The Chilean Congress approved this Thursday a reform of the Constitution that will allow members of the Pension Fund Administrators (AFP) to withdraw up to 10% of their retirement savings to face the economic crisis produced by the pandemic. The initiative, which has the support of eight out of 10 citizens, became a decisive political event. The debate was crossed by the rebellion on the part of the right-wing ruling party, which supported the project in the Chamber of Deputies and the Senate despite the refusal of the Government of Sebastián Piñera, which has suffered a historic defeat. For a large part of the opposition, meanwhile, the approval was the first step to bury a pension system based on individual capitalization, founded in the eighties by the Augusto Pinochet regime, and which they consider delegitimized.
"I do not feel that one experiences a defeat when fighting with conviction and strength for what he believes is the best for Chile and the Chileans," said Piñera this morning. The Government tried to stop the reform through successive plans focused on helping the middle class, which were not enough to convince the parliamentarians. Despite the fact that technicians linked to different political sectors warned about the negative consequences of the early withdrawal of pension funds, in the Senate the initiative was supported on Wednesday by 29 of the 43 congressmen – with five votes from the ruling party. This Thursday, 116 deputies voted in favor, 35 from the ruling coalition Chile Come on.
The economist José de Gregorio, former president of the Central Bank and dean of the Faculty of Economics and Business of the University of Chile, this morning spoke of the triumph of "little thought, reckless and populist" measures. "With a government that is always backward and an opposition that is, in some way, covered by populism, it is very difficult to reach agreements," he said in a radio interview.
The discussion in Parliament was followed with broad interest by citizens, not only because they consider that the withdrawal of 10% of their savings will help them better cope with this time of crisis – in Chile there are about two million unemployed -, but also because the The problem of low pensions has become a priority for Chileans, especially since the riots last October. Although there is consensus on the need for profound changes in the system, the transformations have not materialized and retirements are still very low compared to the standard of living that citizens have in their active stage. Chile also has a poor income distribution.
The assistant María Bravo, 58, who lives in the popular and inhabited municipality of Maipú, in Santiago, is determined to get her 10% pension savings, which in her case would reach the equivalent of $ 2,850 (about four times her salary monthly). Two years after the expected retirement age, he points out that he will use the money for back surgery in the private sector "so as not to have to wait for the hospital", where he has been waiting for a turn for several years. She says that her 57-year-old husband, without a contract job, could get up to the equivalent of about $ 5,200, with which he intends to pay off debts. It is one of the patterns that is repeated, because according to the Central Bank, total household debt, calculated as a percentage of annual disposable income, remained at historical levels and rose to 75.4%, accounting for mortgages.
A polarized environment
The debate among the parliamentarians was on fire, in tune with the polarized environment that exists in different spheres of the country. In the Senate, on Wednesday, the ruling Andres Allamand, from Renovación Nacional, justified his rejection of the project because he believes that it "follows the classic recipe of populism: pay present aid with future poverty." The senator provided some data, such as that about 800,000 people will be able to withdraw less than $ 130 in two payments, that no one is going to make up the withdrawals, because for the "State it is materially impossible to do so" and that "the sale on the run of investments will make the price of assets fall, punishing all members ”.
For the socialist senator Carlos Montes, meanwhile, "citizens see the backwardness and insensitivity of the Government in the face of reality, which has proposed limited programs in the face of people who suffer" and who try to feed themselves, pay debts, protect themselves and are afraid to lose what he has achieved. “They are told that the withdrawal of part of the pension funds would affect retirements, but the judgment is formed: the AFP system is bad because retirements are bad, and if it affects bad retirements the impact is very specific. The needs are now, because they fight for survival with dignity, ”Montes pointed out in his speech.
After Congress approved the initiative, the Executive announced that tomorrow the president will promulgate the law, so he will not appeal to the Constitutional Court, as had been evaluated. With this failure of the Executive in Parliament, the stage is open for Piñera to make a new cabinet change, as has been requested weeks ago even from the ruling parties, which face their own internal wars. In any case, the Minister of Finance, Ignacio Briones, announced that this Administration will convene a "long-standing national priority" to carry out a structural reform of the pension system: "We cannot continue to hurt ourselves," said the economist after the vote this Thursday.
The AFP Association has reacted to the resolutions taken by Parliament. Although the organization stated that it was convinced that "the economic consequences of the health crisis that the country is experiencing will be paid by the workers by making use of their pension savings," it gave guarantees for the coming process: "We will put all our energy so that those who need to withdraw part of their funds do so in a simple, informed and agile way ”, indicated the general manager, Fernando Larraín.
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