Several people with face masks walk through the center of Santiago de Chile, on November 20. Alberto Valdes / EFE
For the second time in this semester hit by the pandemic, Chileans who have pension savings will be able to withdraw up to 10% of their money from pension fund managers (AFPs), according to a bill that is successfully advancing in the Chilean Parliament.
It is a presidential initiative of the Government of Sebastián Piñera.
Although the Executive has opposed the withdrawal of the funds, considering it unconstitutional and harmful for future pensioners, it was forced to pull out its own project to stop another one from the opposition, which was advancing with the support of pro-government parliamentarians and that Among other issues, it did not consider paying taxes for high-income workers.
This Thursday it was approved in the Senate and, from Monday, it will be discussed in the Chamber of Deputies.
Its success is highly probable, so the money could reach the citizens before Christmas.
It is a highly popular initiative.
According to the Cadem survey at the beginning of the month, 87% support the second withdrawal of up to 10% of pension savings.
If the project is approved, 80% would withdraw them, according to the study, while seven out of 10 respondents indicate that their income has decreased in the last three months.
Among the reasons for withdrawing funds from the AFPs, it is mentioned: to save and have in case of emergency, purchase of food and basic supplies, pay debts and distrust in the administrators.
When the first withdrawal was approved last July, which people began to receive in August, 43% say they have spent it, 36% that they invested or saved it and 19% that they saved it in an account.
Eight out of 10 citizens, meanwhile, consider that the money belongs to them.
Chile faced the pandemic last March with an ongoing political and social crisis, after the social outbreak of 2019 that put Chilean institutions on the ropes.
Although a constituent process began on October 25 to draft a new Constitution, after the plebiscite, the political class is weakened on all fronts and has shown that it has only been able to join an initiative highly valued by citizens, despite the technical tips.
The first retirement project was promoted by a deputy from the ruling party, Mario Desbordes, who later assumed the Defense Ministry and is seeking a presidential candidacy from the Cabinet.
The second attack came from a left-wing deputy, Pamela Jiles, highly popular for her controversial style of denouncing political leaders from Parliament itself, influential on social media and with an unusual staging for circumspect Chilean politics.
When the first withdrawal of 10% of pension savings was approved in July, Jiles ran in the hemicycle in front of the Minister of Finance, Ignacio Briones, inspired by the Japanese drawing Naruto.
Guillermo Larraín, an academic at the University of Chile and former pension superintendent in Ricardo Lagos' period (2003-2006), says that there are three elements that would explain what is happening in the country: “A populist agenda of some leaders, which they see an opportunity to stand out, and a lack of credibility and trust in the AFP system that fuels populism ”.
Larraín, however, highlights a third fundamental aspect to understand why "between the first and the second retirement, Chileans will have withdrawn between 25,000 and 29,000 million dollars from their pension funds."
"Chilean social policy has focused on alleviating poverty, but it has forgotten that it has a vulnerable middle class," the economist analyzes.
"The Chilean subsidiary State does not have the instruments to assist these people who represent about 40% of the population and the Government, which realized this very late, has been generating instruments, but by trickle".
Currently, unemployment in Chile stands at 11.6%, but the combined rate of unemployment and potential workforce - people who are mostly not looking for a job, but are available - reaches 25.1%, as reported by this Friday the National Institute of Statistics (INE).
According to the IMF's October Fiscal Monitor, among emerging middle-income economies, Chile has the greatest fiscal responses to the health crisis, with a boost close to 9% of GDP.
But the middle class has a sense of scarcity that explains the withdrawals of their pension savings, according to Larraín.
“Of the 15,000 million dollars from the first withdrawal in August, 5,000 were spent.
The other two thirds are deposited in checking accounts, which shows that people were afraid of being left without access to financing ”, says the economist.
The AFPs currently have more than 11 million members.
Until the end of October, 9.5 million people had withdrawn part of their savings thanks to the first pension fund withdrawal project.
The association of administrators at the beginning of the month warned that some four million citizens will eventually run out of savings after this second withdrawal, which will raise the demand on the state in the future.
The Piñera government decided to object to the opposition's project in the Constitutional Court to deliver a political signal and, in this way, make it difficult for consecutive withdrawals of the AFPs to be attempted.
La Moneda seeks to prevent a system that accumulates financial assets for about two thirds of GDP from ending up emptying, as certain opposition groups seek.
The communist mayor Daniel Jadue, for example, one of the letters of the sector with a view to the presidential 2021, this week supported a transfer of the current pension savings to a collective fund to raise the current pensions "immediately", which are low .
As pension savings in Chile are mandatory and accumulate at a rate of 10% of the monthly salary, they currently accumulate about $ 200,000 million.
Around 45% is invested outside the country.
Despite the fact that improving pensions has been installed as one of the main demands of the citizenry after the social outbreak of October 2019, the reform of the system has been discussed for eight years in Congress and, with a tense political climate, it is uphill for the Government of Piñera to carry it out in the 15 months that remain.