Chile lawmakers push forward proposal for partial retirement of pension funds amid pandemic

SANTIAGO (Reuters) - Opposition lawmakers in Chile late on Wednesday pushed forward a constitutional reform to allow Chileans to withdraw as much as 10% from their pension funds amid the coronavirus crisis, though the proposal still faces several hurdles before it becomes law.

FILE PHOTO: Unemployed people queue to apply for unemployment insurance outside of the office of an unemployment fund administrator, amid the spread of the coronavirus disease (COVID-19) in Santiago, Chile June 8, 2020. REUTERS/Ivan Alvarado/File Photo

The first-line vote by Chile’s lower Chamber of Deputies was nonetheless seen as a major setback for center-right President Sebastian Pinera, who had urged Chileans to resist the temptation to tap in to their pension funds.

Several members of Pinera’s ruling coalition broke ranks and voted with the opposition in the 95-25 vote. The reform will require further votes in both the Chamber of Deputies and the Senate before final passage.

Left-leaning opposition lawmakers have touted the plan as a way for families to stay afloat in crisis-wracked Chile, where unemployment has jumped to double digits and output has plummeted in the past month.

“Right now there are people going hungry,” said Communist Party deputy Karol Cariola following the vote. “Those who are aware of that cannot be indifferent to the need to find solutions.”

Chile remains in the throes of the coronavirus pandemic, with upwards of 300,000 confirmed cases, surpassing Italy, and more than 6,500 deaths from the disease.

Neighboring Peru, also hard-hit by the virus, approved a similar law in April that allows citizens to withdraw up to 25% of their holdings in private pension funds during the crisis.

Chile Finance Minister Ignacio Briones said tapping pension funds now would only cause suffering later, but acknowledged the government could do more to help Chileans bridge the gap during the crisis.

“We have to think about tomorrow’s pensions, but at the same time we must offer an alternative proposal that is better,” Briones said.

Chile’s pension system, introduced decades ago under Augusto Pinochet’s 1973-1990 dictatorship, has long been deeply criticized for scarce payouts that leave many retirees short-changed.

Reporting by Fabian Cambero in Santiago; Writing by Dave Sherwood; Editing by Matthew Lewis