Latin America

Potential new pension withdrawals threaten Chilean system

A fourth round of withdrawals could be the final nail in the coffin for the country's private pension account system

Pension protests in Puerto Montt, Chile, in November 2019. "No more AFP," say demonstrators. Photo: Alex Maldonado Mancilla/Shutterstock
Pension protests in Puerto Montt, Chile, in November 2019. “No more AFP,” say demonstrators. Photo: Alex Maldonado Mancilla/Shutterstock

Chile’s pension system continued making headlines this week after a bill to authorize a fourth emergency withdrawal of 10 percent of funds made it through the committee stage, despite stern opposition from the President Sebastián Piñera administration. If approved, the bill would lead to a massive new outflow of funds from pension accounts totaling around USD 20 billion, adding selling pressure on Chile’s bond and stock market while also likely stoking inflation.

Crucially, a new round of withdrawals could be the final nail in the coffin for Chile’s private pension system, created during General Augusto Pinochet’s dictatorship...

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