Chile Congress approves pension drawdown in blow to establishment

Chilean legislators punched the air and waved the national flag in Congress on Thursday after giving final approval to a government-contested bill to allow citizens to withdraw 10 percent of their pension savings to help ease the economic pain wrought by the novel coronavirus outbreak.

The bill has sped through several congressional votes with cross-party support despite staunch government opposition.

The bill required a three-fifths majority, 93 votes, and 116 deputies voted in favour, with 28 against and five abstentions. A number of the 71-strong governing coalition bloc – including the president of one of its parties – voted in favour.

The chamber erupted in cheers and clapping amid chants of “no more AFP” – a reference to the long-running campaign to tear up Chile’s much-mimicked defined contribution Pension Funds Administrators (AFP) system that was introduced during the Augusto Pinochet dictatorship.

Cristobal Bellolio, a political scientist, said the bill represented Chile’s “Brexit moment”, a symbolic blow dealt to the establishment, against the advice of experts, by an angry populace emboldened by social protests last year against inequality and state policies including the AFP system.

President Sebastian Pinera has 30 days to decide whether to veto the bill, sign it into law or refer it to the Constitutional Court.

Interior Minister Gonzalo Blumel told journalists after the vote not to “get ahead of themselves” with questions about a potential veto, saying, “Congress has to send the promulgatory letter to the executive, and once the letter reaches the executive, he has to decide the way forward.”

Matias Walker, the Christian Democrat deputy who introduced the bill, appealed to Pinera not to veto it, but to “listen to the voice of the people.”

The bill’s swift passage and surprise transversal backing has caught Pinera’s centre-right government on the back foot as it battles one of the world’s worst outbreaks of the COVID-19 pandemic and faces potentially more of the fiery social protests against inequality that erupted in October last year, as well as the drafting of a new constitution.

Economists and ministers have said withdrawing from pension funds will diminish already low average payouts and deliver a shock to stock, bond and currency markets.

The bill’s supporters say alternative support offered by the government to millions of citizens left unemployed and impoverished by the pandemic was insufficient and bureaucratic.