Chilean president announces more aid amid debate over third pension withdrawal

RIO DE JANEIRO, BRAZIL – The President of Chile, Sebastián Piñera, announced on Monday April 19, new aid equivalent to US$5.5 billion to face the economic crisis generated by the pandemic, a measure that adds to the US$18 billion committed so far by the Government for this purpose.

The announcement comes while the Senate is debating a bill that seeks to allow citizens a new withdrawal of 10% of their pension funds – after those approved last July and December – to alleviate the crisis, an initiative that the Government opposes and threatens to take to the Constitutional Court.

The conservative president’s bet focuses on extending the coverage and universality of the so-called Emergency Family Income (IFE), as well as simplifying access to this basic income for those most affected by the pandemic.

Each member of the 80% of the country’s most disadvantaged families will receive a total of 100,000 Chilean pesos (US$140) during May and June, which means helping 13 million people, according to the announcement.

“This new and strengthened IFE will cost the State US$5.5 billion and will be financed with public resources, without affecting pension savings and without diminishing the pensions of Chileans,” Piñera said at a press conference.

The ruler, a billionaire businessman who acceded to power in March 2018 for a second non-consecutive term, also showed his availability to negotiate with the opposition “agreements to increase tax collection, incorporating greater efforts from higher income groups”, at a time when the Parliament debates a tax on the super-rich during the pandemic.

Parliament is also discussing a third pension withdrawal, a measure presented by several parliamentary groups under the argument that the US$18 billion in aid announced by the Government during the pandemic “is not reaching the people”.

Despite being one of the countries with one of the most vaccinated populations in the world, Chile is going through the worst moment of the health crisis with a second wave that forced the imposition of massive quarantines and is entailing the end of thousands of businesses that had managed to save themselves from the 2020 encirclement, a year in which the national GDP suffered a 5.8% drop.

“We are aware that there are still individuals and families who have not received the benefits they need,” the president added.

This withdrawal of funds would be in addition to those approved in July and December last year, requested by most of the 11 million affiliates of the system.

However, according to the Superintendency of Pensions, about 4.9 million members would no longer have funds for a third withdrawal, an argument widely used by the initiative’s detractors, who believe that withdrawing this money is a way of mortgaging the future of contributors.

Replicated in the 1990s in most Latin America and a pioneer in individual capitalization, the Chilean pension system is nowadays strongly questioned for the pyrrhic pensions it provides. There are more and more voices calling for a move towards a more solidarity-based model.