Buenos Aires, in part to bolster the popularity of then-governor Eduardo Duhalde. The program entailed a large transfer of national tax funds to the Greater Buenos Aires area to address poverty and poor infrastructure through public works (Acuña, Kessler, and Repetto ). In , the government adopted the Plan for Unemployed Heads of Household (Plan Jefes y Jefas de Hogar Desocupados)—a cash transfer program for those persons unemployed because of the Argentine financial crisis of –. In practice, about one-third of recipients did not meet the formal criteria to receive benefits and about three-quarters of those eligible for benefits did not receive them. Ninety percent of the program’s beneficiaries had incomes below the poverty line, however. The program added conditions for receiving the transfers, but overall the program was difficult to implement efficiently because of the high levels of informal market employment (Galasso and Ravallion ). The Argentine case illustrates the ways in which labor organizations played a role in the development of welfare institutions, especially prior to the military regime in power from  to . The segmentation of the pension system in particular and the participation of unions in the management of health insurance created incentives for unions to mobilize in defense of their benefits or access to resources, creating impediments to reform efforts. Following the economic and political liberalization of the s, unions faced tough choices about which welfare institutions to defend, given their waning membership and political resources. As in Mexico and Chile, pension retrenchment was much more extensive than reforms to health insurance, in part because of the role of unions in defending the obras sociales at the expense of other reforms. Argentina differed, however, in that it adopted no large-scale social assistance programs prior to the

                             / 

– economic crisis; instead, the Peronist party distributed clientelistic benefits and compensation for the poor, the underemployed, and the unemployed. The strategy was the same—compensating losers for the costs of economic liberalization—though the institutional delivery was different.

Brazil Of the cases considered here, Brazil probably offers the best example of a government that most scholars believe instituted social security as a preemptive measure to co-opt labor’s platform and prevent union mobilization. The dominance of this theoretical explanation is due in no small part to the work of James M. Malloy, including his monograph () and follow-up articles (e.g.,  and ). Malloy argues that the impetus for social insurance in Brazil originated in the state, not with organized labor unions, and that unions later used social security institutions as a base of power and political patronage. While social insurance policy in Brazil, as in the other cases discussed here, was central to the process of incorporating workers into national politics, evidence suggests that unions did articulate demands for social insurance prior to its adoption and that early policies were adopted in the midst of intense labor mobilization and were conflict driven, in part by demands for such policies. In Brazil, industrialization during the first decades of the twentieth century led to the reorganization of mutual aid societies into labor unions that sought to negotiate contracts on behalf of workers. Between  and , the growing labor movement initiated a number of high-profile mobilizations and strikes, particularly in major cities (Collier and Collier , –). During that time, the union movement made an explicit demand that the state provide social welfare policies (Fleury , ). During the labor mobilization of the s, the Brazilian government mandated the creation of the Pension and Retirement Funds (Caixa de Aposentadoria e Pensões, or CAP) for several groups of workers, most notably railroad workers with the Lei Elói Chaves (Elói Chaves Law, named after the Brazilian politician) in January  (Cohn ). Shortly thereafter, additional legislation mandated the creation of pension funds for other groups of workers, though most funds were not really established until  (Malloy , ). According to Sonia Maria Fleury Teixeira (, –), the state clearly did not lead the way in providing pensions; Brazil’s pattern of fund creation clearly showed that the most organized and mobilized groups, not those most important to the economy, were rewarded with pension funds (see also

 \                             

Cohn , ). Although union demands for social security were sufficient to generate a state response in the form of social security legislation, unions were not able to effectively claim a role in the administration of the new retirement and pension funds (Cohn , ). With the installation of Getúlio Vargas as president (–) following the  military coup, the development of social insurance shifted. Unions continued to demand the implementation of social insurance protections, but the state took a more active role in the administration of social insurance, creating the Pension and Retirement Institutes (Institutos de Aposentadoria e Pensões, or IAP). For example, the creation of an IAP for bank employees (the IAPB) was a response to a strike by the Brazilian Bankers’ Union in which the workers demanded retirement benefits. The government created a commission to study the issue, and the IAPB was created in  (Cohn , –; Malloy , ). When IAPs were created for groups with CAPs, the CAPs were often absorbed by the new institutes. The creation of the IAPs during the s, with the state selecting the fund administrators, reveals a shift in social insurance policy making whereby the state begins to use social insurance in order to gain control over organized labor unions (Fleury ). By the late s, the retirement system consisted of almost  CAPs and  IAPs that provided benefits for approximately  different groups (Malloy ; ; Cohn ). The state had the upper hand in labor relations and social insurance policy formation for only a short time. By the s, labor unions had effectively penetrated social insurance institutions, assuming leadership roles and using the institutions for political power and patronage (Malloy ; ). This institutional conversion and power shift—in which unions appropriated welfare institutions that were originally created to discipline and control them—was evident in , when President Vargas sought to unify the social security system. His proposal, originally developed in , particularly displeased the workers who had accumulated benefits through CAPs or IAPs and had resisted the president’s efforts to unify and standardize the social insurance system (Malloy ). Although the president issued a decree to implement the reform, it was repealed before being implemented, and shortly thereafter Vargas was forced from office (Cohn , –). The reform proposal drafted in the early s would be the blueprint for future reform attempts through the s. Reform proposals emerged shortly after Vargas left office in , and he again assumed the mantle of reform during his second administration (–). Originally, government technocrats de-

                             / 

signed a reform that would have unified, universalized, and standardized social insurance for the working population. Resistance to reform efforts emerged among various groups, including the social security bureaucracy that opposed the creation of a superbureaucracy, insurance companies that opposed the “socialization” of workers’ compensation insurance, and workers and unions already enjoying benefits and access to resources (Malloy ). Reform initiatives similar to those developed in the s surfaced repeatedly during the s. Ultimately, the Juscelino Kubitschek de Oliveira administration (–) managed to negotiate a watered-down version of the reform proposal as the Lei Orgânica da Previdência Social (LOPS, or Organic Law of Social Welfare), in . The reform achieved some standardization of contributions and benefits, but it did not unify the separate social insurance funds because unions and bureaucrats resisted such a move (Malloy ; Cohn ). The LOPS also laid the groundwork for the privatization of health-care service provision (Cohn , ). The failed reform efforts of the s and s illustrate both the ways in which bureaucrats can become invested in welfare institutions and thus resist efforts to reform them and the capacity of unions, even when in a fragmented and relatively weak position, to mobilize in defense of their role in welfare management. Given the limitations of the  reform and its adverse effect on the fiscal crisis facing the social insurance system, reform remained high on the political agenda following the imposition of a new military regime in . Unlike the elected governments of the s, the military regime was not hindered by political considerations in its dealings with unions and social insurance. It quickly moved to remove union representatives from social insurance institutes as preparation for a comprehensive reform project. In , the regime unified the various institutes, with the exceptions of those for government employees and the military, into the National Institute of Social Insurance (Instituto Nacional da Previdência Social, or INPS). The military regime also increased its regulation of unions, requiring that unions use government subsidies to provide a range of social assistance and welfare benefits to their workers. The military government also used sanctions or the removal of union leaders to punish unions that did not perform their requisite role in welfare provision (Mericle , –). The military government also expanded social insurance coverage and benefits in the s, first incorporating self-employed urban and domestic workers and then extending noncontributory benefits to the elderly poor, disabled, and rural workers (in a program known as FUNRURAL). An alternative understanding of this expansion is that the system needed new contributors and the military govern-

 \                             

ment needed popular support in elections (Malloy ). Given that some benefits were noncontributory, the latter explanation seems more likely. Additional administrative reforms in the mid- and late s further centralized and consolidated the state’s role in social insurance provision (Malloy ). The success of these reform efforts, where previous governments had failed, is attributed to the military’s ability to ignore the protests of unions and bureaucratic groups (see Weyland ; Pinheiro ). The reform of the pension system and social insurance institutes can be contrasted with the reforms to the health-care insurance and public health system. The military government continued to expand the state’s use of contracts with private health-care providers in the early s. At the same time, efforts to unify, universalize, and redirect the health-care services of the social security system and the Ministry of Health were blocked by three groups: beneficiaries who worried about the effects of universalization and unification on their access to services, private providers concerned with profitability, and health bureaucracies that wanted to maintain their autonomy and influence. Organized rural workers managed to pressure the government to preserve their influence in rural social insurance policy. Although the military was not able to redesign the existing health-care system to address the needs of the rural poor, it did create a public works and health program for rural areas in northeastern Brazil (Weyland ). The creation of a separate program in the face of resistance to reform efforts reflects a typical example of institutional change through institutional layering. As in the other cases of pension and health insurance reform, the military regime had more success at overcoming resistance to its pension reform than its health reform agenda. During and following the democratic transition, several political actors, including representatives of the Brazilian Democratic Movement Party (Partido do Movimento Democratico Brasileiro, or PMDB) and organizations representing rural workers and business interests, sought pension reforms. Rural workers wanted the same benefits that urban workers received, while business representatives wanted public pensions privatized. Meanwhile, reform-minded bureaucrats sought to universalize the pension system and de-link contributions and benefits in an effort to increase equity. None of these proposals gained traction. The focus of those reform impulses was soon centered on the National Constituent Assembly, which produced the Constitution of . Rather than significantly reforming existing pension institutions, that Constitution enshrined some of the most pernicious aspects of the system, such as the contribution struc-

                             / 

ture, generous pension benefits for government employees, and time-of-service pensions (Weyland ; Medici ). The constitutional provisions would create additional barriers to reform by requiring supermajorities to make statutory changes to the social insurance system. Neoliberal pension reform efforts surfaced in . The Fernando Collor de Mello administration (–) established a commission to develop a pension privatization proposal, but despite the support of business and powerful economic interests, it was not actively pursued (Pinheiro , ; Melo ). In the mid-s, under President Fernando Henrique Cardoso (–) a new reform effort began, but this time it initially focused on a constitutional reform that would facilitate pension reform through normal legislation. Even this effort took several years of negotiations in Congress, but in late  the constitutional reform was approved. It paved the way for reform through legislation, though many of the privileges for government employees remained (Pinheiro , –). Meanwhile, since at least , the Cardoso government had had a special commission working on a reform proposal. The options considered ranged from a three-pillar World Bank–style reform to parametric reform with notional defined accounts (Pinheiro , –; Melo , ; Weyland ). While business groups preferred some degree of privatization, unions, pensioners, and leftist political parties advocated parametric reforms (Pinheiro ; Melo ). The result was reform legislation that looked a lot like a parametric reform. It left in place the collective pension account and the state’s role in administering it but introduced a factor previdenciario, which links future pensions to contributions, creating notional defined accounts. One observer described the new system as reform “by stealth” because the enabling legislation, compared to the constitutional reform effort, was “largely invisible politically” due to its technical nature (Melo , ). In part, the reform options were limited by the spread of the East Asian financial crisis to Brazil and by concerns about financing more radical reform proposals in response to Brazil’s relatively high implicit pension debt (Pinheiro ; Melo ). As in Mexico, reforming the pension system for government workers faced more formidable political obstacles. The pension system for Brazil’s government workers was left largely untouched by the  reform, aside from an increase in the minimum retirement age (Medici ). Civil servants continued to have a defined-benefit system in which many workers received pensions equal to  percent of their last wage after as few as ten years of contributions (Medici ).

 \                             

Shortly after taking office, President Luiz Inácio Lula da Silva (–) argued that reform of the civil servant pension system was central to his social justice agenda and to avoiding a budget crisis. His administration introduced a reform proposal in April  that ultimately would have harmonized the civil servant system with that of private sector workers (Melo , ). The compromise version of the proposal, approved in December , increased contribution rates and the retirement age, left unchanged the minimum length of service for retirement, reduced benefits for early retirement, and required new civil servants to enter a modified notional defined-contribution system (Medici ). The reform included a second voluntary public pillar in which the state provided matching funds for workers’ voluntary contributions as an inducement for savings (Melo ). Although Brazil did not privatize its public pension system for private and public sector workers, the delay and dilution of the reforms for government employees compared to private sector workers parallels the pattern of reforms in Mexico. While the Cardoso and Lula administrations both sought pension reforms that would limit worker benefits and government liabilities, they also expanded national social assistance programs (Hall ). For example, a scholarship program to promote school attendance among children in low-income families, Bolsa Escola (School Grant), originated in the Federal District in the s, and it was expanded into a national program in  (Hall ). In , Bolsa Alimentação (Nutrition Grant) began providing conditional cash transfers to lowincome families with young children and pregnant or nursing mothers. The various national social assistance programs received their biggest boost after the election of President Lula. In the first year, Lula brought the government’s poverty alleviation policies under an umbrella called Fome Zero (Zero Hunger). The program sought to create an alternative distribution network to bypass the traditional clientelism. However, the program was abandoned by the end of Lula’s first year in office due to criticisms regarding political manipulation of the program, inefficiency, and poor coordination (Hall ). The government then unified the social assistance programs into Bolsa Familia (Family Grant) and created the new Ministry of Social Development and Fight against Hunger to eliminate duplications, increase efficiency, and improve targeting of benefits to the poor (Andrews ; Hall ). Spending on Bolsa Familia expanded rapidly under Lula, increasing from . to . percent of total government spending and from . to . percent of GDP (Hall ). National spending on Bolsa Familia is now comparable to that of Opportunities in Mexico. Bolsa

                             / 

Familia is estimated to benefit about  percent of families living below the poverty line, and by the end of , it was estimated that  percent of Brazil’s population received benefits (Hall ; Hunter and Power ). Like Opportunities, the program has received generous support from and international promotion by both the World Bank and the Inter-American Development Bank (Hall ). Politically, Bolsa Familia was central to Lula’s reelection in October . Bolsa Familia was central to the consolidation of new electoral support for Lula in less developed regions, which have become more important for Lula since  (Hunter and Power ). The design and expansion of Bolsa Familia parallels that of PROGRESA/Opportunities, despite being adopted by different types of candidates and political parties. In both cases, political leaders expanded social assistance in order to reach voters and potential supporters beyond both the formal labor market and the reach of traditional social insurance institutions. In sum, the historical development of welfare institutions in Brazil has some parallels with that of Mexico. For instance, social insurance institutions emerged as a response to labor demands and conflict in the context of the incorporation of organized labor into national politics. Once created, both countries’ welfare institutions, even though they were quite different in their organizational form, were then shaped and driven by organized labor’s demands and union participation in social insurance management. Labor organizations blocked reform efforts, particularly those affecting pensions for government workers and health insurance. The role of intrabureaucratic rivalries and competition was more important in Brazil than in Mexico, where competition between the social insurance institutes and the health ministry was less pronounced. Both countries sought social insurance reforms that retrench entitlements but also eliminate some stratification among covered workers. In both Brazil and Mexico, noncontributory, meanstested conditional cash transfer programs have become important not only for compensating those beyond the reach of formal labor markets and social insurance but also for generating political support among that growing constituency.

A New Model of Latin American Welfare? The comparison of Chile, Argentina, Brazil, and Mexico is not intended to claim that all four countries have similar welfare institutions but that the role of organized labor, institutional legacies, and the interaction of labor power and welfare institutions shaped welfare development in each of these countries. Organized

 \                             

labor, though not always equally influential or powerful, articulated demands for state-mandated welfare benefits, including workers’ compensation, pensions, and sometimes even health care. In the context of growing industrialization and labor organization and following periods of intense mobilization and conflict, governments adopted provisions to lay the foundations for comprehensive social insurance. Once established, welfare institutions became targets for future labor demands, and unions played central roles in shaping the expansion of coverage and benefits and blocking reforms that would challenge their benefits or privileges. By the late s, each of these countries had institutions that provided legal coverage to nearly all workers. In practice, however, coverage was often lower in less developed regions or among workers in informal or low-productivity sectors. The institutions fell far short of providing universal and equal access to social insurance protections. For the most part, labor unions became central defenders of existing social insurance provisions, blocking state-directed attempts to introduce equality, efficiency, or universal principles. Although governments, particularly during military regimes of the s or s, were sometimes able to implement reforms that challenged the privileges and rights of organized workers, unions or organizations of medical professionals were also able to dilute reform proposals that challenged their institutional survival. Mostly, equity-enhancing reforms prior to the s, even under military regimes, were achieved not by curtailing the benefits of privileged workers but by expanding benefits and coverage for low-income, informal sector, or rural workers. This process reflects the tendency to adopt institutional layering when powerful groups block more integral reform efforts. In all of these countries, the economic and political liberalization of the s or s shaped reform of social insurance and led to the creation or expansion of noncontributory social assistance. Economic and political reforms often eroded formal sector employment most associated with unionization while simultaneously challenging organized labor’s claims to insider status in ruling or democratic coalitions. The relative weakening of unions’ capacity for political influence converged with competitiveness concerns, economic crises, and budget deficits to launch social insurance reform onto the national political agenda. Meanwhile, the informalization of the labor market and periodic economic crises generated new demand for compensation. Noncontributory, targeted social assistance proved more effective at reaching the growing numbers of workers and poor beyond the reach of social insurance institutions. Further, democratization, and

                             / 

sometimes fierce national electoral competition, created political incentives for parties and candidates to reach out to these potential voters. Changes in these countries and others in Latin America suggest that the region is experiencing a fundamental shift in its approach to public welfare provision. In particular, governments throughout Latin America seem less committed to institutional reforms that would strengthen formal labor markets and incorporate all wage workers into national social insurance schemes, with the possible exception of Chile. Instead, governments seem to have accepted or even promoted informalization of labor markets as a means of pursuing elusive economic growth. Governments’ inability to eliminate corruption, evasion, and the expansion of low-productivity employment is only reinforced by a globally competitive economic market in which developing countries hope to compete by marketing lower-priced goods. In light of these changes, and changes in the political incentives facing politicians in competitive democratic politics, governments have turned to noncontributory and means-tested social assistance programs to fill gaps created by market risks. While such programs may be more progressive and have the potential to be equity enhancing, the benefits and funding are often relatively meager and may be insufficient for eliminating structural poverty. The trend in the region is toward a dual pattern of welfare: retrenched and minimal social insurance for the formal sector and means-tested benefits for the poor. Perhaps also problematic for the long term is that the organization and implementation of these social assistance programs fail to establish organized constituencies among the poor who can mobilize and support their continuation through economic downturns. Thus, the long-term commitment to these targeted poverty alleviation and means-tested benefit programs remains uncertain.

 \                             

NOTES

 .  . Notable exceptions are the works of Carmelo Mesa-Lago (; ; ), James Malloy (), Silvia Borzutzky (), Alex Segura-Ubiergo (), and Stephan Haggard and Robert Kaufman (). . Expansive notions of welfare-enhancing public policy may include subsidized or universal public education, progressive taxation, or subsidized housing (with either direct subsidies or tax incentives). Although such public policies can have important welfareenhancing and market-correcting effects, they are usually considered peripheral to the core policies of social insurance or assistance. For a detailed list of the policies included under the heading “social protection,” see International Monetary Fund (hereafter, IMF) . . The five core programs of social insurance are workers’ compensation for work-related accidents and illness, old-age and disability pensions, medical insurance, unemployment insurance, and family allowances. Although German chancellor Bismarck implemented the first modern state social insurance in the s, state-mandated social insurance is largely a product of the twentieth century. In , only  countries had any type of social insurance, but by ,  countries had adopted some form of it (Social Security Administration , xli). The first form of social insurance often adopted is protection for work-related injuries and illnesses; all  countries that had any social insurance in  had coverage for work injuries. Old-age, disability, and life insurance are the next most common forms of social protection. Other types of coverage, such as unemployment and family allowances, are less common. As of , only  countries had some form of unemployment insurance, and  provided workers with family allowances (Social Security Administration , xli). Housing programs are often also included with social insurance. Although Mexico has extensive housing programs administered by the main social insurance institutions, this study does not address housing policy separately from the other functions of the social insurance institutions. . This distinction sets aside policies like general food subsidies that were clearly designed to reduce poverty, though the non-poor were not excluded from the benefits. Targeted, antipoverty programs are also referred to as programs to reduce “social exclusion” (IMF ). . For a look at the IMSS in isolation, see, e.g., Spalding , , and . . See Dresser ; Cornelius, Craig, and Fox ; Bruhn ; Graham ; Dion ; Schady ; and Díaz-Cayeros, Estévez, and Magaloni . . Chapter  further develops the concept of institutional layering. See also Schickler , Thelen , and Thelen . . See Collier and Collier , Thelen , Mahoney , Thelen , and Hall and Thelen . . Stephen Kay () also emphasizes the importance of the centralization of decision making but does not discount the role of organized labor. Instead, Kay argues that the ability of organized labor to block privatization depends on its relationship with the ruling party. . In contrast, Mexican historians have often described periods of regime instability as a consequence of mobilization and strikes by the organized working class. Beginning with



the strike at Cananea in , they have chronicled the Mexican labor movement and its most important struggles, often studying particular periods of heightened conflict between labor and the state. For example, Antonio Alonso () looks at the railroad workers’ strike of the late s, and Pablo González Casanova edited a series on the history of labor in Mexico. As Ilán Bizberg notes, this historical tradition emphasizes the role of workingclass mobilization from a Marxist perspective, and it has often painted an alternative version of labor-state relations from that proposed by Mexican sociologists influenced by the work Seymour Martin Lipset and other theorists of labor relations in the developed world (Bizberg , –). . For analyses of labor, see Roxborough , Middlebrook , and Cook . For analyses of the role of peasants, see Fox . . Two other studies (Brachet de Marquez ; Wahl ) suggest that labor mobilization contributed to the adoption of certain progressive social policies in Mexico, but those works have different theoretical emphases and different outcomes of interest. . See Ragin  for a discussion of Mill’s methods. . Examples of qualitative comparative historical studies include Collier and Collier , Mahoney , Thelen , and Schneider . Studies notable for their combination of qualitative and quantitative methods include Stephens ; Rueschemeyer, Stephens, and Stephens ; Hicks ; and Huber and Stephens . See Mahoney and Rueschemeyer  for a more inclusive list.

 .       . Others have also argued that the Esping-Andersen typology is useful for understanding welfare in Latin America. In particular, Filgueira and Filgueira  suggests that Latin American welfare strongly resembles Christian democratic welfare regimes, though labor market regulation often plays a more important role in Latin America than it does in Europe. Gough and Woods  starts with the Esping-Andersen framework but then elaborates a new typology for welfare in the developing world. Several of Ian Gough and Geof Wood’s classifications of Latin American cases are not consistent with common characterizations of welfare in specific countries, however. Barrientos  suggests that the main characteristics of welfare in Latin America are consistent with Christian democratic welfare regimes, though the author highlights recent shifts toward a neoliberal model. . See Barrientos  and Filgueira and Filgueira  for a similar characterization of Latin American welfare regimes. . Several recent studies consider specific social policies, such as pensions, health care, or targeted poverty alleviation, but few address social insurance and the broader concept of a welfare regime as defined here. Among those works on Latin America that examine social insurance are Mesa-Lago , , ; Malloy ; Spalding ; Borzutzky ; Filgueira and Filgueira ; Barrientos ; and Huber . . Geddes  argues that the domain of a theoretical argument does not derive from the set of cases from which it originated or on which it was originally tested but that the domain of an argument should be defined by the argument itself. . For overviews of the literature, see Skocpol and Amenta , Pierson , and Amenta . The latter two suggest three broad approaches, though their categorization of specific works may differ.

 \             –

. On “institutional complementarities,” see Hall and Soskice . . See Hall and Soskice  and Huber and Stephens  for discussions of welfare regimes and production regimes in the advanced industrialized democracies. . The juxtaposition of rational choice and historical institutionalist approaches is especially pronounced in Thelen  and Katznelson and Weingast . Surveys of the literature often discuss sociological institutionalism, which views institutions as socially constructed. Sociological institutionalism is less common in political science studies of welfare. Also, different authors label the three schools slightly differently. See Immergut , Thelen , Hall and Soskice , Thelen , and Katznelson and Weingast  for overviews of these approaches. . Political science examples of formal models of welfare include Moene and Wallerstein a, b, ; and Mares . These studies often combine formal models with tests using empirical data. In economics, examples of formal models of welfare can be found in Romer , Meltzer and Richard , Roemer , and Austen-Smith . . Class power resource theory has also been called power resource mobilization theory, social democratic theory, and working-class power theory. . For a discussion on class cohesiveness as it relates to Latin America, see Frieden . For an examination of this issue with regard to trade, see Rogowski  and Hiscox . . Another important distinction between liberal economic and Marxist traditions consists of the assumptions regarding political institutions and the state. While liberal economists assume that political institutions and the state are neutral, Marxists often assume that the state is a tool of capitalist reproduction and domination. . According to Swenson, capitalists may favor inclusive and centralized labor policies when such policies will help temper demands from sectors with stronger union organizing. Swenson does not argue, however, that industrialists in northern Europe were eager to pay for extensive welfare benefits for workers, though he does make such an argument for the case of the progressive industrialists in the United States during the Great Depression (Swenson ). . Working-class power is central to these authors’ explanation of democratization in Europe, Latin America, and the Caribbean, but they acknowledge that the working class often cooperated with other classes (in coalition) to push for democratization (Rueschemeyer, Stephens, and Stephens ). . Recent approaches to politics and policymaking in political science deemphasize the importance of the democratic/authoritarian dichotomy and instead emphasize the collective actors that provide political support to both authoritarian and democratic regimes. See Tsebelis , –; Bueno de Mesquita et al. , –. . Given the arguments made in studies of firm preferences regarding social protection (e.g., Mares ; Estevez-Abe, Iversen, and Soskice ), perhaps it could be argued that Mexican capitalism does not provide the structural conditions conducive to firm support for social protection. Nevertheless, evidence suggests that employers in Mexico have not supported social protection policies and of late have been active proponents of privatization. . In the Mexican context, corporatism is also often used to refer to the relationship between organized labor unions and the ruling PRI party. The relationships between unions and the PRI, however, were never codified in Mexican labor law, the legal basis of corporatism. . During the Fox administration, the Mexican Supreme Court declared this provision unconstitutional.

            – / 

. The two laws that regulate labor organization and unions were not the legal basis of the relationship between labor and the PRI. . The PRM was the direct predecessor of the PRI, which was reorganized in . . Democracy can be thought of as having two dimensions: political competition and political contestation (Dahl ). Although the European path to democracy involved increasing political competition before contestation, the pattern of democratization in Mexico in the late twentieth century was the opposite. . See Hall and Taylor , Immergut , Thelen , and Katznelson and Weingast  for overviews. Sociological institutionalism emphasizes that institutions are embedded in social, cultural, and economic contexts (March and Olsen ) and is seldom used in comparative explanations of welfare. . See Meltzer and Richard , Austen-Smith , Roemer , and Romer . An important exception to this general characterization is the work of Isabela Mares (), which combines formal theory development with extensive historical research on the expressed preferences of employers. Her study is a model of how evidence should be employed to validate the assumptions and test the predictions of formal theory. . See also Moene and Wallerstein a for similar analysis. . Interestingly, income inequality has nonsignificant, negative relationships with pensions, family benefits, and anti-poverty/housing subsidies, which, if we strictly follow Moene and Wallerstein’s logic, suggests that none of these programs are redistributive but, rather, that they serve insurance functions. Indeed, according to Moene and Wallerstein’s results, health-care spending is the only potentially redistributive form of social spending, though their result is not statistically significant. . See Wilson and Butler  for a reanalysis of the Moene and Wallerstein a data, with the former’s findings (which contradict the latter’s) suggesting an alternative interpretation of that discussed here. . Avner Greif and David Laitin address this criticism by introducing quasi-parameters, which are previously exogenous parameters that have been endogenously changed by institutions (Greif and Laitin , –). For example, if class power is an exogenous parameter that helps determine the initial institutional configuration, to the extent that the created institutions affect class power, it becomes a quasi-parameter, which can be used to explain institutional change within the rational choice framework. . One effect of institutional cooperation that is often highlighted by rational choice institutionalists is trust between the actors who cooperate to create political institutions (Keohane ). In this sense, trust would help reinforce institutional stability and provide an incentive against defection, implying that institutions do not create the impetus for change. . Collier and Collier  and Mahoney  place considerable emphasis on identifying the end of the critical juncture and the beginning of the legacy of the juncture, including the response to the outcome of the juncture. . For a similar discussion from the perspective of rational choice institutionalism, see Greif and Laitin . . These marginal changes, or oscillation, as described in Schickler , are more frequent and likely to occur over shorter periods of time than are the reactions to critical junctures, as conceived in Collier and Collier  and Mahoney . . See Krueger  for a discussion of appropriate state action according to neoliberal principles. See World Bank  and  for a discussion of the importance of investment in human capital for economic growth and development.

 \             –

. See Weyland  for a discussion of the impact of the Chilean model in several Latin American countries. . When women have played significant roles in the formulation of welfare policies, it has almost always been in democracies. . In many instances, women mobilized around these issues on the basis of social motherhood or their identities as mothers. While soup kitchens, school lunch programs, health care for the needy, and family assistance programs are important elements of public welfare, they are conceptually distinct from social insurance, which at its core is designed to protect workers. The gender biases common to social insurance programs and their conception as the basis of the welfare state are well documented (Orloff ; O’Connor ). . For a discussion of these divisions in congresses of the mid-s, see Soto , ; for congresses in the early s, see Macías , –, and Soto , . These divisions in the early s led to the formation of the United Front for Women’s Rights (Frente Único Pro Derechos de la Mujer, or FUPDM). . The FUPDM tended to privilege women’s vote above other demands of the movement (Soto , –; Macías , , ; Tuñon Pablos , ). The FUPDM’s political platform included a commitment to social insurance (Tuñon Pablos , –), and it contained language similar to that found in the statutes of the Confederación de Trabajadores de México (CTM [] ). However, the only hint of gender issues related to the Social Insurance Law from nonfeminist sources was made by CTMista Alejandro Carrillo during his address to the Chamber of Deputies when he referred to the benefits that working mothers would receive as a result of the legislation (Discurso del Alberto Trueba Urbina [] , –).

 .      . Article , sec. , states, “To be considered of social utility: the establishment of chests of popular insurance for disability, life, involuntary separation from work, accident, and other analogous ends, by which the Federal Government, as well as that of every State, shall foment the organization of institutions of this type to inspire and instill popular social security” (quoted in Huerta Maldonado , ; trans. by author). Section  holds employers responsible for work-related accidents or diseases, and section  requires employers to pay an indemnity of three months’ wages in cases of unjustified dismissal. . For the position of the industrialists, see Cámara de Industriales de Orizaba [] , . . Before leaving office, in September , Obregón also proposed a reform to Article , sec. , which would have enabled the federal government to create a social insurance system for workers. However, the Chamber of Deputies did not discuss or approve this proposal (Cámara de Diputados, September , , –). . The reformed section  of Article , published in the Diario Oficial on September , , reads, “The creation of a Social Insurance Law is considered to be of public utility, and it shall include insurance for disability, life, involuntary separation from work, sickness, and other analogous ends” (Huerta Maldonado , ; trans. by author). . Federico Bach, one of the authors of this  proposal, also helped draft the social security plan for railroad workers and published both a study on social insurance in Europe and International Labor Organization standards for that project (Bach ). He was also

            – / 

involved in the presentation of the proposed law to the public in November  (El Popular, November , ). . The teachers in Veracruz went on strike again in  and  (Fondo de Cultura Económica [hereafter, FCE] , ). . This use of executive authority to implement social insurance in response to labor mobilization is not unlike what prompted Bismarck to adopt social insurance in Germany (Hicks ). . According to one estimate, the CROM grew tenfold from  to , to  million members (Trejo Delarbe , ). . For a discussion of popular support for the Cárdenas administration, see Córdova , Hamilton , and Middlebrook . . The PNR, which was created by President Calles, was the direct antecedent of the PRM, which was created in , and later the hegemonic PRI. For a discussion of the early history of the PRI, see Garrido . . The statutes of the CTM adopted in  were virtually identical to those of the CGOCM (de Lara Rangel , –). . In , Francisco Macín became one of the first technical advisors for the IMSS. . Several sources mention a social security proposal sent to Congress sometime during  (Sánchez Vargas , –; García Flores , –; Pozas Horcasitas , –). However, these sources never mention the exact date, and there are no references to this proposal in the official records of either congressional chamber. . García Téllez was also the second director general of the IMSS in – and briefly Cárdenas’s personal secretary following his presidency. . García Téllez recounted this conversation often, as he did in another interview in  (“García Téllez” , ). . During an extraordinary session of the Congress in July , Cárdenas sent a less thorough and incomplete proposal for social insurance to Congress along with several other proposals. The proposal does not appear in the Diario de los Debates of either chamber. Although this proposal was similar in structure to the one drafted in , it lacked the exact percentages to be contributed by each participant and had no explanation of the legal means for determining such percentages in the future (Secretaría de Gobernación ). Compared to the  proposal, the  draft is much more cursory. Congress never discussed this proposal, “claiming that a new, more complete proposal should be elaborated” (García Cruz a, ; trans. by author). According to Francisco Macín, “The pressure of economic interests against social security would request a new revision of the proposal, which prevented that Congress from discussing it” (Macín , ; trans. by author). The legislature probably avoided the proposal because of the intense political struggles that were occurring during the  presidential elections. . Almazán had been a PRM pre-candidate for the presidency but quickly became independent once it became clear that Ávila Camacho would receive the party’s nomination. . Unions that continued to support the PRM candidate included the CTM, the Confederation of Mexican Workers (Confederación de Trabajadores de México, or CGT), the CROM, and the Federation of State Employee Labor Unions (Federación de Sindicatos de Trabajadores al Servicio del Estado, or FSTSE). . Business leaders in Nuevo León were probably anxious to secure such a bargain because of the political conflict following the  gubernatorial election, when Cárdenas

 \             –

chose a PRM candidate of whom the local political and business leaders disapproved. For a discussion of the Nuevo León conflict, see Niblo . . The labor organizations represented were the CTM, Sindicato Mexicano de Electricistas (SME, also of the CTM), Sindicato de Trabajadores Mineros y Metalúrgicos y Similares de la República Mexicana (STMMSRM), Sindicato de Trabajadores Petroleros (also of the CTM), Sindicato de Trabajadores Ferrocarrileros de la República Mexicana (STFRM, also of the CTM), Sindicato de la Industria Textil y Similares (also of the CTM), and Federación de Sindicatos de Trabajadores al Servicio del Estado (the FSTSE, which had belonged to the CTM until a new federal regulation in  prohibited its membership). In addition, the federal deputy (Alberto Trueba Urbina) and the federal senator (Alfonso Sánchez Madariaga) were also affiliated with the CTM. The employer organizations represented were CONCANACO, Confederation of Chambers of Industry (Confederación de Cámaras Industriales, or CONCAMIN), National Chamber of Transportation and Communication (Cámara Nacional de Transportes y Comunicaciones, or CNTC), Mexican Mining Chamber (Cámara Minera de México, or CMM), COPARMEX, and National Association of Textile Industry Entrepreneurs (Asociación Nacional de Empresarios de la Industria Textil, or ANEIT). The remaining representatives were Miguel García Cruz (of the Secretariat of Labor) and representatives of other ministries. . Members of the National Worker Council that signed the declaration were the CGT, CTM, CROM, National Proletariat Confederation (Confederación Proletaria Nacional, or CPN), Mexican Confederation of Workers and Peasants (Confederación de Obreros y Campesinos de México, or COCM), SME, STMMSRM, and the Independent Union of Hard Fiber Textile Workers (Sindicato Independiente de Trabajadores Textiles de Fibras Duras, or SITTFD) (García Cruz a, –). . During this period, congressional debates were halted after two speeches in favor and two against. In this case, labor leaders gave the speeches in favor, in which they cited capitalist opposition to the new law (“Discurso del . . . Alberto Trueba Urbina” [] , ). The statement issued by the Senate Social Security Commission in support of the legislation also mentioned that employers’ representatives “presented themselves to make objections to the Law, which were listened to by the Commission and had to be rejected for being founded in irrelevant arguments” (“Dictamen de las Comisiones” [] , ; trans. by author). . The CTM reported , members; the CROM, ,; the COCM, ,; and the CGT, , (Medina , n). . The IMSS interpreted the provisions of existing collective contracts to determine employer and worker responsibilities with regard to IMSS contributions and benefits. Employers sent letters to President Ávila Camacho complaining that too often the IMSS determined that the employer had to provide benefits in excess of the requirements of the Social Insurance Law or Ley del Seguro Social. President Ávila Camacho sent a memo to García Téllez in connection with these letters, and García Téllez responded to twelve such complaints. García Téllez’s memo does not include a date, but references and the content of the memo suggest that it was sent in late  (letter in folder , box , Archivo Incorporado Ignacio García Téllez, El Colegio de México). García Cruz (, –) indicates that three days after the president signed the legislation, employers’ organizations sent the president a thirty-eight-page memo outlining their opposition to the Social Insurance Law, including the points discussed above.

            – / 

. Excélsior was considered the mouthpiece of COPARMEX, according to Niblo , . . Due to the bias of the contemporary media against social security, many of the accounts of protests against the law in the press must be read with caution. El Popular, a leftist newspaper associated with the CTM, and El Nacional, the official organ of the PRM, published editorials and accounts supporting the law, which should also be read with some skepticism (Pozas Horcasitas , ). . The FNP claimed to represent , workers in  (Spalding ). By , the CPN (parent organization of the FNP) claimed to represent only , members (Medina , n). . The CPN distanced itself from the FNP at the end of March  (Spalding , ). . When employers interpreted the law to benefit their own interests (cited in the first of the FNP’s pointed complaints), the IMSS often sided with labor unions in resolving the disputes. This summation of the FNP’s complaints is based on letters from the FNP to the president and to the director of the IMSS, dated February , , and March , , respectively (Archivo General de la Nación [hereafter, AGN] , –, –). See also Pozas Horcasitas , , and López Villegas , . . See the FNP’s February , , letter to the president regarding the excessive influence of the CTM on the IMSS (AGN ) or the CTM’s claim that the FNP leadership and a related organization were trying to divide the labor movement (López Villegas , ). . According to some, the organizations leading the protests, including the FNP, were “letterhead organizations,” led by outcasts from the organized labor movement who were seeking a personal following and a public audience and to compete with more established unions, especially the CTM (Medina , ). Despite declarations by the FNP to the contrary, several authors, including García Téllez (head of the IMSS at the time), suggest that right-wing capitalists or the fascist UNS were associated with the movement and were partly responsible for its activities. While it is possible that the reputation of the opposition movement has been clouded by the “official” position of the CTM against it, the various allegations nevertheless call into question the origins and motivations of the movement. . On June , , the five largest labor confederations and the electricians’ union signed the Pact of Labor Unity, or Pacto de Unidad Obrera, in which they temporarily agreed that during the war they would renounce their right to strike and submit labor disputes to arbitration. The pact also called for the unification of the labor movement into the National Worker Council (Tiempo, June , , –; Medina , –; López Villegas , ). . These official government figures are likely to underestimate the decline in real wages in the early s (Niblo , ). . In ,  percent of Mexicans lived in urban areas, a figure that increased slightly by , to  percent. By ,  percent of the Mexican population lived in urban areas (Instituto Nacional de Estadística, Geografía e Informática [hereafter, INEGI] ). . This election in  marked the first time that the opposition was represented in the lower chamber since the creation of the PRM. Nevertheless, all of the presidential proposals sent to the legislature were approved unanimously. It was not until  that presidential proposals passed with less than a unanimous vote, and  percent of those proposals were passed (González Casanova [] , –). In contrast, President Cárdenas did not even have a minimal opposition to face in Congress before , which implies that

 \             –

political institutions did not determine policy outcomes as much as did the class coalitions that supported the regime. . See Confederación de Cámaras Industriales (hereafter, CONCAMIN)  and Confederación de Cámaras Nacionales de Comercio e Industria (hereafter, CONCANACO) . The PAN’s policy position regarding social insurance was one typical of Christian democratic parties in Western Europe: social insurance should protect the weakest members of society, the state should not directly provide health-care benefits, and benefits should vary according to need (Partido Acción Nacional [hereafter, PAN]  and “El Seguro Social” ). . The CONCAMIN () also printed a copy of the law with explanations of employer responsibilities. They worried that employers would be alarmed by the demasiado fuertes (or too strong) financial obligations that social insurance would entail and wanted to assure their members that they had fought against implementation. . The CONCANACO and ninety-six industrial enterprises challenged the legality of the CONACINTRA to stop its organization. The dispute was not resolved by the Mexican courts until  (Alcazar , –). In , more than  percent of CONACINTRA’s membership was concentrated in the Federal District, and it had no Monterrey or Nuevo León delegation (Alcazar , ). . See chapter , Article  in CANACINTRA n.d. See also CONCAMIN  and Congreso Nacional de Comerciantes , which was the Congress at which the CONCANACO was formed.

 .     . Initially, policy makers intended for the federal employee legislation to be extended to state-level government workers (López Cárdenas , ). . The FSTSE initially resisted joining the CNOP when it was formed in  because the FSTSE feared its influence would be diluted in the organization, which included the urban popular masses, professional organizations, and the middle class (Instituto de Capacitación Política , –). . The outgoing president’s choice of Secretary of Labor López Mateos was somewhat surprising since Ruiz Cortines had implied through his actions that his secretary of agriculture or secretary of state would be chosen. However, each of those individuals had a strong following and was aligned with either Cardenista or Alemanista factions (see Lomelí Vanega , –). . In  members of Section IX had demanded salary increases in excess of those accepted by the national leadership, but the national leadership was able to officially exclude the dissidents from being elected to official section posts (Pellicer de Brody , ). . These same demands had initially been made in , when the movement first emerged. . The leadership of the SNTE had begun a public relations campaign to discredit the Section IX teachers, claiming that they were striking for their benefit alone and ultimately wanted to improve their already privileged status within the public education system. . The SNTE leadership’s action provides an example of how the labor law enabled union leadership to control dissident movements within its ranks. Workers dismissed from union organizations also lose their jobs.

            – / 

. For instance, the leadership of the petroleum workers’ union agreed to postpone contract negotiations for a year, until after the  presidential elections, but some rankand-file members in the Federal District opposed the decision and denounced the union leadership’s decision (Pozas and Loyo , –). . Among those unions that sent such letters or telegrams were representatives of the unions of the Secretariat of Labor and Social Welfare, the Secretariat of Agriculture, and the Secretariat of Public Education. . Some state worker unions opposed the requirement that workers contribute for their health-care benefits since the existing Juridical Statute for Government Workers mandated that such benefits be paid for solely by the state (Fondo ALM /./). . Since the creation of the ISSSTE, scholars and government officials have come to use the number of insured workers in the ISSSTE system as the best estimate of the size of the public sector. . Workers in state-owned enterprises legally fall under Part A of Article  of Mexico’s Constitution, meaning they could receive ISSSTE coverage only by presidential decree (López Cárdenas , ). Although employees of state- and municipal-level governments had petitioned President Ruiz Cortines for federal health-care and pension benefits, they were not automatically integrated into the ISSSTE system. Some states formed agreements with the ISSSTE to provide coverage for their workers, but some state governments continue to operate separate social insurance systems for their own employees. . For example, López Mateos had been involved in organizing several government employee unions during his early political career (Parra , –). . In addition to creating the ISSSTE, López Mateos also approved IMSS reforms in  that served to increase benefits and coverage for private formal sector employees. . Here, I discuss expansion in terms of municipalities only because it is the unit that was used to organize and expand services at the time. The number of beneficiaries of IMSS programs also increased substantially throughout the s and s, but that measure is more sensitive to fluctuations in the economy and levels of employment. . See, for instance, CTM a, ; CTM b, ; CTM , –; and CTM , . . This type of “constituent service” was one of the primary functions of the office of the CTM’s undersecretary for social security. Since the s, the CTM has helped workers claim social insurance benefits to which they believe they are entitled; such help has included contacting the IMSS to check on the status of pension and disability benefits. In the s and s, the IMSS fielded more than ten thousand requests a year for information or assistance with IMSS benefits (see, for instance, CTM  and CTM ). Since members of the federal Chamber of Deputies are not allowed to be reelected in the same district and sometimes have little relationship to the district that they represent (having often been imposed on the district by the central PRI leadership), it is not surprising that they do not perform this type of constituent service the way their counterparts in the U.S. House of Representatives do. . The  IMSS reform law eliminated these modified schemes and incorporated them into other existing categories of rural employment (seasonal, temporary, small landowner, etc.). . In Hermosillo, Sonora, the opposition of doctors was so extreme that they rented or bought all suitable property in anticipation of IMSS expansion into the area. Dr. Moreno

 \             –

Islas, who had been sent to the area to establish a new medical facility for the IMSS by Ortiz Mena, ultimately bought a former bordello in the city because it purportedly had an excellent location and sufficient rooms for a full medical practice. Even some of the women who had formerly worked there were trained as receptionists, assistants, or nurses (Ortiz Mena , ; Ortiz Mena ; Moreno Islas ). . Coquet’s administration was also known for excessive spending on projects not directly related to the functions of social insurance, including various cultural centers, community theaters, and a now infamous baseball stadium in Mexico City (FCE , –). . In the early s, the CTM still conveyed specific requests for coverage made by member union organizations (CTM , ; CTM , ; CTM , ). . Data from earlier than  are not readily available. This figure includes only those day-care programs operated by the IMSS for insured female workers. A handful of day-care programs originally created for IMSS workers also began providing services to insured female workers in . Further, in , third-party day-care centers began to be authorized by the IMSS to provide services and receive payment from the IMSS. The use of third-party day-care services subcontracted by the IMSS expanded in the s. . Estimates of the take-up rate for old-age retirement and pensions for ISSSTEinsured workers are not available because the ISSSTE publishes only aggregate figures that combine the number of such pensioners with those on disability pensions.

 .    . For a discussion of the causes and consequences of the debt crisis, see Lustig . . The Federal Labor Law has not been formally reformed since . On labor policies during the Salinas administration, see Zapata . . Partly because Mexico does not have funded unemployment insurance and workers laid off from bankrupt firms have no legal ability to demand the unemployment compensation mandated by federal labor law, many Mexicans facing unemployment during the s and early s sought early retirement pensions or disability pensions (Dion ). . Sarah Brooks (), for example, finds that countries with low levels of government debt are more likely to undertake relatively extensive privatizing pension reforms, even as the implicit pension debt (a measure of the liabilities of the existing pension system) rises. . The CTM in particular had for a number of years demanded the creation of national unemployment insurance. For several years after the  reform, the organization continued to demand that the SAR contributions be used for unemployment insurance instead. The demand for national unemployment insurance is reflected in the Informes, or annual reports of activities, presented at the national meetings of the CTM in , several times during the s, and in the early s (see CTM , –; CTM , ). Several of the Informes of the early s called for the elimination of the SAR in favor of unemployment insurance. The Informe of September  was the last issue of the decade to demand national unemployment insurance (CTM ). . In the  reform, workers were allowed to choose their pension fund administrators or Afore (Administradoras de Fondos para el Retiro), even though some believed that it would increase transaction costs (Solís Soberón ). The CONSAR was also given even more regulatory powers in . Officials made efforts that year to make sure all workers had

            – / 

unique social security numbers, but problems persisted. The December  pension reform required the creation of a unique identification number and card for all Mexicans within the following three years; the card and number were to be used for all services and purposes (e.g., voting, getting a driving license, and acquiring access to social security services). . Although studies have questioned the extent to which the increase in domestic savings in Chile was due to its privatized pension system, at the time of the Mexican reform, most policy makers still believed that pension privatization would boost domestic savings (Madrid ). . Interestingly, of the several individuals who mentioned the Eagle Proposal document in private interviews, none were labor leaders. Moisés García Calleja, a longtime CTMista and secretary general of the IMSS since before the  reform, dismissed the work of the CEDESS as unimportant, saying that the IMSS often hired outside consultants to conduct studies. In contrast, representatives of the business sector and all of the individuals involved with the reform process at CEDESS were familiar with the document’s contents and insisted that the Eagle Proposal was the core of the reform. . In some respects, this proposal was not unlike a return to the private medical unions that had provided primary care services prior to . . Various Mexican banks and the World Bank also provided financial support for the FUNSALUD study (Laurell , ). . Around the same time, a number of public forums were also held to discuss the reform proposals. Representatives of labor, industry, and employers organizations; representatives of the ILO; and former IMSS officials, such as Ricardo García Sainz, who had been director general of the IMSS until , made presentations regarding IMSS reforms. For descriptions, see Laurell . . In an interview, Borrego Estrada () claimed to have guided and shaped the outcome of the “negotiations” between labor and business and even to have drafted parts of the final document. . This isolation of the reform team was not unlike that of the team that developed the pension reforms in the early s in Argentina (Brooks , ) or in the late s in Brazil (Weyland , –). . These documents were vague, lacked concrete suggestions for reform, and did not consider the net impact of pension privatization on workers’ welfare. See CTCTFSS  and García . . A few years after the  IMSS reform, the SNTSS became one of the founding members of the National Labor Union (Unión Nacional de Trabajo, or UNT), an independent labor organization. The SNTSS shares the leadership of that organization with the telephone and university workers’ union. Despite the “independent” status of the SNTSS, it usually has at least one of its leaders in the Chamber of Deputies as a member of the PRI. . Several of these policy makers were former officials whose interviews are mentioned in this document—including Solís Soberón, Dávila, and Reynoso—but there seems to be no consensus on the document‘s influence. The World Bank itself noted the reluctance of Mexican officials to acknowledge its influence or assistance on certain matters (World Bank b). In any event, this seems to be the first documentary evidence suggesting the possibility of pension privatization for Mexico. . In a confidential interview with the author, a former government official also stated his belief that the  pension privatization was part of an undisclosed, explicit under-

 \             –

standing between the World Bank and the Mexican government following the  peso crisis. However, this claim cannot be substantiated. . In another part of the report, the World Bank mentions its concern regarding the top-heaviness of Mexico’s medical system but also indicates its support of greater decentralization of the health-care services provided by the Secretariat of Health (World Bank b). . The “objectives of the reform program seem[ed] quite modest for the size of the loan” (World Bank b, ) mainly because the full reform originally recommended by the World Bank was not implemented due to the obstacles already mentioned. . One official (Martinez ) went so far as to say that the World Bank did not have any influence because they are always ten years behind when it comes to policy innovations. . The ILO sent a representative to one of the public forums in  to discuss reform proposals and discouraged the use of private individual accounts (see Laurell ). . Published statistics from IMSS do not disaggregate coverage figures by gender. . Based on information from CONSAR: http://www.consar.gob.mx/estadisticas/ /dic/estadis_.htm and http://www.consar.gob.mx/estadisticas//Jun/estadis_ .htm (accessed August , ).

 .    . Coverage data come from IMSS ; INEGI, Anuario Estadístico (various years); Zedillo ; and INEGI a. These sources all receive their data directly from the social security institutes. Population data for – are from the United Nations Demographic Yearbook (various years) and for  from INEGI b. Data for , , , and  were linearly interpolated from existing data. The percentage of the population with social security coverage is used instead of the percentage of the economically active population contributing to IMSS or ISSSTE because the rules regarding benefits for dependents are generous, in order to provide coverage that is as broad as possible. The cross-correlation with no lags between the dependent variable and the percentage of the economically active population (EAP) enrolled in the IMSS is ., which indicates that the dependent variable is a good proxy for the percentage of the EAP that is insured. . Coverage data published by the IMSS and ISSSTE may overestimate the level of coverage because some people may have multiple sources of coverage and thus be counted more than once, or individuals may continue to be listed as beneficiaries even after they are no longer living. The degree of overestimation is not likely to be severe. According to a  household survey, . percent of the population had access to either IMSS or ISSSTE health care, compared to an estimated . percent using the official IMSS and ISSSTE data. Since household surveys are not available to construct detailed time series, the IMSS and ISSSTE data are the best available to measure social protection coverage. . Although the variables are all first-order integrated, they are not co-integrated. Extensive tests and co-integrating regressions were run for the dependent variable and each independent variable both separately and as a group, according to the procedures outlined in Durr  and Enders , –. In no case were the residuals from such co-integrating regressions stationary; the variables are not co-integrated. In the event of co-integration, error correction models are the appropriate modeling technique. Error correction models

            – / 

were also estimated in various forms, and in no instance were the error component parameters significant. Additionally, tests carried out following Enders , –, and Gujarati , , indicated that the trends in the dependent and independent variables are stochastic and not deterministic. As such, the variables are difference-stationary, as opposed to trendstationary. The first-differenced variables should be modeled using traditional time-series techniques with no trend variable. . The autocorrelation of the first lag is statistically significant (t = .), and the BoxLjung Q statistic is also significant (Q = ., p = .). . The test for autocorrelation in the error variance was statistically significant (p < .). The errors for the two models presented in table . are stationary. The errors for the ARCH model had a constant variance as well. . The peso crisis of December  was not modeled since data from so few time periods following the crisis were available. . Cross-correlations were used to determine the number of lags to be included in the models. Subtracting or adding additional lags and comparing the models using likelihood ratio tests verified the optimum number of lags for each model. Such diagnostics are recommended in De Boef and Keele . . The number of federal jurisdiction strike petitions filed by unions comes from Middlebrook , with additional information from the Secretaría del Trabajo y Previsión Social, Memoria and Informe de Labores (various years). Missing data for , , , , and  were linearly interpolated from the existing data. Estimating the full equations with missing data reduces the number of cases from fifty-four to forty, which is less than ideal for maximum likelihood estimation. However, when the two full models are estimated with the data missing, the results are essentially the same: labor unrest is still the best and most consistent explanation for social insurance development. . Once a union files a strike petition, it may withdraw the petition or allow it to lapse. If the employer meets worker demands, no strike takes place. If the union sincerely intends to strike or if negotiations with the employer fail, the Secretariat of Labor reviews the petition to determine if there is a legal basis for a strike. The secretariat may deny the right to strike if the petition does not provide sufficient cause. . During the late s and the s, the number of strikes seems to have declined, which could reflect labor acquiescence. However, the number of strike petitions increased slightly, which suggests a different scenario. This discrepancy suggests either that unions were increasingly using strike petitions as a means of political protest or that employers and unions reached agreements after the filing of the petition but before the deadline for a strike. Evidence suggests that the former interpretation may be closer to the truth. For instance, in October , at the height of the debt crisis, many unions organized their efforts to file strike petitions, often filing within the same week to protest the government’s handling of the crisis. . Data for – come from Mitchell , , ; data for – come from INEGI  and , Anuario Estadístico. INEGI sources do not provide a full time series for the entire period of study. . Data to directly measure the size of the informal sector are not available for the full period of this study. Analysts often use the inverse of social insurance coverage as a proxy for informal sector size. . This presentation departs from the standard presentation of time-series results with interactions that would present the coefficient for the interaction variable. However, since

 \             –

I am more interested in the real effects of the variables both before and after the debt crisis (rather than the size of the difference in effect), I have presented the results in a manner that facilitates this type of interpretation. . Trade openness data for – come from UN Secretariat , , and Mitchell , . Data for – come from the Penn World Tables (Heston, Summers, and Aten ), and data for – are from the World Bank . Later data come from INEGI , Anuario Estadístico. INEGI sources do not provide comparable historical series for this variable. . Data concerning federal foreign debt for – come from INEGI , – , while data for – are from the Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público, or SHCP). Thanks to Reyna Gutierrez Solís and Flavio Torres of the SHCP for providing me with the data. INEGI sources do not provide a complete historical series for this variable. . Central government revenue data for – come from INEGI , and for –, from INEGI , Anuario Estadístico. State and local government revenue data for – come from INEGI (various years), Anuario Estadístico, and for – , from INEGI (various years), Finanzas Públicas, Estatales y Municpales de México. Missing local revenue data for  and  were linearly interpolated from the existing data. . The measure is a linear combination of the inverse of the effective number of parties in the lower chamber of the legislature (bounded by  and ), the proportion of state governorships held by the PRI (bounded by  and ), and the proportion of municipal presidencies held by the PRI (bounded by  and  and multiplied by . due to the lesser importance of such offices). The inverse of the effective number of parties is equal to Σ pi ², where pi is the proportion of legislative seats held by each party (i ) (Taagepera and Shugart ). When the inverse of the effective number of parties is equal to , there is only one effective party in the legislature; as the inverse of the index decreases toward , the number of parties increases. The data on the number of parties in the Chamber of Deputies are coded by the author and come from Nohlen  and Keesing (various years). Data on governors and municipal presidents come from official government election returns; Matthew Cleary provided data to the author. The first opposition party governor was elected in . There is very little variation in this variable before the s, and what variation there is in the early decades is driven solely by changes in the composition of the Congress. Differences are calculated over the electoral period for which there was change. . The decision to use levels or first differences was driven by the characteristics of the data (i.e., whether the data are difference-stationary or not). The alternative approach— an error-correction model—does allow for some theoretical decision making. Such models are appropriate when two or more time-series variables are assumed to move in tandem, or are co-integrated of the same order. Extensive testing revealed that none of the variables was co-integrated, despite being first-order integrated. Unit root tests, such as the DickeyFuller, are biased toward finding unit roots. Given the likelihood of a structural break in the series (in  due to the debt crisis), the Perron procedure for testing for unit roots in the presence of a structural break was used, as outlined in Enders , . All of the variables in the equations, aside from strike petitions, have unit roots both before and after . However, strike petitions have a unit root (i.e., are not stationary) before  and do not have a unit root (i.e., are stationary) after . A structural break in the strike petition series was confirmed with another Perron test outlined in Enders , . Error correction

            – / 

models were estimated for the full model and pairs of variables, but none of the error component variables was significant. According to these tests, the variables were not cointegrated and have a stochastic (not deterministic) trend; the recommended analytic strategy calls for making the variables stationary (through differencing and turning them into change values) and using normal Box-Jenkins techniques. . The results of the OLS model are essentially the same as those for the ARCH model, though the significance of some variables changes (with the exception of the effects of trade openness). Despite the inclusion of the lagged dependent variable, the OLS model still suffers from autocorrelation, as demonstrated by the Durbin-Watson d statistic. The temporary intervention of the debt crisis is not included in this model, but the average levels of social insurance coverage before and after the debt crisis are included. The intercept after the debt crisis was not statistically significantly different from zero nor from the intercept before the debt crisis. . Again, temporary interventions in differenced time series should be interpreted as changes in the levels of the original series. . Granger causality tests were conducted with both the bivariate (with one, two, and four lags) and the full model. In both cases, strike petitions Granger-caused health insurance coverage, but not the contrary. . Political centralization was largely constant for most of the series analyzed here, which may explain why it is not statistically significant. Alternate measures of political democracy, such as Polity or Freedom House scores, have little or no variation over the period of study.

 .   . Documents from the development banks indicate that both the World Bank and the Inter-American Development Bank discussed ISSSTE reforms and the potential for technical assistance in  (World Bank a; Inter-American Development Bank ). . The recognition bond for workers with thirty years of service would be worth the cost of a  percent replacement rate annuity at the time of the reform; the bond for workers with between fifteen and thirty years would be worth the cost of a  percent replacement rate annuity at the time of the reform. Those with fewer than fifteen years of service would receive a bond worth the cost of an annuity providing a replacement rate equal to . percent times the years of service at the time of the reform. The minimum pension guarantee for those choosing the privatized system would be equivalent to that of the IMSS system— the minimum wage as of July , , adjusted for inflation. Workers in the privatized system would have the right to withdraw, once every five years, a lump sum from their accounts, though they would then have to contribute longer to earn the minimum pension guarantee. In addition, workers in the private system could voluntarily contribute up to  percent of their incomes to their accounts, which would have to be matched by their government employer. . A handful of Mexican states have their own social security institutes; the majority have agreements with ISSSTE to provide benefits for their workers. . Although the ISSSTE would collect premiums from the organizations for which employees work, the institute would purchase an annuity from the insurance company of a worker‘s choice if he or she was to receive a work-related disability pension.

 \             –

. The elimination of reserved seats for a state governor also suggests less need to attract governors’ support. . Workers using their combined contributions to the IMSS and the ISSSTE to qualify for the minimum guaranteed pension will be eligible only for the minimum pension of the IMSS system. . The figure for the number of workers insured by ISSSTE comes from Fox . Although reform opponents overestimate and supporters underestimate the number of petitions, the court acknowledged that the number was around , (Muñoz Ríos ).

 .   . In , in fact, the PRI reorganized its internal structure in order to create a party of “citizens” that would bypass existing sectoral organizations. . Although Mexican labor law mandates unemployment compensation for unjustified dismissal, these benefits are unfunded and often not paid by employers because bankrupt firms are exempt and workers must file expensive and lengthy petitions in labor courts to receive benefits if the employer chooses not to pay. . During the Zedillo administration, PROGRESA—unlike PRONASOL—was limited to rural communities. . These figures were cited in a press release (Comunicado No. ) issued by the Office of the President, Ernesto Zedillo, on August , , to promote the program during his visit to Cardonal, Hidalgo. . PROGRESA’s emphasis on social investment to stimulate demand reflects a trend in the explanation of poverty in developing countries. . The initiative passed the lower chamber with  votes for and  against, with  members either abstaining or absent (Centro de Estudios Sociales y de Opinion Pública [CESOP] ). . For the retrenchment versus compensation debate, see, e.g., Garrett ; Kaufman and Segura-Ubiergo ; Rudra ; Avelino, Brown, and Hunter ; and Wibbels . . Whereas clientelism hinges on excludability and particularistic benefits, nonclientelistic benefits provided to generate political support are nonexcludable and uniformly provided according to criteria universally applied to all potential beneficiaries (Kitschelt ). Alberto Diaz-Cayeros and Beatriz Magaloni () also emphasize the potential for changes in patterns of clientelism when policies are centralized. Although national strategies for the distribution of geographically concentrated or public goods may be shaped by electoral competition, Matthew Cleary () finds little support for claims that electoral competition improves the provision of public goods by local governments in Mexico.

 .     . Poverty estimates vary depending on methodology used. These are estimates used by the Opportunities program. . The social security systems that cover employees of the petroleum industry and the military remain unreformed.

            – / 

. These figures are based on a search of deputy biographies on the Chamber of Deputies Web site, camaradediputados.gob.mx. Because many biographies are incomplete, the count probably underestimates the number of teacher union members or leaders in the Chamber. . A number of the most prominent studies on the historical development of welfare in Latin America were produced by researchers affiliated with the University of Pittsburgh in the s or s. During that time, Carmelo Mesa-Lago (Department of Economics) and James M. Malloy (Department of Political Science) directed a number of graduate theses (e.g., those of Ernesto Isuani and Silvia Borzutzky) that laid the groundwork for North American research on Latin American social insurance. . Estimates suggest that by –,  percent of the working population and as much as  percent of workers in Buenos Aires belonged to mutual aid societies (R. Munck , ; Lloyd-Sherlock a, ). . For an additional comparison of the health sector reform processes in Mexico and Argentina, see Lloyd-Sherlock . . A reform during the Raúl Ricardo Alfonsín administration (–) had paved the way for private retirement insurance. Although some unions included such insurance in their labor contract demands, there was little growth in the private retirement insurance market (Isuani and San Martino , –). . See Alonso  for a detailed discussion of the negotiation process and changes throughout the reform process. . On competitiveness concerns and health reforms, see Lloyd-Sherlock . On reductions in social security taxes due to worries about competitiveness of the tradable sector, see Etchemendy . . Despite the creation of the National Unemployment Fund in , only , or roughly  percent of the urban unemployed received benefits (Lloyd-Sherlock b).

 \             –

REFERENCES

  Archivo Histórico del Instituto Mexicano del Seguro Social (AHIMSS). /--/, //. Mexico City, Mexico. Archivo Incorporado Ignacio García Téllez, Archivo Histórico. El Colegio de México, Mexico City, Mexico. Fondo Adolfo López Mateos (ALM). /./. Archivo General de la Nación, Mexico City, Mexico. Fondo Adolfo Ruiz Cortines (ARC). ./, /, /./, ./, //, ./, ./. Archivo General de la Nación, Mexico City, Mexico.

  Acedo Angulo, Blanca Margarita. . En la construcción y consolidación del Estado Cardenista –. In Historia de la CTM –, vol. , edited by Javier Aguilar García. Mexico City: Instituto de Investigaciones Sociales, Facultad de Economía, Facultad de Ciencias Políticas y Sociales, Universidad National Autónoma de México. Acepta Gordillo que negoció ‘desde antes’ la reforma a la ley del ISSSTE. . La Jornada, March . Aceves del Olmo, Carlos. . Secretary of social welfare, National Executive Committee, CTM. Interview by author, February , Mexico City, Mexico. Acuerdo presidencial que crea la comisión técnica del seguro social. [] . In El seguro social en México. Mexico: Instituto Mexicano del Seguro Social. Acuña, Carlos H., Gabriel Kessler, and Fabián Repetto. . Evolucion de la política social Argentina en la decáda de los noventa: Cambios en su lógica, intencionalidad y en el proceso de hacer la política social. Self-Sustaining Community Development in Comparative Perspective Project, coordinated by the Center for Latin American Social Policy, University of Texas at Austin, May. Adato, Michelle. . Programas de transferencias monetarias condicionadas: Beneficios y costos sociales. In La pobreza en México y el mundo: Realidades y desafíos, edited by Julio Boltvinik and Araceli Damián, –. Mexico City: Siglo XXI and the State of Tamaulipas. Aguilar García, Javier, ed. . Historia de la CTM: –. Mexico City: Instituto de Investigaciones Sociales, Facultad de Economía, Facultad de Ciencias Políticas y Sociales, Universidad National Autónoma de México. Aguilar Solís, Samuel. . PRI federal deputy. Interview by author, November, Mexico City, Mexico. ———. . Director, International Issues, National Executive Committee, PRI. Interview by author, May , Mexico City, Mexico.

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INDEX

Calles, Plutarco Elías, , –, –, ,  Cámara Nacional de la Industria de Transformación. See CANACINTRA CANACINTRA (Cámara Nacional de la Industria de Transformación), , ; and social insurance, , ,  capital account liberalization, –; in Mexico, ,  Cárdenas, Lazaro, –, , –, , ,  Carranza Garza, Venustiano, ,  causal inference, ,  CCE (Consejo Coordinador Empresarial), , , –; and  IMSS reform, , , –, –, –; creation of, ; demands of, ; organization of, ,  CEDESS (Centro de Desarrollo Estratégico para la Seguridad Social), –, , , ; and business interests,  centralization of decision-making authority, , , ; in Mexico, ,  Centro de Desarrollo Estratégico para la Seguridad Social. See CEDESS Chile, –, , –, , , ; Chile Solidario, ; pension privatization, , , ; and pension reform in Mexico, ; welfare institutions in, , –; women and welfare in, – Civil Pension Law, ; and FSTSE, –; and IMSS, . See also ISSSTE (Instituto de Seguridad y Servicios Sociales del Trabajadores del Estado) class, , –, –, , , ; balance of power, , ; balance of power in Mexico, , –, ; definition of, ; demands of subordinate, , , , ; effect of economic change on, ; identity of, ; industrialist, ; Marxist definitions of, ; in Mexico, , ; mobilization of subordinate, , ; mobilization of working, ; positive political economy definitions of, ; preferences of, ; social construction of, ; subordinate, ; subordinate and power, ; subordinate in authoritarian regimes, ; subordinate in Mexico, , ; working, 

advanced industrialized democracies, , , –, , , – Afore. See private pension fund administrators Afore Siglo XXI, – agrarian reform. See land reform agricultural workers. See rural workers Alber, Jens,  Alemán Valdés, Miguel, , ,  Argentina, ; class coalitions and authoritarianism in,  Article , –, –, , , . See also Constitution, Mexico Aspe Armella, Pedro,  authoritarian bargains,  authoritarian regime, , ; consolidation of in Mexico, –, , ; and cross-class coalition, , ; and cross-class coalition in Mexico, ; and legitimacy in Mexico, –; in Mexico, , , , –, , , ; and organized working class in Mexico, , –, ; political legitimacy of, , –; and social insurance in Mexico,  autocorrelation,  Averting the Old Age Crisis,  Ávila Camacho, , , , –, , , ; campaign of, , –; election of, ; and organized labor, ; and social insurance, – Ayala Almeida, Joel, –, , ,  biological sciences,  Borrego Estrada, Genaro, , ,  Borzutzky, Silvia,  Brady Plan,  Brooks, Sarah,  business interests, , ; and Cardenismo, ; and IMSS, –; and labor law in Mexico, ; in Mexico, , , , , , , ; and PRI, , , ; and social insurance in Mexico, , –, , –, –, –, –, –; and welfare preferences, – Calderón Hinojosa, Felipe, , , ; alliance with organized labor, ; and ISSSTE reform, 



class-based approach, , –; applications of, –; and authoritarian regimes, ; and political power, ; and welfare,  class coalition approach, –, , , ; applications of, –, ; in Argentina, ; and authoritarian regimes, ; limitations of, ; synthesis with historical institutionalism, – clientelism, , , n; in Argentina, , ; in Mexico, ,  CM (Colegio de Médicos),  CMHN (Consejo Mexicano de Hombres de Negocios), , , ; creation of,  CNC (Confederación Nacional Campesina), , , , , –; demands of, ; and land invasions, –; and PRI, – CNOP (Confederación Nacional de Organizaciones Populares), ; and PRI,  CNTE (Coordinadora Nacional de Trabajadores de la Educación),  Colegio de Médicos. See CM collective action, –; costs, ; and welfare, – collective actors, – collective contract. See labor contract Collier, David, , , –, ,  Collier, Ruth Berins, , , –,  Comisión Nacional del Sistema de Ahorro para el Retiro. See CONSAR comparative historical analysis, , , , ; definition of, ; methodology of, ; of welfare,  CONAGO (Conferencia Nacional de Gobernadores),  CONCAMIN (Confederación de Cámaras Industriales), , , –, ; and  IMSS reform, , –; and labor law, ; and social insurance, , , , ,  CONCANACO (Confederación de Cámaras Nacionales de Comercio e Industria), , ; and  IMSS reform, –; and opposition to social insurance,  conditional cash transfers: in Brazil, ; in Mexico, . See also social assistance Confederación de Cámaras Industriales. See CONCAMIN Confederación de Cámaras Nacionales de Comercio e Industria. See CONCANACO Confederación de Trabajadores de México. See CTM Confederación Nacional Campesina. See CNC Confederación Nacional de Organizaciones Populares. See CNOP

Confederación Patronal de la República Mexicana. See COPARMEX Confederación Regional Obrera Mexicana. See CROM Confederación Revolucionaria de Obreros y Campesinos. See CROC Conferencia Nacional de Gobernadores. See CONAGO Congreso del Trabajo. See CT Congress: and ISSSTE reform, ; in Mexico, , , , , , –, , , ; and policy-making in Mexico, –; and social insurance in Mexico, ; United States,  CONSAR (Comisión Nacional del Sistema de Ahorro para el Retiro), –, , , –; regulations of,  Consejo Coordinador Empresarial. See CCE Consejo Mexicano de Hombres de Negocios. See CMHN Constituent Congress, in Mexico, – Constitution: Mexico, , –, –, –, ; United States, . See also Article . contribution rates: IMSS, , ; ISSSTE, ; in Mexico, , ,  Coordinación General del Plan Nacional de Zonas Deprimidas y Grupos Marginados. See COPLAMAR Coordinadora Nacional de Trabajadores de la Educación. See CNTE COPARMEX (Confederación Patronal de la República Mexicana), , ; creation of, , ; and labor law, ; and social insurance, , , –, – COPLAMAR (Coordinación General del Plan Nacional de Zonas Deprimidas y Grupos Marginados), , –, , , , –,  corporatism: in Chile, –; definition of, ; inclusionary, ; in Latin America, ; Latin American, ; legal institutions, ; in Mexico, –, , , –; and social insurance in Mexico, ; state, . See also corporatist institutions corporatist institutions, –, , –; in Argentina, ; in Chile, ; constraints, –; definition of, –, ; government employees in Mexico, ; government workers in Mexico, ; inducements, ; in Latin America, ; in Mexico, , , , ; and organized working class power, ; and reform in Mexico, . See also corporatism

 \     

critical juncture, , , –, –; approaches, ; in Latin America,  CROC (Confederación Revolucionaria de Obreros y Campesinos), ,  CROM (Confederación Regional Obrera Mexicana), , , , , ; and  IMSS reform, – cross-class coalition, , , , , –; and authoritarian regime, , ; and balance of class power, ; and the debt crisis, ; and economic development, ; and electoral competition in Mexico, ; and globalization, ; and government workers in Mexico, , ; and institutional context, ; and ISSSTE, , ; and labor market in Mexico, ; in Mexico, , , –, , , –, , , , –, , , , , ; and organized working class, , ; and organized working class in Mexico, , , , , , ; and PRI, ; realignment in Mexico, ; and rural workers in Mexico, , ; and social assistance in Mexico, , ; and social insurance expansion in Mexico, ; and social insurance in Mexico, , , , –, ; and social insurance reform in Mexico, , , ; and welfare, –; and welfare in Mexico,  CT (Congreso del Trabajo), –, , –, ; and  IMSS reform, ; and  IMSS reform, , –; demands of, –; mobilization of, ; and PRI, –; and social insurance reform,  CTM (Confederación de Trabajadores de México), , , –, , ; and  IMSS reform, –; and  IMSS reform, –, ; and adoption of social insurance, ; and Avila Camacho, –; in Chamber of Deputies, ; and constituent services, ; criticisms of IMSS, ; and day-care services, ; and demands for social insurance expansion, ; demands of, –, ; and doctors, ; and FSTSE, , ; and globalization, ; and health reform, –; mobilization of, ; and pension reform, ; and PRI, , ; and PRM, ; and rank-and-file demands, , ; and social insurance, , , –, , ; statutes and social insurance, ; and strikes, ; and textile workers, – day-care services: as demand of SNTE Section IX, ; demands for in Mexico, –; and

IMSS, , ; in Mexican labor law, ; in Mexico, , ; and textile workers in Mexico, . See also IMSS (Instituto Mexicano del Seguro Social) debt: foreign in Mexico, ; government in Mexico, , ,  debt crisis, , , , ; and labor market, ; in Mexico, –, , –, ; modeling, ; and PRI,  decentralization, ; and welfare in Mexico,  decommodification,  defamilialization,  de la Madrid Hurtado, Miguel,  democracy: competition in, ; populist tendencies in, ; weak accountability in,  democratization, , , –; in Brazil, ; in Chile, ; class coalition analyses of, ; and corporatism in Mexico, , ; effects of, –; and institutional change in Mexico, ; in Mexico, , –, –, –, , ; and organized labor in Mexico, –, , , ; and social assistance in Mexico, ; and welfare, . See also political liberalization diffusion. See policy diffusion disability pensions, ; for government workers in Mexico, ; in Mexico, ,  divided government, in Mexico,  doctors: in Chile, ; and IMSS, –; and institutional conversion, ; in Mexico, , ,  domestic savings, in Mexico, ,  Eagle Proposal, –, , ,  Echeverría Álvarez, Luis, –, –; and business interests, ; election of, ; and landowners, ; and organized labor,  economic crisis, ; in Latin America, ; in Mexico, –, , , ; and poverty in Mexico,  economic development, ; and cross-class coalitions, ; and economic class interests, ;in developing world, ; in Latin America, ; in Mexico, , , , , ; and social insurance coverage in Mexico, ; and welfare, ; welfare in Mexico and,  economic development model, ; in Latin America, ; in Mexico, ; and social insurance in Mexico, ; state-led, ; and welfare institutions, . See also import substitution industrialization (ISI); neoliberal economic model

     / 

economic functionalism, – economic interest groups, ; mobilization of,  economic liberalization, , , , –, –, , , , , –; and  IMSS reform, ; in Argentina, ; and compensation in Latin America, ; and compensation in Mexico, ; effects of, ; effects of in Mexico, , ; impact on class structure in Mexico, ; in Latin America, –; and Mexican labor market, ; and Mexican welfare, , , ; in Mexico, , –, –, –, , , , , , ; and organized working class in Mexico, , ; and pension reform in Mexico, ; and private capital in Mexico, ; and PRONASOL, ; and welfare reform, . See also neo-liberal economic model; globalization economic pacts, in Mexico,  education policy, in Mexico,  electoral competition: effects of, ; and expansion of welfare in Mexco, ; increased in Mexico, , , , , , ; in Mexico, , -; and PRI, ; and transparency, . See also democratization electricity workers, in Mexico, ,  employers. See business interests Esping-Andersen, Gøsta ,  evolutionary biology, – FAIS (Fondo de Aportaciones para la Infraestructura Social), ,  FDI. See foreign direct investment FDSM (Fondo de Desarrollo Social Municipal), – Federación de Sindicatos de Trabajadores al Servicio del Estado. See FSTSE Federación Democrática de Sindicatos de Servidores Públicos. See FEDESSP Federal Labor Law, –, –, ;  reforms, ; and day-care services, ; reforms, ; severance pay, . See also labor law; corporatist institutions federalism: effect on welfare, ; effects on welfare, ; and interest groups, ; in Mexico, –, , ; and social assistance in Mexico, ; and welfare, –; and welfare in the United States, ; and welfare retrenchment,  FEDESSP (Federación Democrática de Sindicatos de Servidores Públicos), , , ;

creation of, ; and ISSSTE reform, –; and SNTE, – feedback effects, –, , , , . See also institutional legacies; policy legacies financial industry, in Mexico, ,  fiscal policy, in Mexico, ,  Fleury Teixeira, Sonia Maria,  Flora, Peter,  FOBAPROA (Fondo Bancario de Protección al Ahorro),  Fondo Bancario de Protección al Ahorro. See FOBAPROA Fondo de Aportaciones para la Infraestructura Social. See FAIS Fondo de Desarrollo Social Municipal. See FDSM foreign direct investment (FDI), –; in Mexico, ,  foreign investment: in Latin America, ; in Mexico, , ; and welfare,  formal labor market, , , ; in Latin America, ; in Mexico, , , , , , , ; and social insurance, ; and social insurance coverage in Mexico, –, . See also labor market Fox Quesada, Vicente, , ; and ISSSTE reform, , ; and PROGRESA,  Frenk, Julio,  FSTSE (Federación de Sindicatos de Trabajadores al Servicio del Estado), , –, , , ; and Article , ; and Civil Pension Law, –; and CNOP, , ; and CTM, , ; demands of, –; divisions within, ; and doctors, ; and FEDESSP, ; and ISSSTE, , , –, –; and pension reform, ; and PRI, , , ; and SNTE, . See also government workers Fundación Mexicano para la Salud. See FUNSALUD FUNSALUD (Fundación Mexicano para la Salud), ,  García Téllez, Ignacio, –, , ,  gender, ; and welfare, – Germany, , , , ; Handwerk system,  globalization, , , –; and compensation, –; and compensation in Mexico, , ; and convergence, ; and cross-class coalitions, ; and CTM, ; and labor markets, ; in Latin America, –; and Mexican labor market, ; and Mexican

 \     

welfare, ; in Mexico, , ; and organized working class in Mexico, ; and social assistance, , ; and social insurance, , ; and social insurance in Mexico, , , , ; and welfare, , –. See also economic liberalization Gordillo, Elba Esther, –, , ; criticisms of, ; and ISSSTE reform, ; and PRI, ,  government: branches of, ; unified in Mexico,  government workers, ; and Calles in Mexico, ; and cross-class coalition in Mexico, ; demands in Mexico, , –, –, ; and IMSS, ; and ISSSTE, , ; and labor contracts, , ; and labor contracts in Mexico, , ; and labor law in Mexico, ; in Mexico, , , , , , , , , ; and PRI, ; and repression in Mexico, ; and salaries in Mexico, ; and social insurance in Mexico, , –, –, , –, ; and unions in Mexico, . See also FSTSE (Federación de Sindicatos de Trabajadores al Servicio del Estado) health care: in Argentina, –; in Chile, –; infrastructure in Mexico, ; in Mexico, –, , , , –, –, , , –, –; non-contributory in Mexico,  health insurance: in Chile, ; private, –; private in Mexico, , – historical institutionalism, –, –, , –, , , –; and institutional change, –; applications of, –; assumptions of, –; and institutional change, –; and institutional stability, ; and path dependency, ; synthesis with class coalition approach, –; and welfare,  housing loans, for government workers in Mexico, –,  Huber, Evelyne, – human capital: and investment, ; in Mexico, –; and social assistance,  IADB (Inter-American Development Bank): and health reform in Mexico, ; and ISSSTE reform, –, ; in Mexico, –; and Opportunities, ; and social assistance, ; and social assistance in Brazil, 

ILO (International Labor Organization), –, , ; and IMSS reform, ; and ISSSTE, ; in Mexico, –, ; and social insurance reform in Mexico,  import substitution industrialization (ISI), –, , , , ; and cross-class coalition, ; definition of, ; exhaustion of, ; and industrial bias, ; and Mexican welfare, , –; in Mexico, , ; and social insurance,  IMSS (Instituto Mexicano del Seguro Social), , , , , , ;  law, ;  reform, , ;  reform, , –, , , ;  reform in Congress, –, –;  reform, –;  reform, –, –; benefits, , , , , –; bureaucracy, ; and Civil Pension Law, ; contribution rates, , , –, –, –, , ; coverage, , , , , , , , , , , , ; creation of, , , , , ; and cross class coalition, –; and day-care services, –, , ; disability pensions, –; and doctors, –, , –; and domestic workers, ; expansion of, –, –; finances of, , –, , , –, ; and government contributions, ; and government workers, ; and health care, –, –, , –, ; and health care reform, , , –, –, ; and inflation, ; and institutional stability, –; and international organizations, ; and ISSSTE, ; life insurance, –; maternity leave, ; and medical infrastructure, , ; and medical unions, –, ; minimum pension, , , , , ; and modified schemes, , –, ; parametric reforms, –; pension benefits, –; pensioners, ; pensions, , , –, , , –, ; and policy legacies, ; and private health insurance, –, ; privatization of, , , , ; and PRONASOL, ; quality of services, ; and reinterpretation, –; replacement rates, , , –; retirement age, ; and rural workers, –, , ; social benefits, ; and state capacity, ; and subcontracting of medical services, , , , , , , ; transition costs, –; and unintended consequences, ;

     / 

IMSS (cont.), and voluntary enrollment, , , ; workers, , , , . See also Social Insurance Law. IMSS-COPLAMAR. See COPLAMAR (Coordinación General del Plan Nacional de Zonas Deprimidas y Grupos Marginados) IMSS (Instituto Mexicano del Seguro Social) Technical Council, , , –, , ; and  IMSS reform, – IMSS (Instituto Mexicano del Seguro Social) workers’ union, see SNTSS (Sindicato Nacional de Trabajadores del Seguro Social) individual accounts, ; in Chile, ; in Mexico, –, , , –, , ; and organized labor in Mexico,  industrialists: and labor law in Mexico, ; in Mexico, ; and social insurance in Mexico, ,  industrialization, , , ; and economic classes, ; and factor mobility, ; and formation of economic classes, ; in Mexico, ; state-led, –; state-led in Mexico, , ; and welfare, –, , –. See also economic development inflation: in Mexico, , , ; and social insurance in Mexico,  INFONAVIT (Instituto del Fondo Nacional de la Vivienda para los Trabajadores), , ,  informal sector, , , , , , –, , , , , , ; and economic globalization, ; in Mexico, , , , , , , , ; and social insurance in Mexico, ; urban, , , , , . See also labor market infrastructure spending, in Mexico, – institutional approaches: critique of, ; and welfare,  institutional change, –, , , –, ; and class coalitions, ; definitions of, –; endogenous sources of, ; and historical institutionalism, , –, ; and ISSSTE, ; measuring, –; in Mexico, , , , –; modes of, –; and parametric reform, , ; and punctuated equilibrium model, ; and rational choice institutionalism, –. See also institutional reform institutional complementarities, –, ; in Mexico, ,  institutional conversion. See institutional reinterpretation

institutional layering, , , –, , –, , ; definition of, , –; and IMSS modified schemes, ; and ISSSTE, , ; in Latin American welfare, ; in Mexican welfare regime, , , , , ; and PRONASOL, –; and Seguro Popular,  institutional legacies, ; effects of, ; and IMSS, ; in Mexico, –, ; statistical evidence for, ; and welfare retrenchment, . See also feedback effects; policy legacies institutional reform, , ; definition of, ; parametric, , ; structural, –. See also institutional change institutional reinterpretation, , –; in Argentina, ; in Brazil, ; and de facto welfare privatization, ; and IMSS, –; and Mexican doctors, ; in Mexican welfare, ; in Mexico, , ; and social insurance in Mexico, . See also institutional stability institutional stability, –, , –, ; and class coalitions, ; definition of, ; and historical institutionalism, ; in Mexico, , , . See also institutional reinterpretation institutions, , –; as dependent variable, , ; economic,  Instituto de Seguridad y Servicios Sociales del Trabajadores del Estado. See ISSSTE Instituto del Fondo Nacional de la Vivienda para los Trabajadores. See INFONAVIT Instituto Mexicano del Seguro Social. See IMSS insurance industry: in Mexico, ,  Inter-American Development Bank. See IADB interest rates, ; in Mexico,  international competitiveness: and Mexico, , , –, . See also globalization International Labor Organization. See ILO international organizations (IOs), –, ; in Mexico, – investment portfolio: in Latin America, ; in Mexico,  IOs. See international organizations. ISI. See import substitution industrialization ISSSTE (Instituto de Seguridad y Servicios Sociales del Trabajadores del Estado), , , ; and Afores, ; benefits, –, , ; compared to IMSS, ; contribution rates, , , ; coverage, , , , , ; creation of, , , ; and cross-class coalition, , ; demands for, ; development of, ; finances, , –, ; and FSTSE,

 \     

; and government contributions, ; implicit pension debt, ; and inflation, ; and institutional layering, ; medical infrastructure, , ; and minimum pension, ; and need for reform, –; and organized labor, , –; origin of, ; and PAN, ; and pension reform, –; pensions, , , ; and policy legacies, , ; and recognition bonds, ; reform, , , –, , , , –, –; reform team, ; replacement rates, ; retrenchment of, ; and SNTE, ; and subcontracting of medical services, ; transition costs, , , ; as violation of IMSS law, ; and World Bank, , –. See also Civil Pension Law judicial system: and corporatism in Mexico, ; and IMSS reform, ; and ISSSTE reform, ; in Mexico, , , –. See also Supreme Court labor. See organized working class labor conflict: in Argentina, –; and government workers in Mexico, –; in Mexico, , , –, . See also organized working class labor contract: enforcement in Mexico, , ; and government workers in Mexico, , , –, ; IMSS, ; and judicial system in Mexico, ; in Mexico, , , , ; and policy legacies, – labor law: and day-care services in Mexico, ; in Argentina, ; in Chile, –, ; and gender discrimination in Mexico, ; and government workers in Mexico, –, , ; and liberalization in Mexico, ; in Mexico, , –, , , –, , , . See also corporatist institutions; Federal Labor Law labor market, , ; and class structure in Mexico, ; flexibilization in Mexico, ; informal, , ; informal in Mexico, , ; in Latin America, ; liberalization in Mexico, ; in Mexico, , –, –, , ; risks of, ; weak formal,  land invasions: in Mexico, , –; and social insurance in Mexico,  landowners: in Mexico, , , –, ; and opposition to Echeverria, ; and opposition to social insurance in Mexico, , 

land reform, in Mexico, , , – Levy Algazi, Santiago,  Ley del Sistema de Ahorro para el Retiro. See SAR logic of industrialism, , – Lombardo Toledano, Vicente, , , ,  López Mateos, Adolfo, , , –, , ; election of, ; presidential campaign of, ; and social insurance,  Macín, Francisco, ,  Madero González, Francisco I.,  Madrazo Pintado, Roberto,  Mahoney, James, , –,  Malloy, James M.,  Marxist approaches, –; assumptions, , ; and economic class, – maternity benefits: in Mexico, ,  Maximato, –, –,  median voter, ; in Mexico,  Meltzer, Allan,  Mesa-Lago, Carmelo,  Messick, Richard,  methodology, ,  Mexican Revolution, , , ,  Mexico: authoritarian regime, ; changes in welfare regime, ; class structure, ; exceptionalism, ; factors of production, ; organized working class, ; and political stability, , , , ; politics, ; welfare institutions, ; welfare regime, , ,  military regime: in Argentina, –; in Brazil, –; in Chile, – minimum pension guarantee: in Chile, ; in Mexico, –, , , – Moene, Karl Ove,  Molinar Horcasitas, Juan,  Monterrey, ,  Moreno Cueto, Enrique,  Morones, Luis,  mutual aid societies: in Argentina, ; in Chile, ; in Mexico,  NAFTA (North American Free Trade Agreement), – neoliberal economic model, , , , ; effects of, ; in Mexico, ; and social assistance, , ; and social insurance, ; and social insurance coverage in Mexico, . See also economic development model; economic liberalization; globalization Niblo, Stephen, 

     / 

noncontributory benefits: in Brazil, ; in Chile, , ; in Mexico, , , –, , . See also social assistance North American Free Trade Agreement. See NAFTA Obregón Salido, Álvaro, –, ,  O’Donnell, Guillermo,  OECD (Organization for Economic CoOperation and Development), , ,  Opportunities (Oportunidades), , , ; criticisms of, ; expansion of, –, ; and Inter-American Development Bank, ; and World Bank,  opposition parties: in Congress, ; in Mexico, , ,  Organization for Economic Co-Operation and Development. See OECD organized working class, , –, ; and autonomy in Mexico, , ; in Brazil, –; in Chile, ; and co-optation, , , ; and corporatism, ; and cross-class coalition in Mexico, , ; and declining political influence in Mexico, ; and demands, , , , –; and demands in Argentina, –; and demands in Chile, ; and demands in Mexico, , –, ; and divisions in Mexico, , , , ; and economic liberalization, ; and economic liberalization in Mexico, ; and electoral politics in Mexico, ; and government workers in Mexico, –; and incorporation, –, , , ; and incorporation in Mexico, ; in Latin America, , ; in Mexico, , –, , , , , ; and mobilization, ; and mobilization in Argentina, ; and mobilization in Chile, –; and mobilization in Mexico, , , –, , , , , –, , ; and political capacity in Argentina, ; and political capacity in Mexico, , ; and political parties, ; and political power in Mexico, ; and political capacity of, ; and power, , , –, –; and power in Mexico, , , ; and PRI, , –, , , , ; and repression in Mexico, ; role in cross-class coalition, ; and social insurance, , –, ; and social insurance in Mexico, , , , , , –, , –, , , , –, , , , ; and welfare in Mexico, –

Ortiz, Guillermo,  Ortiz Mena, Antonio, , ,  Ortiz Rubio, Pascual,  PAN (Partido Acción Nacional), , , , ; and  IMSS reform, ; and business support, ; founding of, ; and ISSSTE reform, –, ; and opposition to social insurance, ; and organized labor, ; and party discipline, , ; and SNTE, , , ; and transparency,  PANAL (Partido Nueva Alianza), ,  Partido Acción Nacional. See PAN Partido de la Revolución Democrática. See PRD Partido de la Revolución Mexicana. See PRM Partido Nueva Alianza. See PANAL Partido Revolucionario Institucional. See PRI party organization, ,  path dependence, , , , ; definition of,  peasants: in Mexico, , , , ; and mobilization in Mexico, , –; and PRI, ; and social insurance in Mexico, ; as workers in Mexico, . See also rural workers; land reform pension privatization: in Chile, ; financing in Mexico, ; in Mexico, , , –; and NAFTA, ; transition costs in Mexico, –; transitions costs in Mexico, . See also pension reform; pensions pension reform, ; and women in Mexico, ; in Argentina, , –; in Brazil, –; in Chile, , ; and government debt, ; in Latin America, ; measurement of, ; in Mexico, –, –, ; in Mexico and Chile, ; and organized working class in Mexico, ; types of, . See also pension privatization; pensions PensionISSSTE, –, –, ,  pensions, ; defined benefit, ; defined contribution, ; demands by government workers in Mexico, ; and government workers in Mexico, , –, –; IMSS, ; ISSSTE, ; in Latin America, ; old-age for government workers in Mexico, ; rural,  peso devaluation: , ; , ; in Mexico,  petroleum: nationalization, , , ; nationalization and social insurance, –; prices, ; workers in Mexico, , , , ,  Pierson, Paul, 

 \     

PNR (Partido Nacional Revolucionario), , . See also PRI (Partido Revolucionario Institucional) policy diffusion, –, , –; and Mexican social insurance, –;definition of, ; in Mexico, – policy legacies, –, , , ; in Chile, ; and ISSSTE, ; and labor contracts, –; in Mexico, , , ; and PRONASOL, . See also institutional legacies political competition: and cross-class coalition, ; and division of power, –; in Mexico, , , ; and PRI, ,  political institutions, , , –, ; in Chile, ; effects on welfare, , ; as independent variables, , ; and welfare in Mexico, ; and welfare regimes,  political liberalization, ; and Congress in Mexico, ; and corporatism in Mexico, ; and expansion of social assistance in Mexico, ; and the judicial system in Mexico, ; in Mexico, , , –, , ; and organized working class in Mexico, ; and social insurance expansion in Mexico, . See also democratization political parties: in Chile, ; in Mexico, ; number of, ; relationship with labor unions, ; social democratic,  political regime: effects of, ; and transitions,  Portes Gil, Emilio,  poverty, ; in Mexico, , , , , . See also social assistance PRD (Partido de la Revolución Democrática), ; and  IMSS reform, ; and IMSS reforms, ; and Opportunities, ; and oppostion to pension reform, ; and SNTE, , ; and SNTSS, ,  presidential elections: in  Mexico, ; in  Mexico, , , ; in  Mexico, ; in  Mexico,  PRI (Partido Revolucionario Institucional), , –, , , ; and business interests, ; and clientelism, –; and congressional majority, , , ; and cross-class coalition, , , ; and CT, ; and CTM, , , ; divisions within, , ; and elections, , , , , , ; and FSTSE, , –; and IMSS reforms, , , ; and independent unions, –; and ISSSTE reform, –, , –; and large landowners, ; and mobilization of

subordinate classes, ; organization of, –, , , , , , –; and organized working class, , –, –, –, , , , , , , , ; and party discipline, , ; and pension reform, , ; and political legitimacy, , , , ; and popular support, , , , ; and repression, ; and rural workers, –; and SNTE, –, –; and SNTSS, ,  private insurance: market, ; in Mexico, , , –,  private pension fund administrators, , ; in Argentina, ; in Chile, ; in Mexico, , ,  private pension plans: in Mexico, ,  private sector workers: in Mexico, ,  privatization, in Mexico, –,  PRM (Partido de la Revolución Mexicana), , , –; and business interests, –; and candidate selection, –; and government workers unions, ; and organized working class, , –, . See also PRI (Partido Revolucionario Institucional) production regimes, –; definition of, ; in developing world, ; and welfare regimes, , – production, rural,  Programa de Educación, Salud, y Alimentación. See PROGRESA Programa Nacional de Solidaridad. See PRONASOL PROGRESA (Programa de Educación, Salud, y Alimentación), , –, ; benefits, ; coverage, ; creation of, –; criticisms of, , ; expansion of, ; and policy legacies, , ; and poverty, ; spending, ; targeting of, ; transparency of, ; and World Bank, . See also social assistance PRONASOL (Programa Nacional de Solidaridad), , ; as compensation, ; critiques of, ; and cross-class coalition, ; and economic liberalization, ; and electoral support for PRI, –; expenditures, ; and IMSS, ; and institutional layering, ; and policy legacies, , ; and poverty, , ; targeting of, ; and World Bank, . See also social assistance punctuated equilibrium, , –; and institutional change, 

     / 

railroad workers: in Argentina, ; in Brazil, ; in Chile, ; in Mexico, , , , ,  rational choice institutionalism, –, ; assumptions, –, ; assumptions of, , ; critiques of, –; and institutional change, –; and welfare, – recognition bonds, in Mexico, , ,  replacement rates, ; IMSS, , , , ; ISSSTE, ; in Mexico, – repression, ; in Mexico, ; and organized working class in Mexico, ; of rural workers in Mexico,  Richard, Scott,  Rueschemeyer, Dietrich,  Ruiz Cortines, Adolfo, –, , , – rural poor:and IMSS, ; in Mexico, , –, , , –, ; and social assistance,  rural workers, , , ; in Brazil, ; and IMSS, , ; in Mexico, –, ; and mobilization in Mexico, , , –, ; and social insurance in Mexico, –, –. See also peasants Salinas, Carlos de Gortari, , , , , –, ; and economic liberalization,  SAR (Ley del Sistema de Ahorro para el Retiro), –, , , , , , –; reforms,  Schickler, Eric, – Schmitter, Phillippe,  Schoenbaum, Emilio, ,  sectors: nontradable, , , ; nontradable and unions in Mexico, , ; tradable, , , , , –, , , ; tradables in Mexico, . See also labor market Seguro Popular. See Popular Insurance Serra, Jaime,  Sindicato Nacional de Trabajadores de Educación. See SNTE Sindicato Nacional de Trabajadores del Seguro Social. See SNTSS social assistance, , , ; and democratization in Mexico, ; in Argentina, ; in Brazil, ; in Chile, –; and compensation in Latin America, ; as compensation in Mexico, ; definition of, ; expansion of, , , ; and federalism in Mexico, ; and globalization, ; and institutional layering in Mexico, ; in Latin America, , –; and logrolling, ; in Mexico, , , , ,

, , , ; politics of, ; and the PRI, ; and transparency in Mexico, ; and women in Mexico,  social insurance: and business interests in Mexico, –, , , , ; and government workers in Mexico, , –, , , ; in Argentina, –, ; in Brazil, , –; in Chile, –; and clientelism in Mexico, ; contributions in Mexico, ; coverage in Mexico, , , , , –, , –; and debt crisis in Mexico, ; definition of, , , n; and democratization, ; expansion in Mexico, –; financing in Mexico, ; and globalization, , ;in Argentina, ; in Latin America, ; in Mexico, , , , , , , –, –, , –; and mobilization of subordinate classes, ; and organized labor in Mexico, , , ; redistributive impact in Mexico, ; retrenchment, , ; retrenchment in Mexico, , , , , –, ; and rural workers in Mexico, , , . See also IMSS (Instituto Mexicano del Seguro Social); ISSSTE (Instituto de Seguridad y Servicios Sociales del Trabajadores del Estado) Social Insurance Law, , ; , , , –;  and business opposition, ;  and cross-class coalition, ;  and reactions to, –;  and worker opposition, –;  reform, –, –, ;  reform, ;  reform, ; and daycare services, ; and business opposition, ; and government workers, ; and ILO, ; and landowner opposition, . See also IMSS (Instituto Mexicano del Seguro Social) social protection, , , ; as collection of policies, ; definition of, ; origin of, ; reforms of, ; study of, . See also welfare institutions; welfare regime social spending: in Brazil, ; in Chile, ; and effects of economic liberalization, ; and measurement problems, –; in Mexico, , , , –, – SNTE (Sindicato Nacional de Trabajadores de Educación), , , ; criticisms of, ; divisions within, –, ; and education policy, ; and FSTSE, , ; as independent union, ; and ISSSTE, ; and ISSSTE reform, , , , , –;

 \     

and organizational capacity, ; organization of, ; and PAN, , ; and pension reform, ; and PRD, ; and PRI, –, , –; and PT, ; Section IX, , ; and social insurance reform,  SNTSS (Sindicato Nacional de Trabajadores del Seguro Social), , –, , ; and  IMSS reform, –, , ; and  IMSS reform, ; and  IMSS reform, –; divisions within, ; and health reform, –, –; internal organization of, ; and ISSSTE reform, ; and labor conflict, ; and labor contract, , , , –, , ; and opposition to IMSS reforms, ; and organizational capacity, ; and PRD, , ; and PRI, , , ; priorities of, ; and social insurance reform,  Spalding, Rose, ,  state: autonomy, ; capacity, , ; capacity in Mexico, , –, , , , ; centralization of Mexican, ; Marxist assumptions and the, ; spending, ; spending in Mexico,  Stein, Osvald,  Stepan, Alfred,  Stephens, John D., – stratification, , ; definition of, ; in Mexican welfare, –,  strike petitions, ; in Mexico, , –; and organized working class in Mexico, ; and social insurance coverage in Mexico,  strikes: in Mexico, ; in Mexico, –; and textile workers in Mexico, . See also strike petitions structural adjustment, ; in Mexico, –. See also economic liberalization; neoliberal economic model sugarcane workers: in Mexico, , ; and social insurance in Mexico,  Supreme Court: and ISSSTE reform, ; and labor contracts in Mexico, ; and labor law in Mexico, ; and policy-making in Mexico, –. See also judicial system Swank, Duane,  Swenson, Peter,  teachers’ unions: and pensions in Mexico, ; and strikes in Mexico, –. See also SNTE (Sindicato Nacional de Trabajadores del Seguro Social)

Teichman, Judith,  telephone workers: in Mexico, ,  textile workers: and day-care services, ; and demands for day-care services in Mexico, ; in Mexico, , , ; in Mexico demands of, ; and strikes in Mexico,  Thelen, Kathleen, –, –,  Tixier, Paul A.,  trade liberalization, ; in Mexico, –. See also economic liberalization; globalization; neoliberal economic model; trade openness trade openness, –; in Latin America, ; in Mexico, , –; and social insurance, . See also globalization union density: in Argentina, –; in Chile, ; in Mexico, . See also organized working class Unión Nacional Sinarquista. See UNS unions: independent, , , ; independent and PRI, ; independent in Mexico, , , , ; official and PRI, ; official in Mexico, , –. See also organized working class United States, ,  UNS (Unión Nacional Sinarquista), – urbanization, in Mexico, , –. See also economic development Usui, Chikako,  validity: external, ; internal,  varieties of capitalism, ; in Mexico, ; and political conflict, ; and welfare regimes,  Velázquez, Fidel, ,  Veracruz, – veto players: in Chile, ; in Mexico, , , , ; partisan, ,  veto points: institutional, , ; in Mexico,  Wallerstein, Michael,  welfare institutions, –, , , ; and advanced industrialized democracies, ; in Argentina, –; in Brazil, –; and class power, ; and collective action, –, ; and cross-class coalitions, ; definition of, –, n; and democratization, ; as dependent variable, , ; and economic development models, ; and economic organization, ; expansion of, , ; and federalism, ; functional explanations of, ; and gender, –; and globalization, , –;

     / 

welfare institutions (cont.), and institutional change in Mexico, ; and institutional stability, –; in Latin America, , –; measuring change in, –; in Mexico, , , , , ; pluralist explanations of, ; reform of, ; research on, ; and unintentional consequences, . See also social assistance; social insurance; social protection; welfare regime welfare regime, , –, , –, –; in Argentina, ; in Chile, , ; Christian democratic, –; class-based explanations of, –; corporatist, , ; definition of, –; development of, –; economic explanations of, –; in Europe, ; explanations of, ; and federalism, ; and globalization, ; ideal types, –; and industrialization, –; in Latin America, , n; liberal, ; in Mexico, , –, , , , –, , –, –, , , , , –; and political institutions, , –; and production regime, , –; social democratic, , ; theoretical dimensions, ; and varieties of capitalism, ; wage-earner, 

Weyland, Kurt, – workers’ compensation: in Argentina, –, ; in Brazil, ; in Mexico, , , –, –, , ,  World Bank, –, , , , ; and health reform in Argentina, ; and health reform in Mexico, ; and IMSS reform, , , ; and ISSSTE reform, –; in Mexico, –, ; and Opportunities, ; and pension reform in Mexico, –, , –; and policy diffusion, ; and policy networks, ; and PROGRESA, ; and PRONASOL, ; and social assistance, , –; and social assistance in Brazil, ; and social insurance reform in Mexico, , , –. See also international organizations Zedillo Ponce de León, Ernesto, ; and crossclass coalition, ; and economic crisis, ; and economic liberalization, ; and health reform, , , ; and PRONASOL, ; and social assistance, , –, , , ; and social insurance reform, , , , –, ; and social spending, 

 \     