Chilean House of Representatives approves withdrawal of 10% from retirement funds

Marcelo Montecinos/The Santiago Times Staff

SANTIAGO – After a tense 10-hour debate as to whether Chileans could withdraw, as a personal, temporary loan, part of their retirement funds, it was approved, much to the chagrin of the reigning right-wing government.

The motion needed 93 votes to pass to the next stage and got by with a very narrow margin of 95. Unexpectedly, 14 right-wing representatives voted for the motion. The pressure on the representatives was so high that one of them fainted as a result. He recovered after two hours.

The measure still has to pass various stages before it becomes law, including who can take out the 10% personal loan, and how much they can withdraw.

As is, many Chileans can take out as much as $1,000,000 Pesos ($1,250 USD). This minimum amount would represent much more than the 10% voted upon for as many as three-quarters of Chileans, where the have/have-not divide is extremely high. 50% of those with retirement funds have less than $4,000,000 Pesos in their accounts. The minimum that people could withdraw was set at $1,00,000 Pesos while the maximum was set at $4,300,000 ($5,300).

This could represent a future retirement crisis if those withdrawing don’t pay back their loans by the time they retire. This comes at a time when most pension funds have taken a hit due to a social uprising and the worldwide Covid-19 effect.

Camara de diputados

The Santiago stock exchange fell 1.7% as a result of the possible positive vote today. It is expected to fall further tomorrow.

Chilean AFP websites collapsed after the decision.

The possible new law might be a life-saver for hard-hit Chileans in these troubling times.
It could also be a positive for the Chilean economy since many people withdrawing these funds might use them to spend it in a quavering marketplace, thereby supporting it. It also shows that Chile is joining a developed world, like Canada, and their not-so-developed neighbor Peru, which already allow their citizens to borrow from their pension funds.

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