Invest in you FUTURE NOW.
The number of Americans and Canadians living abroad, by today's count approximately 7 million (according to The Washington Post), is twice the population of Chicago and greater than that of 33 U.S. States. A number that has grown steadily over the past decade, and it is expected to more than double within ten years. In the next 20 years, 100 million baby boomers, from the USA and Canada, are going to retire. Five million baby boomers turn age 60 each year, Ten Thousand per day, Eight per minute, and scores of them are purchasing property abroad as vacation homes or investment homes. Naturally, many of them are auditioning these homes for potential primary retirement residences.
These OCEAN FRONT lots where Caribbean and Gulf meet are 2 hectares (5 acres ) 20 meters (66 Feet) x 1000 meters (3280 feet) offers the relaxation of living in close contact with nature, away from the hustle and bustle of cities, but at the same time in an exclusivity community, right on a gorgeous beachfront in the middle of a huge nature reserve.
http://www.igoyucatan.com/yucatanbeachlots/
sábado, 17 de agosto de 2013
jueves, 8 de agosto de 2013
sábado, 22 de junio de 2013
Mexico’s Expanding Economy Attracts Record Business, Domestic & Foreign Investment Capital
Mexico is quickly becoming a major force to be reckoned with on the world economic stage, with a booming economy, low unemployment, affordable luxury real estate and a large labor force, it’s easy to see why the following companies are investing heavily in what has become Latin America’s second largest economy.
BUSINESS, DOMESTIC & FOREIGN INVESTMENT CAPITAL
ABC News
The lower house of Mexico’s congress voted this week to loosen longstanding restrictions on foreigners who buy Mexico real estate along the nation’s coast and borders. The measure will become law following approval from the senate and a majority of state legislatures.
"Thousands of Americans and Canadians already own beach homes in Mexico anyway and many more are interested in buying,” writes ABC News.
Automotive World
“Jatco has confirmed plans to invest US$220m to construct a second automatic transmission plant in Mexico,” writes Automotive World. “The new facility will have annual production capacity of 400,000 units and be the Nissan Group transmission specialist’s second plant in Mexico.”
“Chrysler de Mexico reported sales of 8,003 units, representing an increase in retail sales of 2.3 percent,” writes Automotive World. According to Bruno Cattori, president and CEO of Chrysler de Mexico, the company “keeps its retail sales growth trend as a result of new product launches.”
Bloomberg
“Mexico’s auto production has almost doubled since 2009,” writes Bloomberg. “Now its steel industry is spending almost $3 billion on new and improved factories.”
In addition, the Mexican Automobile Industry Assoc. expects output to rise by as much as 40 percent by 2017, as Mexico has “become a magnet for automakers seeking low labor-cost output with access to North and South American markets and other regions through the nation’s trade agreements with more than 40 countries.”
Behre Dolbear
Respected U.S. minerals advisory group Behre Dolbear has named Mexico as one of the top five best places in the world for mining investment in 2013.
Budapest Business Journal
A meeting between Hungary’s state secretary for foreign affairs Péter Szííjjártó and Mexico’s deputy foreign minister Juan Manual Gómez Robledo resulted in a new agreement to “boost trade and help more Mexican companies enter the Hungarian market.”
CNBC
“Mexico has secured its place as the new favorite among investors looking to put cash into Latin America,” writes CNBC. “Investors have been encouraged by signs that the new Mexican president will continue to push for economic change.”
In addition, the iShares MSCI Mexico Capped exchange traded fund rose more than 17 percent over the last 12 months, compared to a lost of more than 15 percent by Brazil’s iShares MSCI Brazil Capped Index Fund.
Financial Times
Real estate in Mexico is once again making headlines, with the Financial Times calling it ‘red hot’ in a recent article. The news comes just weeks after President Enrique Peña Nieto vowed to push a variety of progressive economic reforms through Congress and on the heels of his success in already passing significant reforms in Mexico’s telecom and education sectors.
As Mexico continues to capitalize on its rising status as one of the world’s strongest economies, energy sources and manufacturing hubs, President Enrique Peña Nieto is actively working to increase trade with Japanese business leaders and has announced an agreement with Japan’s Mitsui Corporation to build a new $460 million gas pipeline.
“The deal will provide cheaper and more abundant energy for Latin America’s second-largest economy,” writes the Financial Times. “Mexico is thought to sit on one of the world’s largest shale gas reserves.”
Financial Times
The auto industry in Mexico is booming, with powerful growth from both car markers and associated industries, according to new figures released by the Mexican Auto Industry Association (AMIA). Since 2009 production has nearly doubled, spurring expectations that the nation will produce more than 4 million cars each year by 2017, compared to last year’s 2.9 million, and 2013 is already showing another substantial increase.
“In April alone, Mexican auto production surged to 238,766 units, a 15.6 percent increase from the 206,489 of the same month of last year, AMIA reported,” writes The Financial Times.
The growth is largely due to new investments from Audi, Honda, Mazda, Nissan and Volkswagen, along with related investments in Mexico’s steel industry. In recent weeks, Audi has begun construction on a $1.3 billion assembly plant located in Mexico real estate, while Honda has announced that it will invest in a new $470 million transmission plant and Volkswagen has opened a $550 million engine plant in Silao, Mexico. Similarly, Mazda is investing around $650 million in a new plant and Nissan will open a new $2 billion plant by late 2013, while Ford and GM continue to invest hundreds of millions into their existing plants.
Forbes
Spanish Bank BBVA Bancomer will reportedly invest more than $3.5 billion dollars in Mexico over the next four years, highlighting the bank’s growing presence in Latin America. The money will be used to renovate its branches, upgrade information technology and to fund the construction of new operations centers, as well as a new corporate headquarters.
“We are convinced that, in the coming years, Mexico has been consolidated as one of the most important and dynamic economies in the world, and will lead global growth,” stated Francisco Gonzalez, executive chairman of BBVA, according to a report by NASDAQ. “The investment is the largest in the history of BBVA Bancomer.”
Money Morning
Global investing news service Money Morning has dubbed investing in Mexico a “100-year opportunity,” citing the evolution of the nation’s government and economy over the last century and the positive repercussions that are already in the pipeline that are stemming from last year’s election of President Enrique Pena Nieto.
“There is quite a bit of long-term upside ahead [in Mexico],” writes Money Morning. “The short term picture looks pretty good, too. The Economist team of forecasters already puts Mexican growth at 3.7 percent in 2013 and 3.9 percent in 2014. Further, the Banco de Mexico has just cut interest rates from 4 percent to 3.5 percent and that should help the economy.”
New York Daily News
“There’s a mutual interest to strengthen trade relations,” said Mexican Foreign Relations Secretary Jose Antonio Meade according to New York Daily News. “We believe it can be achieved by business meetings by sectors.”
In addition, Mexico and Brazil have eliminated the visa requirement for Mexican and Brazilian citizens to visit one another’s countries for up to 180 days in an effort to farther stimulate tourism and mutual business opportunities.
“Eurocopter plans to invest up to $550 million in Mexico over the next few years,” writes New York Daily News. According to Eurocopter’s president and CEO Lutz Berling, the company “is ready to continue investing.”
The investment will go toward a new unit in the state of Queretaro that will produce a variety of state of the art aircraft components. Eurocopter has been in Mexico for more than 30 years and will create at least 200 specialized jobs.
New York Daily News
“Mexico’s Vitro, one of the world’s largest glassmakers, said it planned to invest $146 million in different products this year,” writes the New York Daily News. Vitro will focus on increasing production and modernizing plants in Mexico.
Nestle has invested $130 million to expand a factory in Mexico, boosting the plant’s capacity by 30 percent and making it the largest of its kind in the world. Nestle also boosted its workforce at the factory by 10 percent.
Public Radio
IBM has announced that it will move the manufacturing of Power Systems, PureSystems and PureFlex Systems servers to Guadalajara, Mexico by mid-2014.
Reuters
In 2013 alone, investment in Mexico’s mining sector will near $8 billion, while the five-year projection is currently hovering around at least $25 billion, according to Mario Cantu Suarez, who is Mexico’s chief mining official.
“A healthy boost in foreign direct investment in the first quarter underscored confidence in Latin America’s No. 2 economy,” writes Reuters. “Foreign direct investment reached $4.99 billion in the first quarter. The lion share of the direct investment went into the manufacturing sector and came from the United States.”
Reuters reports that fibras – which are Mexico’s version of real estate investment trusts, or REITs – are experiencing unprecedented growth, with no signs of slowing down.
“Domestic and foreign investors are piling into Mexican real estate investment trusts, which are strongly outperforming the wider stock market,” writes Reuters.
Reuters reports that foreign investors are buying record amounts of Mexican stocks and bonds, totaling more than $80 billion in the fourth quarter alone. According to the central bank, this is nearly five times more than the amount of foreign investment dollars that went into Brazil during the same period.
“Foreign portfolio investment inflows doubled in 2012 from a year earlier on optimism about reforms promised by Mexico’s new government and solid growth of about double that of Brazil, Latin America’s biggest economy,” writes Reuters. “Investment in both private and public sector assets picked up in the fourth quarter to notch quarterly records for the period since 1995, when the current data series began.”
Travel Weekly
“Union Pacific’s connections to Mexico will be an important driver of business growth for the company in the coming years,” writes Travel Weekly. “Union Pacific is one of the leading railroad companies in the United States. Trade between the two countries is expected to rise as Mexico is forecasted to export more goods into U.S. than China by 2018.”
USA Today
U.S. President Barack Obama met with Mexican President Enrique Peña Nieto last week, calling for broader economic relations between the two countries, while praising Mexico’s efforts to expand its economy and its democratic system.
“I have come to Mexico because it is time to put old mindsets aside,” stated Obama according to an article published by USA Today. “It’s time to recognize new realities, including the impressive progress in today’s Mexico.”
The leaders hope this growing relationship will improve communication and cooperation between the two nations, which will ultimately build a stronger economy for all of North America. Obama’s three-day trip to Mexico was his fourth visit as president and the first since Peña Nieto took office last December. Annual bilateral trade between the U.S. and Mexico is already close to half a trillion dollars.
Wall Street Journal
As Mexico continues to forge ahead by leaps and bounds in the global economy, the Western Union Company has announced that it has entered into a five-year agreement with Bancoppel to offer its services at close to 1,000 new locations.
“Mexico is a strategic market for Western Union,” stated Odilon Almeida, president of Western Union in the Americas, according to The Wall Street Journal. “We see a great opportunity to expand in Mexico through existing and new Agent relationships such as Bancoppel – while combining the strengths of our global brand and network to offer innovative financial solutions to consumers and businesses.”
“Foreign direct investment is expected to surge this year and for years to come,” writes the Wall Street Journal. “Mexico’s Economy Ministry said that its tally for first-quarter FDI was just shy of $5 billion, up sharply from a year earlier.”
The Wall Street Journal reports that the Mexico real estate investment trust (REIT) known as Terra has raised more than $772 million in a global offering. According to the Mexican stock exchange, more than 47 percent of the sale went to Mexican investors, while more than 52 percent went to international investors.
“Mexican REITs, known by their Spanish acronym as Fibras, are relatively new instruments that have become sought after by Mexican pension funds and wealthy individuals due to their steady revenue streams and long-term horizons,” writes the WSJ. “Wealthy individual investors typically allocate between 15 and 20 percent of their portfolios to real estate.”
Washington Post
For the last 75 years, the government has controlled Mexico’s massive petroleum and shale gas resources in a state-run monopoly known as PEMEX. Today, moving the company into the modern era and opening it up to foreign investment is one of President Enrique Peña Nieto’s top priorities.
“The U.S. Energy Information Administration calculates that Mexico’s gas deposits are the fourth largest in the world, with the potential to ensure decades of low-cost energy and give manufacturers an additional incentive to invest in Mexico over places such as China,” writes The Washington Post. “Mexico remains the third-largest source of foreign oil for the United States after Canada and Saudi Arabia.”
The reforms are expected to take place by late summer and will likely give outsiders the opportunity to invest in Mexico’s wealth of energy resources. The changes will also reportedly introduce new technology and accelerate growth; thereby lowering electricity costs for families and businesses throughout the country.
Wells Fargo
Investment and financial services giant Wells Fargo called Mexico a “smart investment decision” in a recent article, citing the country’s robust economic growth, booming car export industry and consistently rising level of national productivity.
“Investors who 10 years ago looked beyond the headlines and found merit in the country’s economic fundamentals and enlightened fiscal policies have seen the Mexican Bolsa equity index average a 21.7 percent annual gain during the 2003-2012 decade,” writes Wells Fargo.“Further bolstering the Mexican economy has been an expansion of ‘near-shoring’ with many international manufacturers, particularly automotive companies, seeking shorter supply chains and proximity to the U.S. market.”
ECONOMIC DEVELOPMENTS
Financial Times
“Mexico’s constitution forces it to run a balanced budget in sharp contrast to Washington,”writes the Financial Times. “Meanwhile its debt-to-GDP ratio is less than 45 percent and falling, compared to more than 90 percent in the U.S., according to the International Monetary Fund (IMF).”
Morningstar
Savvy members of the global investment community have taken notice of recent reforms taking place in Mexico real estate. In addition, Standard & Poor’s upgraded the outlook for Mexico’s sovereign credit rating in early March, moving it from stable to positive, which could indicate an additional upswing over the next year and a half or so.
“These moves should help set the foundation for healthy growth,” writes Morningstar. “Some of this appreciation has been driven by strong foreign investment inflows into Mexico.”
In fact, according to the Mexican central bank, foreign investors dumped more than $80 billion into stocks and bonds this February, marking it a record month for the nation’s market and surpassing nearly five times the inflows to Brazilian securities over the same period.
New York Times
Mexico’s economy and its stock market have been posting strong gains in recent weeks, causing the nation’s treasury department to increase estimates for economic growth in 2014 to at least 4 percent. This beats projected growth for 2013, which remains at around 3.5 percent. In addition, Mexico’s IPC index has risen for seven sessions in a row, causing analysts to predict further gains ahead.
“Mexico’s growth prospects are attracting investment banks and investors hunting for ways to gain greater exposure to international markets,” writes Elizabeth Malkin for the New York Times. “At the same time, foreign manufacturers are returning to Mexico as a production platform for the recovering American market.”
Reuters
“Mexico will allow increased foreign investment in its telecom sector as part of a reform bill announced Monday,” writes Reuters. “The country will allow up to 100 percent foreign investment in telecoms and up to 49 percent foreign investment in broadcast media and communications.”
“Mexico’s auto production increased by 1.6 percent in February compared to the same month a year earlier,” writes Reuters.
Wall Street Journal
“Mexican retail sales rose in January from the year-earlier month, and also posted a gain from December,” writes the Wall Street Journal. “Sales rose 1.8 percent on better sales of products such as automobile parts, fuels and lubricants, paper products, personal-care items, clothing and shoes, among others. Retail sales for all of 2012 grew 3.7 percent compared with the year earlier.”
Fitch Ratings upgraded Mexico’s credit rating from BBB to BBB+ this May, following news that proposed economic reforms would boost growth in Latin America’s second largest economy. This move is expected to help further reduce Mexico’s already low borrowing costs and has helped to boost the peso.
“Fitch noted Mexico’s economic resilience despite a sluggish economy in the U.S., Mexico’s key trading partner, with three-year growth averaging 4.5 percent in 2012,” writes the Wall Street Journal. “The agency also praised Mexico’s prudent macro-economic policy, which underpins the country’s low inflation.”
Yahoo! News
“Mexico’s National Statistics Institute says the country’s economy grew 3.9 percent in 2012, thanks in part to a rise in agricultural activity,” writes Yahoo! News. “Agricultural activity grew by 7.2 percent in the last quarter of the year.”
In addition, Mexico’s new federal government, led by President Enrique Peña Nieto, is actively working to pass a series of reforms in the telecommunications and energy sectors that analysts expect will create even more growth and employment opportunities in Mexico.
A major shift in where and how the world’s manufacturing dollars are being spent is the focus of reports published by Yahoo! Finance and StreetAuthority last week. In China, wages have been steadily climbing at a rate of at least 12 percent each year over the last decade. This, combined with the high cost of shipping goods from the other side of the globe, is prompting a growing number of manufacturers to consider Mexico as a more cost effective alternative.
“The evidence clearly shows which country is poised to own economic growth in the next decade,” writes Joseph Hogue of the StreetAuthority network. “[Mexico] has a quarter of the transportation costs as goods exported from China and a boom in natural resources that makes the energy to run plants extremely cheap.”
According to a survey conducted in 2011 by online manufacturing superstore MFG.com, at least 21 percent of North American manufacturers said they plan to bring production closer to the U.S. and 38 percent are actively working to do so as soon as possible. What all of this means in the bigger picture is that Mexico will continue to attract new foreign investment dollars in record amounts.
Wall Street Journal
The iShares MSCI Mexico Capped exchange-traded fund (ETF) has been getting quite a bit of attention in the news lately, attracting more than $1.4 billion in net inflows through the beginning of April. This is in stark contrast to the iShares MSCI Brazil ETF, which has seen outflows reaching upwards of $236 million since 2012.
“Fund investors keep pouring money into Mexico’s white-hot stock market, joining a rush to embrace sweeping economic reforms ushered in by a new government,” writes The Wall Street Journal. “The country’s stock market is trading at a forward price-earnings ratio of around 17, as compared to Brazil’s multiple of 11.”
According to the report, Ben Marks, chief investment officer at Marks Group Wealth Management said, “Mexico’s transition into a more competitive marketplace for foreign investors is looking better and better.”
Zacks
Mexico’s booming economy has given rise to a variety of excellent investment options, due in part to the many reforms that have been underway since President Enrique Peña Nieto took office late last year. Most recently, Zacks covered the Mexico ETF, which research analysts have dubbed a “long-term winner” and an “excellent investment.”
“Economists think these critical reforms could push growth to about 6 percent,” writes Zacks.“As a result of open market policies, fiscal discipline, labor reforms and prudent macroeconomic measures adopted by the country, the economy has been on a sound footing – currently growing at about 4 percent.”
jueves, 9 de mayo de 2013
Why Invest In Mexico
Why invest in Yucatan Real Estate, well for one they are not making anymore beachfront and with 10,000 Baby boomers retiring every day in North America, looking where to move to, over 1 million Americans already living in Mexico , strong economy, Mexico is your best bet.In a study designed to pinpoint the top emerging markets for 2013 and beyond, HSBC has named Mexico the “Top Country for Investment,” thanks to the nation’s longstanding status as a successful example of free-market economic activity in Latin America. HSBC is one of the world’s largest banking and financial services organizations, dedicated to discovering international engines of global growth and to helping businesses and whole economies profit from international trade flows.
The recent HSBC study examined the three largest economies in Latin America, namely Mexico, Brazil and Argentina, ultimately naming Mexico as the “investment of choice.”
“What has long been known by insiders in Latin America is Mexico, the only Latin American country that is a member of NAFTA, has for over 15 years been the shining example of free-market economic activity in the region,” writes HSBC. “Combining this with a new government that has been clear about policies of reform; and HSBC has concluded that Mexico is the safest bet for investors in the region.”
The report found “major problems” with both Brazil and Argentina. In Brazil, government intervention has been found to have a negative effect on the country’s economic activity, while external debt in Argentina, combined with excessive governmental crackdowns, has caused serious hindrances to growth.
“Playa del Carmen has been for the last 12 years, the fastest growing city in Latin America,”writes HSBC. “With the Mexican economy on the verge of explosion and Playa benefiting from an international clientele that is unlike anything else on the hemisphere, now is the time to invest in real estate.”
Specifically, investors are urged to take a close look at Yucatan. These areas continue to experience exponential growth, offering a major investment opportunity the likes of which rarely comes along but once in a lifetime.
http://www.yucatanliving.com/real-estate-yucatan/merida-real-estate-predictions.htm
I GO YUCATAN
Lic Alfonso Galindo
contact@igoyucatan.com
Skype alfonso.galindo
805-284-9410 USA
999-101-2049 Mex
Why Invest In Mexico
Why invest in Yucatan Real Estate, well for one they are not making anymore beachfront and with 10,000 Baby boomers retiring every day in North America, looking where to move to, over 1 million Americans already living in Mexico , strong economy, Mexico is your best bet.In a study designed to pinpoint the top emerging markets for 2013 and beyond, HSBC has named Mexico the “Top Country for Investment,” thanks to the nation’s longstanding status as a successful example of free-market economic activity in Latin America. HSBC is one of the world’s largest banking and financial services organizations, dedicated to discovering international engines of global growth and to helping businesses and whole economies profit from international trade flows.
The recent HSBC study examined the three largest economies in Latin America, namely Mexico, Brazil and Argentina, ultimately naming Mexico as the “investment of choice.”
“What has long been known by insiders in Latin America is Mexico, the only Latin American country that is a member of NAFTA, has for over 15 years been the shining example of free-market economic activity in the region,” writes HSBC. “Combining this with a new government that has been clear about policies of reform; and HSBC has concluded that Mexico is the safest bet for investors in the region.”
The report found “major problems” with both Brazil and Argentina. In Brazil, government intervention has been found to have a negative effect on the country’s economic activity, while external debt in Argentina, combined with excessive governmental crackdowns, has caused serious hindrances to growth.
“Playa del Carmen has been for the last 12 years, the fastest growing city in Latin America,”writes HSBC. “With the Mexican economy on the verge of explosion and Playa benefiting from an international clientele that is unlike anything else on the hemisphere, now is the time to invest in real estate.”
Specifically, investors are urged to take a close look at Yucatan. These areas continue to experience exponential growth, offering a major investment opportunity the likes of which rarely comes along but once in a lifetime.
http://www.yucatanliving.com/real-estate-yucatan/merida-real-estate-predictions.htm
I GO YUCATAN
Lic Alfonso Galindo
contact@igoyucatan.com
Skype alfonso.galindo
805-284-9410 USA
999-101-2049 Mex
lunes, 6 de mayo de 2013
Multi billion pound port opportunities announced in Mexico
A £2.9 billion expansion of the port of Veracruz in Mexico planned for the next 10 years offers significant opportunities for British enterprises, it is claimed. The port development is descried as the largest for many years and is designed to increase the existing port capacity while meeting the new Panamax specifications for larger vessels.
This 10 year project is expected to be included in the President’s National development plan to be announced in July 2013. Veracruz port is already saturated and unable to receive larger vessels that will be using the widened Panama Canal. The development is being split into three stages and will include the building of two breakwaters, the construction of 10 new terminals, the development of 36 new berthing positions, and an increase in the port’s cargo handling capacity from 21 million tonnes to 116 million tonnes.
‘This business opportunity offers opportunities for UK companies operating in all areas associated with port construction and operation,’ said a spokesman for UK Trade and Investment which works with UK based businesses to ensure their success in international markets, and encourage the best overseas companies to look to the UK as their global partner of choice. Opportunities include consultancy for inception and master and impact planning as well as specialist services during the pre-construction phase including environmental seabed surveying and dredging.
Quote from Gringos.com : “I am involved with a Canadian business which is located in Mexico. This company provides services to people who live in Canada, Mexico and the U.S.. However product sales/services are always provided to residents or Mexico visiting tourists. This company does not import their products but utilizes Mexican companies for their production in order to keep jobs in Mexico. Is there an organization/company in Mexico which gives a seal of approval or better business rating somewhat like the BBB or other?”
Specialist consultancy and engineering expertise will be needed during the construction phase as well as the provision of specialist port operating equipment, consultancy and systems for the port operator and financing, credit insurance and insurance. The UK Trade & Investment team in Mexico City has already established a good relationship with both Mexico’s Ministry of Communications and Transport and Veracruz’s Integral Port Administration and is well placed to offer support to interested UK Companies.
‘Identification and relationship building with the likely Port operators and local construction companies is already in progress and will provide an effective conduit for UK Companies who have interest in this project,’ explained the spokesman. ‘This is a great opportunity to work with the UK Trade & Investment team to benefit from this venture. The UK has a sound reputation owing to involvement in earlier Port construction in Mexico,’ he added.
miércoles, 24 de abril de 2013
Pension-Law Proposal Would Hit Some Retirees
Why wait for the other shoe to drop, get out now!
By Kris Maher April 15, 2013, 7:01 a.m. EDT
A coalition of unions and employers is proposing changes to the federal law that governs the pension plans of about 10 million people, including reducing benefits paid to retirees, the first time in four decades that such cuts would be allowed. The proposal, which would undo guarantees put in place by federal law in 1974, is already stirring controversy among pension-rights advocates and rank-and-file union members. It was developed by some of the nation’s biggest unions, including the Teamsters and United Food and Commercial Workers, and industry trade groups such as the Associated General Contractors of America.
Pension experts say a report issued by the group earlier this year will likely serve as the foundation of a bill to replace rules governing pensions that expire in 2014. Sen. Tom Harkin (D., Iowa), chairman of the Senate committee overseeing pension policy, called the proposals, which include cutting retiree benefits, “a starting place.”
Mark Hulbert talks with Andrea Coombes and Robert Powell about whether retirement savers should pile into stocks at today’s lofty levels, or sell in May and go away. The answer: It’s a good time to rebalance your portfolio.
“The fact that labor and management were able to come together and agree on a comprehensive proposal to protect the pensions of millions of middle-class families are a significant development,” Harkin said.
“The fact that labor and management were able to come together and agree on a comprehensive proposal to protect the pensions of millions of middle-class families are a significant development,” Harkin said.
The plan is the latest to address a chunk of the nation’s creaky retirement infrastructure. President Barack Obama’s budget proposal this past week could also lead to a reduction in Social Security benefits for retirees. And last week, the Government Accountability Office said the number of insolvent multiemployer pension plans could double by 2017.
Something must be done to shore up about 10% of the roughly 1,450 multiemployer pension plans in the U.S., pension experts say. The plans, which are funded by groups of employers in construction, trucking and retail food, and pay out a monthly check known as a defined benefit, are the backbone of the retirement security for 10.3 million retirees and current workers.
More than half of such plans are funded to at least 80% of their liabilities. That is up from one out of five plans at that level in late 2008, after the stock market tanked. But a minority is in far worse shape. As many as 150
multiemployer plans are headed toward insolvency, according to government projections.
multiemployer plans are headed toward insolvency, according to government projections.
For those troubled plans, unions and employers are proposing that the Employee Retirement Income Security Act of 1974 be rewritten so that benefits for people who are already retired can be reduced. Without that fix, advocates argue, the plans will run out of money and retirees will end up with a fraction of their current benefits when the government takes over the plans.
Advocates say early cuts can stave off deeper ones down the road. Under the proposal, trustees from labor and management would determine how deeply to cut benefits to return the plans to solvency. One labor official said the cuts could take effect within a year of the decision.
The cuts would depend on each plan’s finances and could reduce benefits to as little of 110% of the level guaranteed by the Pension Benefit Guaranty Corp., the federal agency that backstops private-sector pensions. The 110% level amounts to $12,870 a year for people who retires at age 65 with 30 years of service.
“What we’re really trying to do is salvage the system,” said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, a nonprofit group that assembled the labor-management coalition.
The coalition is recommending additional changes to multiemployer pension plans. It is also proposing a new form of pension plan that would carry less risk for employers than a defined-benefit pension, but is designed to provide more security for retirees than a 401(k). The assets are pooled, rather than held in individual accounts, reducing the investment risk to retirees. Employers would contribute a negotiated amount but wouldn’t be liable for additional payments if funding levels dropped, as they currently are with multiemployer pensions.
DeFrehn said cutting retiree benefits is the controversial proposal, but noted that lawmakers have said they don’t intend to bail out the pension plans. “This is kind of a reverse bailout,” he said. “It shifts a lot of liabilities away from the public sector and the taxpayer.”
Retiree advocates are raising red flags. Karen Ferguson, director of Pension Rights Center, a Washington, D.C., group that advocates for employees and retirees, said the union and management interest in the long-term survival of plans might conflict with the interests of older retirees who can’t afford to lose their income now. She said she thinks legislation should make sure retirees have input in the cuts, and that Congress should consider alternatives to the cuts.
Greg Smith, a 64-year-old Norton, Ohio, truck driver who retired in 2011 after working 31 years, agrees. He now receives a monthly check for $3,019 from a Teamsters pension plan that is projected to become insolvent in 2024. If that happens, the PBGC would take over and his benefit could be cut to as low as $1,100 a month.
Under the new proposal, his benefits could be trimmed before funds run out, giving the plan’s investments a chance to recover in the market. His benefits would be guaranteed not to fall below $1,210 a month, 110% of the PBGC level.
“It’s a precarious position for a lot of us retirees,” Smith said. “Let’s come up with a plan that doesn’t trash the retirees and put them in the poorhouse.”
A spokeswoman for the Teamsters, which participated in the coalition, declined to comment on the plan or whether the union endorses it.
David Blitzstein, who oversees multiemployer plans for United Food and Commercial Workers, said cutting benefits remains controversial for unions, companies and members of Congress. He participated in the 18 months of talks that led to the proposals. “It was a very tough bullet to bite for everyone in the room,” he said. Blitzstein said the majority of unions in the coalition supported cutting retiree benefits. The UFCW has openly endorsed it. It has retirees in about 60 multiemployer plans, covering 1.4 million people. He said cutting retiree benefits could be the only way to save about five deeply troubled plans, and added that it wasn’t clear how much benefits would have to be cut. “We haven’t modeled it yet in some of these really sick plans.”
Over time, numerous factors have hurt the ability of plans to fund benefits. Bankruptcies have cut the number of employers paying into some plans, economic downturns hurt investment returns, and some policy decisions intended to strengthen plans ended up weakening them.
The first multiemployer plans were created during World War II, when wages were controlled by the War Labor Board. Pensions were offered to unions as a trade-off. They were among “fringe benefits.” At first, company contributions were the sole source of income. Funding problems in the 1960s were addressed by the passage of Erisa in 1974, which required advance funding, and investments became the main funding source.
By the 1980s, some plans were so well-funded that companies risked losing the tax-exempt status of contributions. They responded by increasing benefits for retirees to levels that have never been reduced. Multiemployer plans recovered from the bursting of the tech bubble in 2000 and the median plan was 90% funded in 2007. But they were devastated by the 2008 market crash.
Now it is harder to make a comeback because plans’ recent investment gains are based on a smaller asset base. Contributions by employers are made per hour worked, and have lagged behind as employment has remained weak. Many plans are starting to have more retirees drawing benefits than active workers. Some companies have paid a penalty to withdraw from plans to get the liability off their books, leaving fewer employers paying into plans.
Big and small companies now say their future is threatened by underfunded plans. The problem is also holding down wages and benefits for current workers in industries like trucking.
Judy McReynolds, president and chief executive of Arkansas Best Corp. is among executives who back the coalition’s proposals. The company’s ABF Freight System unit participates in 25 multiemployer plans, and has 7,500 Teamster employees, two-thirds of whom are enrolled in troubled plans. She said half of ABF’s annual pension contributions of $132 million are for people who never worked for the company, and that its contributions are 14 times greater than those of competitors. “This is not sustainable,” she said. “It is imperative that we find concrete solutions.”
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