Chile begins debate on third pension withdrawal amid second wave of the pandemic

The Chilean Congress started on Wednesday the debate on a third early withdrawal of pension funds to help citizens and residents that have already run out of funds because of the pandemic.

RIO DE JANEIRO, BRAZIL – The Constitution Committee of the Chamber of Deputies will analyze five legislative initiatives, opposed by the Government and presented by parliamentarians and pro-government members, and will decide whether to merge them into a single one, since they have similar characteristics.

The approval of a third withdrawal is almost assured, although it has generated much debate in recent months and the Government has threatened to appeal it in courts, under the premise that close to 3 million people have already run out of savings and that it would be a way of mortgaging their future.

Waiting to make a withdrawal from the penson fund. (Photo internet reproduction)

The Executive’s counter-proposal is to speed up a parliamentary agreement to reform the criticized pension system and approve more social aid, for which US$6 billion have been announced, in addition to the $12 billion committed since the beginning of the pandemic.

The defenders of the withdrawal, however, are of the opinion that the pandemic is lasting longer than expected, that the aid is insufficient and that it is necessary to advance in the reactivation of the economy, which fell by 5.8% in 2020.

Chile, which has 947,783 infected people and 22,402 deaths since the beginning of the pandemic, is experiencing the most critical moments of the second wave that began in December with the arrival of the austral summer.

At the same time, the country is carrying out a successful vaccination process and has managed to inoculate more than 5.8 million inhabitants with at least one dose, which implies more than 37% of the target population, a figure that has placed it at the forefront of immunization in the region.

In July 2020, the Parliament approved in an unprecedented way a first withdrawal by indivduals of 10% of their accumulated pension funds, from which 94.4% of the 11 million members of the system benefited.

The payments made by the administrators reached $16 billion dollars, according to the Superintendency, and in spite of the Government’s outright rejection to approve the measure, it was later acknowledged by the government that it had a positive impact on consumption.

Last December 3, the second withdrawal was approved, a project promoted by the Executive branch which allowed the withdrawal of another 10% only, but which taxed the withdrawal of funds above 1.5 million pesos (about $2,000).

Conceived by José Piñera, one of the brothers of the current president, Sebastián Piñera, and introduced during the dictatorship of Augusto Pinochet (1973-1990), the Chilean pension system was a pioneer in establishing individual worker capitalization and was replicated in other Latin American countries.

The defenders of the withdrawal, however, are of the opinion that the pandemic is lasting longer than expected, that the aid is insufficient and that it is necessary to advance in the reactivation of the economy, which fell by 5.8% in 2020. (Photo internet reproduction)

The funds are managed by the so-called Pension Fund Administrators (AFP), private companies that obtain million-dollar profits after investing savings in the markets and which are highly criticized for the low pensions they provide.

The transition to a more solidarity-based model with better pensions is one of the main demands of the wave of protests that broke out in October 2019.

Source: EFE

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