Chileans drain $10 bln more from pension funds as pandemic drives withdrawals

By late Tuesday evening, more than 5.5 million Chileans - more than one-quarter of the population - had sought a third payout, averaging around $2,000 per person, according to Chile's Pension Superintendency. Ives Ghetto, a 61-year-old unemployed baker from Santiago told Reuters his funds had gone directly to feeding his family.

Chileans flocked for a third time to withdraw money from their retirement funds this week, draining nearly $10 billion from the country's privatized pension system in a move some billed as a lifeline amid a fierce second wave of the coronavirus pandemic.

Chile's Congress in late April approved a bill allowing citizens a third opportunity to withdraw 10% of savings held in privately held pension funds. Many Chileans have already twice tapped their funds since the pandemic struck in March last year, hobbling a system once hailed by free-market economists worldwide. By late Tuesday evening, more than 5.5 million Chileans - more than one-quarter of the population - had sought a third payout, averaging around $2,000 per person, according to Chile's Pension Superintendency.

Ives Ghetto, a 61-year-old unemployed baker from Santiago told Reuters his funds had gone directly to feeding his family. "Straight into the cooking pot," he said as he waited in line on a cool fall afternoon for an additional unemployment payment. "We have no choice."

The center-right government of Sebastian Pinera has opposed raids on Chile's privately held funds, the cornerstone of its capital markets, arguing they diminish already paltry payouts in the long-term. He has instead rolled out more than $12 billion worth of subsidies in stimulus. But critics say government aid has been mired in bureaucracy and is difficult to access.

The pension withdrawals "are like selling your refrigerator to buy food, that is, you are not improving your situation, you are actually making it worse," said Vicente Espinoza, a Chilean sociologist and researcher, who called the withdrawals "bad public policy" in the long-term. "But to the extent that government policies have obstacles or struggle to reach the people who really need it, it is the only alternative available."

More than 22 million people across Latin America fell into poverty in 2020, according Economic Commission for Latin America and the Caribbean, and the hard-hit region continues to see soaring cases and deaths from the coronavirus.

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