Chile’s Piñera announces additional US$7 billion in social aid due to the pandemic

RIO DE JANEIRO, BRAZIL – Chile’s president Sebastián Piñera on Tuesday announced a US$7 billion aid package that will allow extending direct transfers to families for 2 more months and financing a new employment subsidy to tackle the pandemic.

The amount represents an extension of the so-called “Universal Emergency Family Income” (IFE Universal), an assistance that directly reaches 90% of households and was initially intended to run only until September.

“The economic situation is improving very significantly (…) but we are fully aware that despite this fact, the pandemic continues to cause hardship,” the president said.

This support will benefit over 14.8 million people out of the country’s 19 million inhabitants, he added, excluding 10% of higher income households, with incomes over 800,000 pesos (US$1,100) per person.

The benefit varies according to the number of household members: for single-person households it is 177,000 pesos (US$242, the equivalent of the poverty line), while for households with 4 members it will reach 467,000 pesos (US$640).

In addition, a Labor Emergency Fund will be created as a monthly subsidy for workers who find a formal job during 2021, which will be added to their wages, with a maximum of 200,000 pesos for men and 250,000 pesos for women (US$250 and US$320, respectively).

“Our goal is to create 500,000 new formal jobs during this year and by doing so we would be taking a big step forward,” Piñera added.

This additional US$7 billion, which will require parliamentary approval, will be added to the US$34.2 billion already committed by the government to address the current crisis.

PREVENTING FURTHER PENSION WITHDRAWALS

The announcement came the day before Congress begins to discuss the possibility of another withdrawal of pension funds, an initiative the government strongly opposes, which would allow Chileans to withdraw 10% of their pension savings for the 4th time since the start of the pandemic.

The increase in benefits is perceived by the pro-government right-wing as a way to prevent a new withdrawal from progressing in Parliament, which some advocate is the only way for the middle class to cope with the current economic crisis.

Leftist Marcos Ilabaca, who chairs the Chamber of Deputies’ Constitution Committee, where the debate on the 4th withdrawal will begin tomorrow, clarified that this initiative will not be conditioned to the extension of the IFE.

A growing number of voices, particularly among experts, point out that the withdrawals are bad economic policy that will leave many taxpayers with no savings in the future and also that it is an “opportunistic” parliamentary measure to win votes in the run-up to the November elections.

Among the 3 withdrawals approved to date, Pension Fund Administrators (AFP), private companies that manage the funds, have disbursed over US$50 billion.

The pandemic, which has infected more than 1.6 million people and caused a 5.8% drop in GDP in 2020, is receding in the country after a second wave that forced the decree of extensive quarantines and put an end to thousands of businesses that had managed to survive the previous confinements.