MercoPress. South Atlantic News Agency

Bill allowing Chileans to withdraw yet another 10% of pension savings does not make it through the Senate

A fourth withdrawal could “overheat” the economy, Central Bank authorities had warned

A bill authorizing Chileans to make a fourth withdrawal of pension funds to cope with economic shortcomings due to restrictive measures taken during the fight against COVID-19 has failed to make it through the Senate.

At least 10 million Chileans were to benefit from the measure which fell one vote short of getting past the Upper House, where 15 lawmakers also voted downright against it and one Senator abstained.

Despite this outcome, the bill will now go to a bicameral committee where a deal between the two houses is to be brokered.

”Neither the AFPs (Chilean pension fund administrators) nor the economic interests of a few will make us lower our arms,“ said Senator Alfonso De Urresti. ”We are going to move forward. It cannot be allowed that simply by one vote we have this adverse situation. There is a large majority of senators who are promoting this fourth withdrawal and I have no doubt that in the mixed committee we will achieve a majority to approve it,“ he added.

The legislation would allow Chileans to withdraw up to yet another 10% of their funds within the AFPs after three withdrawals have already been authorized since the outbreak of the coronavirus pandemic.

If the bill finally makes it through Congress, at least 10 million Chileans will be able to withdraw sums ranging between US $ 1,280 and US $ 5,600.

The three previous pension withdrawals have represented a dent to the AFPs liquidity worth around US $ 50 billion.

The AFPs are private companies highly questioned in Chile due to the low monetary privileges they grant after a lifetime of compulsory savings and the large benefits they extract in the process. They were added to Chile's pension system under former dictator Augusto Pinochet.

The bill had also been okayed by Senators Manuel José Ossandón and Marcela Sabat of President Sebastián Piñera's ruling party despite calls from the Executive to vote against it.

On the other hand, Christian Democratic Senator Carolina Goic opposed the initiative despite presidential candidate Yasna Provoste's stance in favour of it.

”(...) From the centre-left, to which I belong, it seems that we are abandoning the flags. At what point do we begin to relativize what all the technicians say? I am going to reject this fourth withdrawal,“ Goic said in her speech.

Finance Minister Rodrigo Cerda pointed out that there were several arguments that the parliamentarians incorporated in their speeches. ”We understand that the discussion continues and we would also like to speak to our compatriots in the sense that we as a government know that there are people who need state aid (...) in the budget there are spaces to maintain employment assistance programs,” Cerda said.

While the AFPs rake in substantial profits, half of the Chilean taxpayers receive monthly pensions of less than Ch $ 215,000 (US $ 280) per month, according to the Fundación Sol, while the poverty line stands at Ch $ 170,000.

Last August, Chile's Central Bank authorities had warned against a fourth withdrawal, saying the resulting amount of money in circulation could boost inflation, among other unwanted consequences encompassed under the expression “overheat” the economy.