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JPMorgan on Pension Withdrawal Bills

CHILE
  • The government managed to prevent a fifth pension fund withdrawal in exchange for a legislative defeat. The government achieved its initial objective of preventing a new unrestricted 10% pension fund withdrawal (PFW). Yet, the bill sponsored by the government for a restricted withdrawal was also rejected.
  • In all, the outcome is not negative for the government, as it could be interpreted that the rejection of both bills strengthens the position of Finance Minister Marcel who firmly opposed pension savings withdrawals.
  • Moreover, following the rejection, the regulation of Congress mandates that bills associated to pension withdrawals could not be discussed again for a year, what limits diminishing in principle the risk for a new pension fund withdrawal in the near term.
  • On the other side, if the legislative door for additional pension fund withdrawals remains closed for a year, the stress on the government for additional fiscal resources only mounts to accommodate the impact of elevated inflation as well as the economic deceleration ahead.
  • So far, the government implemented a US$3.7bn program, and the government bill that was rejected yesterday entertained additional support to households for about US$3.0bn.
  • JPM foresee increased pressure on the administration for a similar amount in fiscal support ahead to compensate for the restricted bill rejection.
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