Citing expropriation risk, Chile lawmaker supports 100% pension withdrawal

The political spotlight in Chile has shifted back to pension fund withdrawals.

A right-wing lawmaker said he was in favor of authorizing private pension fund contributors to pull out 100% of their savings, citing the risk that the next administration – if left-wing – would nationalize funds and use them for political gain.

Pro-government UDI party lawmaker Jorge Alessandri said he would submit an associated bill if congress approved a fourth drawdown of 10% of savings held by the country's seven private pension fund managers (AFPs), according to local press reports.  

Among those who may seek to run in this year’s presidential election are lawmakers in favor of nationalizing funds. Primaries are due to be held on July 18 and Chileans are scheduled to choose a new president in November. Communist mayor Daniel Jadue, who favors transferring AFP savings to a state fund, is among those leading the polls.  

In parallel, humanist party deputy and architect of previous drawdowns, Pamela Jiles – who has also been polling strongly and opposes the current pension system – presented a bill authorizing a fourth drawdown of pensions funds as well as full withdrawal. 

A long-term campaigner against the AFPs, Luis Mesina said in a tweet that Alessandri's proposed measure was "populism" and "irresponsible."  

Right-of center lawmaker Jorge Durán also announced a proposal for a fourth drawdown of 10%, citing the need to support households struggling amid the pandemic.

On the funding front, such moves have crimped access to financing by infrastructure firms.

“Certain limitations have been observed in access to financing via the capital market. The placement of bonds has been difficult in view of the recent withdrawals of pension funds, since the main buyers of these debt instruments are the pension fund administrators and the insurance companies, which have had to liquidate current investments to address the withdrawals of funds [following the passage of early pension savings drawdown bills], so there is no certainty in the short term of having funds in this market,” Manola Quiroz, partner at Chilean law firm NLD, told BNamericas recently. 

So far, almost US$50bn has been paid by AFPs to savers under the three laws. Total assets under management stood at around US$196bn in May, according to pensions watchdog SP.