By Diego Cevallos

MEXICO CITY, Aug 5 (IPS) - The legislative reform passed by the Mexican Congress Thursday will merely put a bandaid on the critically ill Social Security Institute (IMSS), while opening the floodgates of a potentially huge labour conflict.

After receiving the news that the amended version of the social security law had made it through the Senate, the trade union of IMSS workers declared a stoppage in several administrative offices of the social security system, which provides healthcare coverage to 12 million people in this country of more than 100 million.

The union also threatened to call a massive strike within the next few days if President Vicente Fox signs it into law as it now stands. The National Union of Workers (UNT) labour federation also warned that it may stage a protest on Sep. 1 by cutting off electricity and telephone services nationwide.

In the midst of street protests and marches by IMSS workers, which delayed the start of the debate in the legislature Wednesday and caused traffic jams in the capital, the Senate ratified the overhaul of the social security system, which had been approved by the lower house in late July, in the early hours of Thursday morning.

The reform of the social security law, which was backed by the conservative Fox administration, establishes that new employees hired by the IMSS, which currently employs 360,000 workers, will not enjoy the same benefits in terms of pensions and retirement age as the current employees.

In addition, their contributions towards retirement will be larger.

Studies on the problems faced by the IMSS indicate that the system is near collapse due to the deterioration caused by the early age at which the current employees are allowed to retire.

The average age of retirement for IMSS employees is 53, compared to the minimum retirement age of 65 for the rest of the country's workers.

In addition, women can retire after 27 years in the IMSS and men after 28 years, regardless of their age. They retire with a monthly pension larger than their last paycheck.

There are already 120,000 retired IMSS workers drawing pensions, and the benefits they enjoy are far superior to those obtained by the rest of the population.

''We did not fix the main problems, that is true. But at least we put a halt to certain questions, to allow the Institute to continue to be a viable institution,'' Genaro Borrego, a parliamentary deputy with the main opposition party, the Institutional Revolutionary Party (PRI), and a former IMSS director, told IPS.

''The problem of the wages, pensions and retirement of current workers must be resolved by the government and the trade union in the collective bargaining of a new contract,'' he added.

But the union of IMSS workers warned that if they are not granted wage hikes and if there are any attempts to slash their rights in the next collective contract, which is to be negotiated this month, they will go on strike.

Such a move would affect around 140,000 children who attend the IMSS day care centres while their parents work. Service would also be affected at the system's 1,521 family medicine clinics, 217 local hospitals and 10 national medical centres.

In the view of Héctor Castellanos, who has worked in the IMSS since 1989, the reform approved by the governing National Action Party (PAN) with the support of PRI represents the start of a future privatisation of social security, ''as ordered'' -he said- by the International Monetary Fund (IMF) and World Bank.

The overhaul was rejected by the leftist Party of the Democratic Revolution (PRD).

''The worst thing is that the workers are blamed for the crisis in the IMSS, as if we were delinquents just because we have a decent collective contract,'' Castellanos commented to IPS.

The IMSS will shell out more than 15 billion dollars this year to its active and retired workers, while it will spend a mere 71 million dollars to build and maintain health clinics and other infrastructure.

Most of the wages and pensions, which are growing by three percent a year, come from the state coffers, because the current quotas paid by workers and employers do not even cover half of the cost.

IMSS debts currently amount to around 35 billion dollars, while it has only 2.4 billion dollars in reserves. Not even by selling all of its assets could it cover that deficit, states an IMSS report to Congress.

''If the working conditions in the IMSS do not change and if the structure is not overhauled, the system will simply stop functioning due to a lack of funds, according to the projections,'' María Cristina Palencia, an accountant and actuary, told IPS.

The reforms approved Thursday do not fix the underlying problems, ''but the union's reaction indicates that it will be very difficult to come up with an in-depth solution without paying a huge political cost,'' said Palencia.

There will be no privatisation of the IMSS, said Borrego, who added that ''the idea behind the overhaul is for it to remain part of the state, but in a viable form, and with a promising future.''

''Sooner or later, Mexico has to face up to decisions'' with respect to modifying the retirement and pensions regime for IMSS workers, said President Fox shortly before the reforms were approved.

''The IMSS could die within five years'' if the way it functions does not change, the Institute's director Santiago Levy said in February, urging IMSS workers to renegotiate their current retirement and pensions system.

But the trade union responded that if Levy wants to talk about reforms, he should first agree to a reduction in his salary, which tops 20,000 dollars a month.

The UNT, which represents power and telephone company workers, among others, said that to protest the reforms they may cut off electricity and phone services nationwide on Sep. 1, when Fox is scheduled to give a state of the union address.

Meanwhile, IMSS workers blocked several main avenues in the capital Thursday and brought several IMSS services to a halt. They also warned that more radical protests lie ahead.

The IMSS union proposes a gradual increase of the contributions of it workers, from the current three percent of wages to six percent in 2012. But that is far from the 15 percent needed, according to studies.

The reform approved Thursday stipulates that new IMSS workers will contribute more than the current employees towards retirement, and will not be able to retire until the age of 65.

With respect to private sector employers and workers who receive health coverage from the Institute, no agreement has been reached on a proposal to raise their contribution to the IMSS from 15 to 19 percent of wages.

The union of IMSS workers has traditionally been aligned with the PRI, which governed Mexico from 1929 to 2000, when Fox was elected. It gained many of its privileges in exchange for political support for the long-ruling party.

For example, when the wages of active employees are raised, pensions go up proportionally. Today, retired IMSS workers draw an average pension of more than 1,500 dollars a month.

That stands in stark contrast to the benefits of the rest of the country's formal sector workers, who cannot retire until they turn 65, and whose pensions amount to no more than 200 dollars a month.

In addition, slightly more than half of all workers are in the informal sector, which means they do not pay into the social security system and have no hope of retiring with a pension.