© RODRIGO GARRIDO
Chile’s finance minister Mario Marcel, speaks with Minister Secretary General of the Presidency Giorgio Jackson in the constitution commission of the Chamber of Deputies at the congress in Valparaiso, Chile April 12, 2022. REUTERS/Rodrigo Garrido
On the afternoon of Friday, April 8, the ministers Mario Marcel and Giorgio Jackson met on the 12th floor of the Ministry of Finance with the conviction that the task of avoiding the fifth withdrawal from the pension funds in Congress was almost lost, despite to the intense deployment of the government in the official ranks and the opposition that week. The appointment, which lasted for several hours and also brought together the Undersecretaries of the Treasury, Claudia Sanhueza, and of the Segpres, Macarena Lobos, landed on paper the scarce possibilities of facing the parliamentary motion and set the guidelines for a new and risky political strategy.
The extensive meeting was the prelude to the government’s presentation last Tuesday of an unexpected new pension dissaving project with borders, that proposes the use of funds in health, food, credit and housing debts, and that seeks to stop the parliamentary rebellion for a fifth withdrawal without restrictions launched a month ago.
That Friday’s meeting evidenced the deepest fears of the ruling party about the “de facto parliamentarism” already shown last year and the limited control of the Executive over the parliamentarians of the ruling coalition. A restless Segpres minister, Giorgio Jackson, raised an idea that day that had been “chewing” before: the need for an alternative proposal to the fifth withdrawal, since many parliamentarians had notified their impossibility of rejecting the project without having a second option that would decompress the pressures, recounts an official source who experienced the process up close.
The fear of a profound defeat a month after the start of the government, which would hit the waterline of the economic agenda and caused a shock in the market, forced Marcel to design an alternative proposal that would have the least possible impact on inflation. Marcel, who maintained a tenacious speech against withdrawals from pension funds until last week, has shown his agreement with the option taken, sources close to him report.
Boric’s green light
That same night, the general guidelines of the new proposal were on the table of President Boric, who endorsed the new strategy and gave the green light to the proposal. Immediately, and throughout the weekend, the Treasury and Segpres teams worked together on the design of the new project.
Under pressure from the parliamentary world, Marcel and Jackson decided to immediately submit the alternative bill to Congress, so as not to repeat the failed strategy of former President Sebastián Piñera, who had belatedly sent his own 10% withdrawal project last year without being able to stop the initiative that emerged in Congress.
In a move that astonished many, including the Undersecretary of the Treasury, Claudia Sanhueza, who acknowledged not having been informed, the government submitted its alternative project on Tuesday morning, hours before the Constitution Commission of the Lower House voted on the motion. parliamentary withdrawal of funds.
“The advance of the fifth retreat was catastrophe and Mario Marcel realized that. In this scenario, the minister was practical and acted with the means that he had at his disposal. Although both are bad signs due to the negative effect on pension savings, one of the projects generates a catastrophe and the other does not”, explains a source from the financial sector who was familiar with the process.
In La Moneda they raise nuances and put cold cloths on the decision of the Treasury. “There was a need to address the concerns that people were conveying to their parliamentarians, but with minimal effects on the macro economy. In this context, Marcel had a practical approach and was open to the concerns of parliamentarians. He reacted to the scenario that was being presented, ”says an official source, who reveals that the ministers of Women, Antonia Orellana, and Labor, Jeannette Jara, also participated in the process of the alternative project.
Economist Andrea Repetto, whose name was on Boric’s list of potential finance ministers at the campaign stage, acknowledged Marcel’s difficult position. “I put myself in the shoes of the Treasury and it was possibly the only thing they could do to stop the fifth withdrawal, but it is risky because now both of them can go out,” the economist told Duna this week.
The market concern
However, Repetto’s more indulgent analysis seems to collide with the vision of analysts and agents who move in the financial market. “A few weeks after being installed in the government and in different and less critical conditions than those that happened to former President Piñera, this government is validating the policy of permanent withdrawals with pension funds,” says a senior executive of a bank of the plaza, who remembers the anti-withdrawal speech installed by Marcel when he was president of the Central Bank and in the first weeks as finance minister.
“The withdrawal of 100% of the pension funds today is closer to the government proposal than it was a week ago,” adds a prominent financial agent with dismay.
For the executive director of the Center for Financial Studies of the ESE Business School, Universidad de los Andes, Cecilia Cifuentes, the pressures of the Communist Party (PC) ended up “bending the hand” of Mario Marcel. According to Cifuentes, after presenting an alternative withdrawal project, the finance minister was politically weakened.
“When it is justified that retirement savings can be used for emergencies, to pay short-term debts for specific problems that will always exist, I feel that the message that is being given is that the pension savings system is definitely mortally wounded. ”, maintains the economist, who adds that because the economic situation will continue to be complex, it is expected that new withdrawals will occur in the future.
“What was done here is to deliver the pension savings system and the only thing Mario Marcel is trying to do is make the impact more gradual,” added Cifuentes.
Cristián Valdivieso, director of Criteria Research, says that what happened with the fifth withdrawal process is a very strong “blow” for the government and reveals the deepening existence of “two souls” in the ruling coalition, where the minister of Treasury is the main flank.
“They are hitting President Boric and, especially, Mario Marcel to the waterline. But the underlying message is ‘we are not going to accept someone who comes to tell us what to do and who has so much technocratic force within the government that it prevents us from carrying out a project and starting to bleed the pension funds anyway,’” believes Cristián Valdivieso, who maintains that within the ruling coalition there are sectors that minimize the risks and effects of high inflation.
“Marcel was already weakened from the moment he had to open up to something that, basically, is a withdrawal with “fine print” no more, and that is going to cause an inflationary effect in a significant way”, adds the director of Criteria.
political fragmentation
However, the academic from the Faculty of Economics and Business (FEN) of the University of Chile, Guillermo Larraín, believes that it is not correct to personalize the problem of the fifth retirement in the figure of the Minister of Finance. “What happened to Mario Marcel is an issue that could have happened to anyone,” says the former Superintendent of Pensions.
“The underlying problem is that there is a de facto parliamentarization of the political system in circumstances where we have a presidential system (…) The government’s concern now is not its finance minister, who has to continue doing his trick. He has to worry about how he solves now and also in the future this serious problem of the fragmentation of the political system in the Chamber of Deputies with a weak President who is a minority in that same Chamber, ”says Larraín.
After the rejection of the parliamentary motion for the withdrawal of 10% in the Constitution Commission last Tuesday, this Monday both initiatives will be voted on in the chamber of the Chamber of Deputies, in a scenario also marked by the opposition’s proposal to declare pension funds inexpropriable. While the first project needs 93 votes to be approved, the government project requires only a simple majority.