The economic effects of the pandemic have been devastating. During 2020, Chile's GDP fell 5.8%, the largest decline since the debt crisis. Since March, and after having endured the first shock of the social outbreak, the labor market was deeply affected. At the height of the pandemic, 1.8 million jobs were lost and, at the time of writing, 925,000 compatriots willing to work could not find a job.

In this context, and in addition to the measures implemented by the government (which has mobilized resources of more than US$30 billion, of which more than US$8 billion corresponds to executed fiscal spending), two projects have been discussed and approved that allow members of the pension system to make withdrawals from their funds. These measures have been called "10% withdrawals", but the truth is that, in reality, they allow a majority portion of members to withdraw much more than 10%. In fact, up to now, almost 3 million people have withdrawn 100% of their savings, causing more than 4 million people in Chile to have a zero balance in their pension funds. This, with this system or another, will have a significant impact on the pensions that we will be able to pay in a few decades to our senior citizens. I insist, with this system or another.

Thus, already a year after the adverse effects of covid 19 began in our country, a bill appears that would allow a third withdrawal. One of the reasons put forward is to continue allowing the most vulnerable and the middle class to cover their expenses in this period in which mobility is once again tremendously restricted. I believe that no reader could object to such a motivation, especially since many could be in a similar situation. However, regardless of the intention, is the tool the right one?

The answer one gets from looking at the data is mostly negative. It is true that there may be special cases in which the objective is met (the lack of disaggregation of public data prevents us from performing such analysis), but for the vast majority of potential beneficiaries the amounts to be withdrawn would be lower or there would simply be nothing to withdraw. In terms of age, among those without savings, those under 35 years of age predominate, due to the short time they have been saving and also because of lower salaries. But there are also older people, affected by gaps (particularly women), low salaries and little formality in their jobs. Do these characteristics coincide with our compatriots with lower incomes? Unfortunately, the answer is yes. Therefore, withdrawals will be directed mainly to people with more savings, with more contribution density and with better salaries.

In the evaluation of public policies it is important to separate the motivations from the tools used to achieve them. There is nothing worse than falling in love with the instruments (or using them with other motivations, such as ending the PFA system), because that can lead us to fail to solve the original problem. Let us hope that our congressmen understand this.

Nathan Pincheira 

Chief Economist of Fynsa