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The government suffered a hard blow yesterday in the Constitutional Commission of the Chamber of Deputies that approved the idea of legislating a second withdrawal of 10% of the AFPs.
The initiative received the support of 11 parliamentarians and only one rejection, that of the UDI deputy, Jorge Alessandri. The parliamentarian argued that people’s savings cannot be reached to face the crisis and called on the government to reach into its pockets to help people.
In this context, he proposed to the Executive to offer an alternative that he called “10% Bonus”, which basically consists of the government paying the equivalent of 10% “of what you have in your pension savings, with the limits and floor it has the bill ”.
“What we have proposed in the commission is that each one can get into their AFP, calculate what the second 10% withdrawal is and that that check reaches you, but it does not come from your savings, that it comes from the treasury ”, Said the deputy to CNNChile, after the vote.
Alessandri calculated that this could have a fiscal cost of the order of US $ 20,000 million, and that it could be financed “obviously” with public debt.
“I think it is time to do different things, special things and the Executive, the State in this case has to get this time with the Chilean families,” he said.
Right off the bat, the idea sounds good since people would not lose their old-age savings to face this crisis. However, it places a presumably unbearable burden on the tax coffers, even with the luck of having the copper price at its highest level in two years, and above US $ 3 per pound. It should be remembered that the Chilean economy is going through its worst crisis since the 1980s, with historical falls in the Imacec.
It would also reopen the debate around the structural surplus rule and the level of debt that Chile has, which has risen steadily in recent years. The public debt, in fact, It is over 32% of GDP, surpassing the 30% barrier for the first time since 1992.
In this context, someone might be tempted to turn to sovereign wealth funds, whose objective is to contribute to macroeconomic stability and to finance certain contingent liabilities. The Pension Reserve Fund (FRP)Created at the end of 2006, it was established to finance the Treasury’s pension obligations towards the most deprived sectors; Meanwhile he Economic and Social Stabilization Fund (FEES), created at the beginning of 2007, is intended to finance fiscal deficits and the amortization of public debt.
How much is the FEES? “Only” to US $ 10,569 million.
The proposal of the UDI deputy is equivalent to 7.1% of Chile’s GDP and far exceeds the US $ 12,000 million from the Covid Fund created after an agreement between the government and the opposition, the result of a proposal made by a transversal group of economists.
But beyond the delicate situation of the country and that the level of debt in relation to its GDP is still considerably lower than that of other large economies such as Japan (220%), the Euro Zone (100%) or the US itself (123% ), What do economists say?
Study warns that with the second withdrawal of 10% of the AFPs, 4 million affiliates would have no balance
Zaldívar before a debate for the second retirement: “You cannot improve pensions if I use those resources for another purpose, no matter how important it is”
“Politically it is very viable, but economically it is a disaster for fiscal accounts. Just to think that an agreement was put together with a lot of effort to give the green light to extra expenses of up to US $ 12 billion. The withdrawal of funds figures are too high to be equated by a similar fiscal expenditure, ”said EuroAmerica economist Felipe Alarcón.
While, the academic from the University of Los Andes, Cecilia Cifuentes, stated that “not only is it totally unfeasible from a fiscal point of view, but it would be a terrible allocation of public spending, totally regressive ”.
For his part, the academic from the University of Chile, Alejandro Alarcón, was more open to the proposal of the parliamentarian. “I do not rule out AlessandriBut the important thing is to calibrate how much the Treasury can finance those requirements and studying how the resources were spent in the withdrawal of the first 10% ”.
The idea of legislating a new withdrawal of 10% is approved: with RN and Evópoli votes, the first vote obtained broad support
Santiago Stock Exchange follows the decline in global markets while analyzing the second withdrawal of 10% from the AFPs
From La Moneda, despite the fact that they are against a second withdrawal of 10%, they have already closed the door to the Alessandri proposal.
“The State today is not in conditions, we are talking about a second withdrawal that is US $ 20 billion, we are talking about an enormous amount of resources, which is equivalent to the budget of the Ministry of Education for one year,” said the Minister of Labor, María José Zaldívar when asked about the proposal of the parliamentarian.
Faced with this scenario, his counterpart in the Treasury, Ignacio Briones, commented that “each of these withdrawals is US $ 18 billion, US $ 20 billion. That is one third of the national budget. It is more than the entire Education budget. Let’s put the numbers in perspective. “
