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November 6, 2020

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CHILE: Governing from weakness

BY Nicholas Watson

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( 3 mins)

President Sebastian Pinera’s administration increasingly resembles a damage limitation exercise. This week, Pinera lost an Interior Minister, Victor Perez, who had only been in the job for 98 days. In parallel, a bill that would allow people to make a second withdrawal from the private pension (AFP) system – a measure the government opposes but which it cannot hold off – is now ready for a plenary vote in the lower house.

Another minister out

Perez resigned on 3 November following a lower house vote to censure him over policing controversies and his handling of a truckers’ strike in August that was triggered by violence in the Araucania region. Despite his resignation, the Senate will still have the final say on whether Perez, who hails from the Independent Democratic Union (UDI), will face a ban on public office. Not only does Perez’s departure highlight how weakened the Pinera administration has become, but the ex-minister’s defense succeeded in riling the National Renovation (RN) party – a coalition partner – as he initially claimed that Defense, not Interior, was in charge of policing; the Defense portfolio is held by Mario Desbordes, the RN’s leading presidential aspirant.

Perez’s successor at Interior is Rodrigo Delgado, until now mayor of the Santiago district of Estacion Central. Delgado is also from the UDI but represents a very different profile to Perez. Delgado is younger, is seen as having a more consensual style, and – crucially – voted in favor of a new constitution, unlike most of the UDI, which could help connect the government and public. His local-level experience could also be useful in addressing two major challenges: public order problems and persistent violence in Araucania. However, there is no escaping the fact that he stands for a weak government, and that missteps will be punished by a restive – albeit internally divided – opposition.

Another pension withdrawal

Meanwhile, the second pension withdrawal initiative has this week progressed through the lower house constitutional commission and is now ready for a vote which will probably take place the week after next. In the knowledge that it could not block the withdrawal initiative, the administration has been trying to circumscribe the measure, for example by limiting access to those who have lost their jobs or seen their income fall by at least 30%. This proposal failed, though another measure to tax withdrawals for those earning over CLP 2.5mn monthly passed. A proposal to allow annuities to be tapped has also been shelved pending further examination of its legal implications.

Also positive was that the commission yesterday, 5 November, rejected a proposal to schedule a third withdrawal (up to 5%) in six months’ time. Whether opposition to a third withdrawal proves enduring will depend on the rate of economic recovery and whether the country is hit by a second Covid-19 wave. Advancing the broader pension reform – currently stalled in the Senate – would also help head off the threat of further withdrawal initiatives. At the moment, the political mood is fractious as some within the opposition want to oust the current lower house leadership and there is talk of a motion of censure against Finance Minister Ignacio Briones. With little over a year to go before the presidential elections, Pinera’s predicament is unlikely to improve.

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