April 28, 2021

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CHILE: Another populist lurch as government beaten on third pension withdrawal

BY Nicholas Watson

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The Constitutional Court (TC) yesterday, 27 April, voted not to admit the government’s legal challenge against an opposition-led initiative to allow people to withdraw up to 10% of their savings from the private pension (AFP) system – the third such action since the start of the pandemic. The initiative passed a final congressional vote on 23 April with the support of members of the governing Chile Vamos (CV) coalition. However, President Sebastian Pinera was hoping that the TC would block it on grounds that the executive has the prerogative on spending bills. At the same time, to keep the public onside, Pinera unveiled his own counter proposal that would still allow pension savings to be accessed (with conditions). Following yesterday’s TC ruling, Pinera has withdrawn his counter proposal and will sign the opposition project into law.

This is an acutely embarrassing and highly damaging defeat for Pinera, who looks politically adrift once again; note that his approval rating stood at 9% before this latest setback. Not only did he miscalculate TC dynamics and antagonize his own coalition, but Pinera will sign into law a bill he does not support, having legitimized the continuing erosion of the pension system by presenting his own (failed) counter proposal. The president’s closest ministers grouped together in the Political Committee are now under intense pressure, though Pinera may try to avoid any cabinet changes until after the rescheduled 15-16 May mayoral, municipal council, gubernatorial, and constituent assembly elections.

The May mega-elections go a long way to explaining why so many CV legislators voted for the opposition pension withdrawal bill. A key question is how the chaotic government performance of the last few days affects voting for the constituent assembly, and whether it ends up expediting the emergence of a two-thirds bloc championing radical change and/or populism. Up until now, it seemed a reasonable assumption that the CV would reach the crucial one-third veto number in the constituent assembly. Recent events weaken this assumption. The constitutional dynamic converts what might have been a momentary crisis of executive authority and the early onset of lame duck syndrome into an issue with much deeper consequences that potentially has implications for Chile’s institutional design and workings for years to come.

In the more immediate term, the populist creep in Congress certainly continues. Opposition parties – for whom this is clearly a crest moment given their own seething resentments and fragmentation – are now likely to push ahead with a project for a universal emergency income. The populist lower house deputy, Pamela Jiles, has already said she intends to submit a fourth pension withdrawal proposal. No matter that some 25% of pension system participants have already exhausted their funds and that withdrawals are highly regressive, opposing Jiles – currently Chile’s most popular politician – will be difficult given electoral considerations and the constitutional debate. Whether noises about another impeachment bid against Pinera materialize into a formal accusation is less clear; the need for a two-thirds majority in the Senate means impeachment is unlikely to prosper, and opposition moderates will be alert to the risk that it re-opens divisions across the Left.

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