Chileans get the right to dip into their retirement savings

The law was passed in record time. At the end of twenty days of debates in Congress, and under immense social pressure – Horn and pot concerts in the windows of confined residents have sounded in the capital, Santiago, and the major cities of the country on several occasions in recent weeks -, the Chamber of Deputies definitively approved, Thursday, July 23, the text authorizing the Chileans to draw on their retirement savings. They will be able to withdraw up to 10% of their contributions, up to a limit of 4.3 million pesos (4,700 euros), in order to cope with the economic difficulties caused by the Covid-19 pandemic.

This decision is a blow to the Administrators of pension funds (AFP), the private institutions that manage the pensions of Chileans. The pension system, inherited from the dictatorship of General Pinochet (1973-1990) and designed by José Piñera, the brother of the right-wing president, Sebastian Piñera, provides that all employees must pay 10% of their salary. The private pension funds, responsible for making these sums grow on the financial markets, the total amount of which is equivalent to 80% of Chilean gross domestic product (GDP), then distribute only miserable pensions to retirees. In 2019, eight out of ten received a pension below the minimum wage (301,000 pesos). Ending AFP is one of the main demands of the historic social movement that started in October 2019.

“Against all odds, the people won! “, rejoiced on Twitter opposition MP Vlado Mirosevic, member of the Liberal Party of Chile. Huge setback for the government: half of the deputies from the ruling coalition, Chile Vamos, voted in favor of the text. “These parliamentarians saw how popular the reform was, polls showed that 80% of the population was in favor, recalls Recaredo Galvez, political scientist and researcher at the Fundacion Sol think tank. It is a proposal that gained momentum as the pandemic spread, as the government measures were deemed insufficient. “

“80% of adults in debt”

Since the start of the Covid-19 epidemic – which has claimed nearly 9,000 lives in Chile – the government has distributed 2.5 million food packages and paid a “Emergency family income” to the most vulnerable citizens. “But this aid only affected a very limited number of families”, says Galvez. The government also announced, in mid-July, an aid plan for the middle classes, including zero-interest loans. “In Chile, 80% of adults are in debt, and 5 million people [sur 18 millions d’habitants] fail to pay their debts on a daily basis, so this is not a very attractive option “, believes Mr. Galvez.

You have 34.3% of this article to read. The rest is for subscribers only.