Moody’s joins Chile’s pension debate: “The need for pension reform has become more pressing”
RIO DE JANEIRO, BRAZIL – While waiting for the government to make a proposal to the opposition to unblock pension reform, which has been stalled in the Senate for over a year, more and more voices are calling for changes to be urgently implemented.
This time it was Ariane Ortiz-Bollín, Vice President Senior Analyst of Moody’s Investors Service, who stated that “the need for a pension reform has become more pressing,” amid a warning as to what could happen if a new pension fund withdrawal is authorized.
In a seminar organized by the Americas Society/Council of the Americas and on the day that the Chamber of Deputies ruled the bill that seeks to allow a third withdrawal admissible, the expert stated that what has occurred so far does not necessarily imply a “significant risk in the mid-term,” but cautioned that “it would if withdrawal continues to be allowed.”
The process posed by the two previous withdrawals, Ortiz-Bollín noted, “renders the urgency of a pension reform more immediate,” and recalled that the need for such a reform has been under discussion for over a decade.
“With retirement, the problem has become even more acute,” she stressed, and commented that “hopefully there will not be a continued undermining of the system as a whole because Chile’s development was enabled in part due to these important savings that are the backbone of the financial system in Chile. Consequently, preserving the continued health of the pension system and contributing to it is of great importance.”
From a fiscal perspective, she argued that the costs of withdrawals already implemented would not be “that significant,” but she does see concern from a credit perspective. “The main concern was how they passed the reform, because it was not done the usual way,” she said.
Recalling that the bills “were not backed by the standard technical considerations, they were passed in a week, coming from Congress rather than from the Executive,” among other aspects, she said that “from our perspective, the way in which the approval occurred was more negative than the actual fiscal costs.”
However, Ortiz-Bollín stressed that the two early withdrawals of pension funds have had positive results. In addition to boosting consumption, the economist pointed out that “politically, it was positive because people realized that pensions do exist and will probably change their perception of private pension funds for the better.”
Source: Diario Financiero
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