SANTIAGO, CHILE (REUTERS) – Chilean senators on Wednesday (July 22) voted to approve a controversial Bill that allows citizens to withdraw 10 per cent of their pension savings to help ease the economic impact of the novel coronavirus outbreak.
The Bill, which polls suggest has widespread public support, has been staunchly opposed by the government of President Sebastian Pinera, but was approved by 29 votes to 13 with one abstention.
Swift passage of the Bill, and surprise cross-party support, has pushed Mr Pinera’s centre-right ruling coalition to the brink of collapse and brought warnings of dire economic consequences.
It also raised concerns about a swerve toward populism following months of rioting and protests last year over inequality and precarious living standards in one of Latin America’s traditionally most stable and prosperous nations.
Senators approved the vote with five government representatives crossing the floor to support the opposition in voting it through.
On Wednesday night, they continued to debate proposed amendments to the Bill, including who can access funds, and a provision that would see the government or employers replenish pensions after the Covid-19 crisis.
If all amendments are rejected, the Bill can be signed into law. If any are approved, it will return to the Lower House for a final vote as early as Thursday.
Removing funds from the defined contribution Pension Fund Administrators (AFP) system will reduce already low average pension payouts, and shock the local stock, bond and exchange markets, according to the government and mainstream economists, though opinion diverges on how much.
The AFP system was introduced in the 1980s under the dictatorship of Augusto Pinochet and has been the subject of public protest and reform pledges because of low payouts for years.
In a Cadem poll published last week, 86 per cent of respondents said they supported the pension withdrawals, and 82 per cent said they would request access to their funds if allowed.