|
|
|
|
Search: 
Latin American Herald Tribune
Venezuela Overview
Venezuelan Embassies & Consulates Around The World
Sites/Blogs about Venezuela
Venezuelan Newspapers
Facts about Venezuela
Venezuela Tourism
Embassies in Caracas

Colombia Overview
Colombian Embassies & Consulates Around the World
Government Links
Embassies in Bogota
Media
Sites/Blogs about Colombia
Educational Institutions

Stocks

Commodities
Crude Oil
US Gasoline Prices
Natural Gas
Gold
Silver
Copper

Euro
UK Pound
Australia Dollar
Canada Dollar
Brazil Real
Mexico Peso
India Rupee

Antigua & Barbuda
Aruba
Barbados
Cayman Islands
Cuba
Curacao
Dominica

Grenada
Haiti
Jamaica
Saint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines

Belize
Costa Rica
El Salvador
Honduras
Nicaragua
Panama

Bahamas
Bermuda
Mexico

Argentina
Brazil
Chile
Guyana
Paraguay
Peru
Uruguay

What's New at LAHT?
Follow Us On Facebook
Follow Us On Twitter
Most Viewed on the Web
Popular on Twitter
Receive Our Daily Headlines


  HOME | Chile

Chileans Could Pull $20 Billion from Pension Funds



SANTIAGO – A law allowing Chileans to withdraw up to 10 percent of the money accumulated in their mandated individual retirement accounts took effect on Thursday with expectations that amid the economic fallout from the COVID-19 pandemic, as much as $20 billion could be pulled out of the funds.

Under the pension system instituted during the 1973-1990 Pinochet dictatorship, workers see 10 percent of their gross monthly earnings withheld and deposited into accounts managed by a group of seven private companies licensed as pension fund administrators (PFAs).

Though withdrawals can be made online, account-holders have been seen standing in line outside PFA offices.

The authorization for tax-free withdrawals of up to 10 percent will remain in place for a year, even if the economic hardship linked to the pandemic begins to ease before then.

If each of the nearly 11 million account-holders withdraws the maximum amount, the flow of money out of the PFAs will range anywhere from $15 billion to $20 billion, analysts say.

But the PFAs loss will be Chile’s gain, economist Francisco Castañeda told EFE, as that money will boost the struggling economy via consumption of goods and services.

The Finance Ministry said that 10 percent of the total held in individual retirement accounts amounts to $18.46 billion with a corresponding fiscal impact of nearly $6 billion, or 2.5 percent of Chilean gross domestic product.

Looking ahead, the ministry said that the measure will cost the government $355 million because of the requirement to ensure that low-earners receive an adequate amount when they retire.

Economists with the Chilean unit of Canada-based Scotiabank estimate that workers will take roughly $16.8 billion out of the PFAs.

Regarding the impact of the cash injection on GDP, the research department at Scotiabank Chile sketched out three different scenarios.

The most conservative forecast calls for $5 billion in additional consumer spending that would raise GDP by between 1.5 percent and 1.8 percent.

In what the Scotiabank team described as the likeliest case, consumers will pump an extra $10 billion into the economy to lift GDP by as much as 3.5 percent.

Given that Chile’s GDP is on track to plunge 7 percent in 2020, even a 3.5 percent bump would still result in a net decline of 4 percent.

Scotiabank Chile’s most optimistic estimate envisions $15 billion more in consumer spending and a GDP gain of 4.5 percent to 5.3 percent.

The least an account-holder can withdraw is roughly $1,300, while the maximum is $5,500. Around 42 percent of workers have the equivalent of between $1,300 and $13,000 in their accounts and another 26 percent have less than $1,300.

Fewer than one in 10 account-holders are in a position to take out the maximum of $5,550.

 

Enter your email address to subscribe to free headlines (and great cartoons so every email has a happy ending!) from the Latin American Herald Tribune:

 

Copyright Latin American Herald Tribune - 2005-2020 © All rights reserved