July 15, 2020 / 7:49 PM / a month ago

UPDATE 1-Upset for Pinera as Chilean lower house approves withdrawal from pensions

(Adds result of lower house vote, commentary)

By Fabian Cambero and Aislinn Laing

SANTIAGO, July 15 (Reuters) - Chilean lawmakers in the country’s lower house on Wednesday approved a bill to allow citizens to withdraw up to 10% from private pension funds, in a significant blow to the government of center-right President Sebastian Pinera.

Deputies gathered in the Chilean Congress in the coastal city of Valparaiso cheered and sang the national anthem after the result was announced. The vote was 95-36, with 22 abstentions. The bill was backed by 13 members of Pinera’s ruling coalition.

Pinera on Tuesday announced cash payments to middle-class citizens hard-hit by the coronavirus outbreak to try to kneecap support for the bill, which economists have warned could cause a short, sharp shock to the country’s bourse and diminish future pension payouts, already widely accepted to be too low to live on. Chilean senators will vote on the bill in the coming weeks.

Finance Minister Ignacio Briones walked out of the chamber as the voting took place. Interior Minister Gonzalo Blumel said afterwards he hoped the Senate would “correct this mistake.”

“This is not the right way to resolve the problems the middle class is facing, which should be resolved through good public policies,” he said.

After the vote, citizens honked horns and banged pots and pans around Santiago, the capital. Overnight, Santiago was rocked by a resumption of social protests that started in October last year over paltry pensions, patchy healthcare and the fierce police response to them. Messages on social media promoting the latest protests bore the slogan “I want my 10%!”

The plan, backed by 83% of Chileans in a July Cadem poll, passed an initial lower house vote last week.

In Peru, a similar plan for a 25% drawdown was approved in April.

Chile remains in the throes of the coronavirus outbreak, with Santiago and many other major cities under lockdown. There have been a total of nearly 320,000 cases of the virus and more than 7,000 deaths.

Izkia Siches, president of the College of Doctors, warned that “social peace” was imperative for the country to be able to keep fighting the pandemic. (Reporting by Fabian Cambero and Aislinn Laing Writing by Dave Sherwood and Aislinn Laing Editing by Jonathan Oatis and Leslie Adler)

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