After the Constitutional Court threw out his bid to block the proposals, Chilean President Sebastian Pinera will sign a bill to allow billions of dollars in early pension withdrawals.
According to a statement, the court voted 7 to 3 against his request even before discussing the basis of the appeal.It didn't immediately give its reasons.Shortly after, Pinera said in a televised speech that he will enact the law on Tuesday.
'We accept and respect the decision of the Constitutional Court even though we don't agree with it, Pinera said.We will do all we can to ensure it gets to people for the beginning of the next week.
The court verdict is a shocking blow for Pinera, who challenged the political bill even as it garnered support across the opposition divide.Chile is weathering its worst coronavirus wave s history and the Bill's backers say it's key to getting help for cash-strapped families.The court move sent stocks and bonds lower amid the calls for Pinera to unify his advisors and replace his cabinet.
Read more: Chile hurts Towards Showdown Over Billions In Pension Cash.
The administration will introduce a bill to give cash transfers to employees who don't have any money left in their pension accounts within the next few days, said Pinera.The law will also allow most workers to gain their money as if it was freely withdrawn from the accounts, he said.
The proposals were part of a rival pension withdrawal bill that Pinera announced Sunday, but which he is now withdrawing from the Congress.
At stake is a portion of the $210 billion that is managed by the pension funds, known as AFPs, the pillar of Chile's capital markets.Itau estimates the expenses from the legislative at $14 billion and 19 billion, while JPMorgan estimates they could reach $ $20 billion.
Pinera notified the market that it was going to seize: is the new Bonds available in Chile?
Following the court announcement, Chile's benchmark stock index extended losses and became 2.4% at the close of trading, the biggest drop since Jan 29.The yield on the nominal BTP 2030 bonds of the government has increased to 3.78% by 11 basis points or 3.98%.
In recent days, Federal Bonds on the Chilean government slid on bets that pension funds, known locally as AFPs, will be forced to lave out fixed-income assets in order to make the payouts.
Pinera then took the proposal of the congress to the court approved by the panel last week, arguing that the presidency has prerogative over pension bills.The government also introduced pressure and ceded its own unilateral withdrawal bill later.
In the past year, the South American nation has spent billions of dollars on measures including cash transfers, job protection programs and low-interest loans.Critics say the stimulus is filled with fine print that ends up excluding many families and businesses in need.
Chileans have already yanked $37.5 billion from their retirement savings by two separate rounds of withdrawals approved last year.At the time, the central bank stepped in to smooth out the financial market volatility.
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