Coronavirus in Chile ECONOMY

Piñera Announces Extra Middle Class Support Ahead of Pension Withdrawal Vote

SANTIAGO – In an ultimate bid to convince lower house members in his coalition to vote tomorrow against the bill that would allow Chileans to withdraw 10 percent of their pensions, President Sebastián Piñera announced a support package for the country’s middle class on Tuesday, July 14. Among the new measures is a one-time deposit of CLP$500,000 for middle class workers who lost income. Regarding the bill up for vote tomorrow, the president called his support plan “a better solution.”

On the day before Chile’s lower house of Congress votes on a bill that would allow Chileans to withdraw 10 percent of their pension funds, President Sebastián Piñera announced new measures to support Chile’s middle class affected by the current economic crisis. Although the president announced less than 10 days ago a plan to provide financial relief for this group, the outcome of the vote last week suggested that members of his own coalition, not to mention members of the opposition, were not satisfied with the existing government aid. To change the tide, Piñera presented a plan that he dubbed “the Strengthened Plan for the Protection of the Middle Class.”

I have listened carefully and with affection to the message of our people. Chile faces a double challenge. On one hand, we must protect a middle class that is suffering, and, on the other hand, we must reform the pension system to ensure decent pensions for all. Both challenges have to be met,” the president said before announcing four measures.

Also read:

Lower House Approves Withdrawal of Pension Funds in Historic Vote

Four New Measures

  • All workers who had formal monthly incomes between CLP$500,000 and CLP$1.5 million, and who saw their monthly income drop by 30 percent or more will receive a payment of CLP$500,000. Workers with incomes between CLP$1.5 million and CLP$2 million per month, who have suffered drops in income, will also receive a payment.
  • On top of these payments, the government announced a so-called State Solidarity Loan, which is a loan that aims to compensate up to 70 percent of lost income. The loan will be paid in three installments, with a maximum of CLP$650,000 per payment and a maximum total loan of CLP$ 1,950,000. The loan will be interest-free and borrowers must start paying it back after one year and within three years, with a maximum monthly payment of 5 percent of the borrower’s income. If after four years, the borrower has not been able to pay off the loan, the debt will be forgiven.
  • The third pillar in the newly-presented plan is focused on homeowners and people who rent. It includes a postponement of six months of mortgage dividend payments, with the State as guarantor, and a three-months subsidy of 70 percent of the monthly rent for people who lost a major part of their income.
  • The last measure is focused on students: students who want to apply for state credit get an extended deadline, while students who need to pay back their state credit (CAE) get three months’ deferment.

On July 5, President Piñera previously presented a support plan for Chile’s middle class, which included zero-interest loans and benefits for their rent and mortgages.

“A Better Solution”

That the newly announced plan was in direct response to the vote on the pension bill tomorrow in the Lower House was something President Piñera pointed out on several occasions during the presentation of the support package. “The protection of the middle class cannot and must not be at the cost of reducing their pension savings or compromising the country’s future,” he said. “This is a better solution.”

Referring to the vote tomorrow, Piñera said, “With respect to the vote that will take place in our Congress tomorrow, I only hope for one thing: that all members of parliament, when they vote, reflect; do so responsibly and do not make the mistake of protecting the middle class in these times of emergency by weakening the pensions of current pensioners and future pensioners.”

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