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Knockout blow to the AFP system in Chile

From Santiago

Although almost no one says it openly, the destiny of the Pension Fund Administrators (AFP) in Chile seems to be closer to the end than to some cosmetic reform to adapt to the citizen demands that put them at the center of the Social Outbreak that began in October 2019 and that has resulted in three withdrawals – each capped at 10 percent – of money saved for old age. This week, with the approval in the Deputies last Tuesday of a fourth withdrawal, which has now passed to the Senate, a debate that crosses the Chilean presidential campaign has been reopened.

This pension system, established in 1981 during the Pinochet dictatorship, obliges workers to deposit 10 percent of their salaries to administrators, who choose between five funds (“A” being the riskiest and “ E ”the most conservative). Not only do they charge a commission, but they also invest within Chile and abroad, obtaining profits that are not passed on to the worker. On the contrary, it is the latter who bear the losses. It is not by chance that police and armed forces have been saved from this scheme to this day.

Piñera’s candidate acknowledges having withdrawn 10 percent

The ruling candidate Sebastián Sichel, who has the backing of Sebastián Piñera himself, who predicted that he will be “a great president.” In July, in tune with Piñera, Sichel declared himself against the fourth early withdrawal and warned: “I’m going to be looking at who supports when later they ask for support back in the campaigns.”

This threatening tone has crossly annoyed the ruling alliance of the Independent Democratic Union, National Renovation and Evópoli and has been moderating, especially because Sichel has not managed to outperform Gabriel Boric, candidate of the conglomerate Approve Dignity – made up of Party C and the Broad Front, which supports the withdrawal.

But there is something else, the man of the right, who presents himself as someone far from traditional politics and a supposedly humble past, has been openly accused of having withdrawn his 10 percent, which has cost him the support of several deputies from his sector.

Sichel, in his chameleon style, originally said this was a trap. “I am not going to fall into that moral debate, because I believe that this is incoherence of the system, while some come out to give explanations, I believe that the other way around, I believe that the explanations should be given by those who are approving the fourth withdrawal.” Until finally today he affirmed on twitter that he actually took that money out but invested it in a Voluntary Pension Savings (APV) account, belonging to the same AFP system. In addition, he especially called on Boric to respond if he has also withdrawn his funds.

The delusional thing is that he recognizes it when even his own spokeswoman Katherine Martorell, former Undersecretary of Crime Prevention, or the Ministers Rodrigo Cerda of Finance and Carolina Schmidt of the Environment, have said, in an attack of sincerity, that they have taken percentages of the corresponding money to their pensions.

“The truth is that if the fourth withdrawal is approved, which I hope will not happen, I want to seriously discuss why we do not withdraw 100 percent of our savings to keep them away from bureaucrats and politics and manage it in separate accounts for our future pension ”, Sichel upped the ante

The AFPs, nervous

This chaos has had a profound impact on the AFPs, which have had to adapt since the first withdrawal in July 2020. Although their spokesmen began by saying that it was something that would harm the economy, leading Chile into an open abyss with the Social Outbreak and the pandemic Currently, the AFPs have invested in a better presence on social networks, sending emails about the benefits of not withdrawing funds and adopting a style of supposed proximity to the needs of their affiliates.

But inside there is nervousness, many overtime hours and long costs before a transformation of proportions of the old pension system. Thus, for example, AFP Provida, the largest in the country, called emergency and face-to-face meetings a month in advance last August. Although the reason given was that workers could “see each other”, perhaps there is a more pragmatic factor and it would have to do with which it leads the flight of affiliates in pandemic and that its owner, the Americans of MetLife, would be beginning to worry with so much retirement, which possibly also occurs with other administrators such as Habitat or Plan Vital belonging to Prudential Financial (USA) and Assicurazioni Generali (Italy).

The media businessman Juan Sutil, president of the Confederation of Production and Commerce, pointed out in his customary apocalyptic tone that approving this withdrawal —which will be processed next week in the upper house— “means breaking the rules of the game for investments, for entrepreneurship, for development and especially for the fulfillment of the obligations that Chile has with foreign investors ”.

In fact, the dollar has just exceeded 800 Chilean pesos, reaching its highest value since October 2020, one of the reasons being the uncertainty regarding the fourth withdrawal and the future of the AFPs. A situation that contrasts with the lack of refinement, spring and the end of the curfew that is rapidly normalizing life in the big cities of Chile, although with the mask and alcohol gel.

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