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November 30, 2020


CHILE: Government fights rear-guard action on pensions

BY Nicholas Watson

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( 3 mins)

The political tussle over a second withdrawal from the pension system continues. A second withdrawal is likely to go ahead – with lower house approval possible in the early part of this week. However, recent government manuevers should go some way to preventing future withdrawals from the pension system, assuming a key court decision goes the government’s way. The parallel battle to see off an opposition-tabled bid to bring forward presidential elections to April 2021 is far more straightforward for the government and will not advance. However, both issues highlight once again how some within the opposition are spoiling for a fight with President Sebastian Pinera, whose political defenses remain weak.

Pension wrangles

The government headed off the opposition’s second pension withdrawal initiative in the Senate last week by presenting its own bill along similar lines; the main difference is that the government’s bill would see higher earners pay tax on any withdrawals they make. The other factor favoring the government’s bill is that the opposition initiative could eventually be struck down by the Constitutional Court (TC), a fate that will not apply to the government’s bill.

The government bill now goes to the lower house. Approval is not guaranteed because some within the governing Chile Vamos (CV) coalition oppose any form of pension withdrawal, while others in the opposition – at least six of whose votes will be necessary – are reluctant to hand Pinera a political victory. However, there is now an expectation among the public that a withdrawal will be possible before Christmas, which should motivate ratings-conscious deputies to move quickly. Whether the cost of these opposition votes entails a concession from the government on the broader question of pension reform remains to be seen; currently, the broader reform remains stalled.

Pyrrhic victory?

Regardless of the complicated to-ing and fro-ing in Congress, a second withdrawal from the private pension system is seemingly unstoppable. What the government has done is ensure that the opposition does not get all the political credit for the initiative; impose some conditionalities; and try to check congressional overreach and thus prevent an even more damaging third withdrawal proposition from materializing next year.

That the government actually opposes any form of pension withdrawal but has ended up sponsoring an initiative to that very end is a sign of how politically boxed in Pinera has become. However, if the TC rules with the government against the original opposition withdrawal bill, Pinera will have won an important, if costly, victory; a TC ruling against the government, on the other hand, would open up the possibility of a highly detrimental third withdrawal initiative in 2021.

Early elections

A separate bid to bring forward presidential elections from November 2021 to April (to coincide with regional, municipal, and constituent assembly voting) shows how congressional populism operates on numerous fronts. The initiative has already been widely rejected and will not advance. However, the proposal has won the support of Alejandro Guillier, the losing presidential candidate in 2017, as well as the three-time presidential candidate Marco Enriquez-Ominami, who is close to Argentina’s President Alberto Fernandez. In the context of continuing protests, the signal this sends about political institutionality is troubling.

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