Chile’s Senate on Wednesday approved a measure allowing citizens to withdraw up to 10 percent of their pension funds to help mitigate the effects of the coronavirus pandemic.
The bill, approved by a 29-13 vote with one abstention, will now return to the lower house Chamber of Deputies where it has already been given the green light for a final and decisive vote.
The change has been opposed by the government of President Sebastian Pinera but is supported by several senators from the country’s governing coalition.
It would be the first major reform of the privatized pensions system that was installed under late former dictator Augusto Pinochet.
The program obliges workers to pay 10 percent of their salaries into an individual account that is managed by administrators of private pension funds.
These AFPs, as they are known, are deeply unpopular in Chile and were one of the focal points when widespread anti-government protests erupted in October 2019.
Many people had seen their pensions fall to below the minimum wage of 301,000 pesos ($390) even though their pension plans were supposed to guarantee them 70 percent of their last salary.
When the Chamber of Deputies first approved the new measure last week, the sound of pots and pans being banged — a popular method of both protest and celebration in Latin America — could be heard throughout Santiago and other cities.
If the bill passes the final hurdle, 10.9 million people will be able to withdraw up to 4.3 million pesos ($5,400) from their pension funds.
A similar measure in Peru passed in May saw hundreds of thousands of people withdraw up to $3,700 from their pension funds.
Pinera has opposed the Chile law and tried to resist it by announcing a package of measures to support the middle classes including a $630 bonus and low-interest loans of $1,900.
But he failed to sway a number of rebel legislators from the ruling coalition whose political futures depend on the middle classes, many of whom feel abandoned by the government.