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Chile Congress rejects fourth pension withdrawal bill

12/03/2021 | 01:27pm EST

SANTIAGO, Dec 3 (Reuters) - Chile's Congress rejected a bill to allow Chileans to make a fourth withdrawal from their pension funds on Friday, spelling the end for now of a proposal that had been criticized by the central bank and opposed by the center-right government of President Sebastian Pinera.

The vote in the lower chamber saw 89 lawmakers vote in favor of the bill and 29 against, with eight abstentions. It needed 93 votes to pass and move up to the Senate.

Promoters of the bill argued that the withdrawals of up to 10% of an individual's pension fund helped counteract the impact of the COVID-19 pandemic, which they said was necessary because support measures implemented by the government alone were insufficient.

However, the central bank and many economists warned that a new withdrawal could lead to overheating of the economy, higher inflation and financial imbalances.

Since July 2020, Congress has granted three withdrawals, each allowing Chileans to cash in 10% of their pension fund.

Chile is set for a polarized presidential run-off https://www.reuters.com/world/americas/chileans-head-polls-with-two-radically-different-visions-ballot-2021-11-21 election on Dec. 19 between leftist front-runner Gabriel Boric and far-right rival Jose Antonio Kast.

Boric has been in favor of the pension withdrawals, though his financial adviser Stephany Griffith-Jones this week called the fourth withdrawal a "big mistake."

Chile's private pension scheme has come under harsh criticism in the South American country, with opponents saying the pensions it generates are too low. It was one of the main targets of social protests against inequality that broke out in October 2019.

The bill had in a previous form been approved by the lower chamber, before being queried in the Senate and going back to a mixed commission for amendments. (Reporting by Fabian Cambero; Writing by Adam Jourdan; Editing by Rosalba O'Brien)

ę Reuters 2021
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