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Government Promulgates Third Pension Withdrawal Law After Constitutional Court Defeat

SANTIAGO – Once again, a bill seeking a partial withdrawal of pension funds by Chileans to relieve economic stress has caused upheaval in Chile’s government. After President Sebastián Piñera tried to declare the bill, already approved in both houses of Congress, unconstitutional, the Constitutional Court rejected his claim. Piñera was forced to promulgate the law on Tuesday night and withdraw a similar bill he had drawn up to counter the original bill.

 “I am against withdrawing AFP pension funds, because they are a sacred asset,” Juan Sutil, head of the Federation of Entrepreneurs and one of the most outspoken defenders of Chile’s neoliberal open market model, said in June 2020, when the first withdrawal of pension funds by Chilean was still on the table. By calling the funds sacred, Sutil demonstrated how far the defenders of the neoliberal model in Chile are willing to go to maintain them. And although the government in the months that followed saw two pension withdrawal bills approved, the AFP pension system in Chile remains one of the most sacred cows of the Piñera administration.

There is, however, a dire financial need in Chile after more than a year of a devastating pandemic. The economy has crashed, unemployment has hit double digits, and, despite stimulus packages from the government, some 50 percent of Chile’s population says it has not received a peso to this very day. Searching for means to relieve the financial burden, Chileans have turned to their pension funds, which are – despite being their very own savings – hidden far away in a complex system of privately-managed investment funds. The aforementioned pension withdrawal bills sought to return these funds to their owners, and a third pension withdrawal was only a matter of time.

It was no surprise that Pamela Jiles, a former journalist who has evolved into a populist leader, filed the bill that would give Chileans – those with any funds left – the chance to withdraw pension funds for a third time since the start of the pandemic. Where a first pension withdrawal was fought in parliament with interpellations from ministers and approved by only a small majority, times have changed for the governing coalition Chile Vamos. The always-so-united coalition has been the stage of ongoing internal struggles, with approaching presidential elections widening the rifts as candidates from the right-wing seek ways to profile themselves as men and women of the people. The third pension withdrawal bill sailed through Congress, in part thanks to right-wing representatives and senators.

In a last effort to halt the bill, President Sebastián Piñera pushed his own bill, similar to the already-approved bill but different to the extent that the withdrawn funds had to be returned to the AFP system, mainly through taxes on employers. The bill appeared to have been hastily prepared and was quickly opposed and, itself, brought before the Constitutional Court as unconstitutional.

Read more:

The Pension System in Chile: “A Reform is Not Enough”

Another Miscalculation by the Piñera Administration

In the end, trying to halt financial aid for Chileans in dire need was just one more error of the Piñera administration. A large number of Chileans have not received any form of financial help during the pandemic. Stimulus packages for Chile’s middle class – recently announced – turned out to be disappointments for many who were confronted by a big, red cross on government websites when they tried to find out how they migth apply for the financial help. Piñera, who, ever since the estallido of 2019 has been fighting single digit-approval ratings, was, once again, the man to blame for Chilean workers, who announced strikes and protests, that left 25 ports partially paralyzed after dockworker unions walked of the job. Mining unions warned that they were next if the government did not promulgate the approved pension bill.

But the biggest blow for Piñera was not delivered by striking unions, marching people, or effective opposition members. It was the Constitutional Court that rejected his claim of unconstitutionality on Tuesday, Apr. 27, that put him on a crossroad of tremendous consequence3. He could try vetoing the bill, but that would likely result in only more protests and strikes, apart from all the resistance he would face from both opposition and coalition members. On Tuesday night, a visibly tired Piñera announced he would promulgate the original third pension bill, and withdraw his own.

Opposition members celebrated Piñera’s decision as a victory. They called the series of defeats suffered by the president in recent days a sign that his presidency is de facto finished. Members of his own coalition, even of his very own party, are opposing him instead of siding with him on bills and decisions. Headliners in the ruling parties publicly criticize his leadership. The Chilean opposition seems, after months or even years of division, to understand that working together as one makes a stronger bloc and with a majority in the lower house of Congress the eleven months left for Piñera could mean he will have to dance to the tune of opposition members such as Jiles. If the humiliation of Tuesday night weren’t enough, this very Jiles presented a fourth withdrawal bill on Wednesday, Apr. 28. To be continued.

Also read:

The Sebastián Piñera Administration Has Ended

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