Chile’s Finance Minister Signals Tougher Stance in Pension Talks

Maria Eloisa Capurro and Matthew Malinowski
·3 min read
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(Bloomberg) -- Chile’s government will sharpen its negotiation strategy to approve President Gabriel Boric’s flagship pension reform in the Senate, avoiding early concessions that left many allies disappointed, according to the nation’s finance minister.

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While the administration remains open to dialogue with lawmakers, it will not get bogged down by hot-button issues like employer pay-ins, Mario Marcel said in an interview on the sidelines of the International Monetary Fund Spring Meetings in Washington. Political talks will continue while specialists analyze the proposal, and officials will insist on more cooperation from the opposition.

Many government coalition lawmakers felt resentment after talks in the lower house, Marcel said. “They noticed the government’s push for flexibility wasn’t met with a response from the opposition. Now we have to be more constructive.”

More than half way into his term, Boric is struggling to approve marquee bills to raise revenues and boost pensions in one of of Latin America’s wealthiest nations. The economy, meanwhile, is turning a corner after an anemic 2023 marked by tight monetary policy, high political uncertainty and low confidence. Marcel is one of the ministers in charge of communicating the government’s positions and negotiating in the fragmented Congress.

In January, the lower house backed the base text of the pension reform but rejected several key articles, most notably one on a proposed new employer pay-in. The legislation is now starting to make its way through the Senate and is currently at its Labor Committee, where article-by-article discussions can begin in two or three weeks, Marcel said.

“The administration wants the committee’s work to continue regardless of whether at the same time there is more technical work involving legislative advisers and the government,” Marcel said. “We want to avoid having a waiting period like we had in the lower house.”

The legislation seeks to address low pensions that were one of the drivers behind a wave of social unrest starting in late 2019. The government wants to shift away from the current system of individual savings accounts managed by private funds toward a more mixed set-up with a solidarity component.

Government Estimates

A University of Cambridge-trained economist, Marcel is presiding over a recovery in activity that contrasts with expectations of a slowdown in other Latin American nations like Brazil and Mexico.

Local activity surpassed analyst forecasts in the first months of the year, prompting investor growth estimates to rise closer to the government’s 2.5% projection. By comparison, the World Bank expects Latin America’s gross domestic product as a whole to expand just 1.6% in 2024.

Growth prospects are getting support from the central bank’s cycle of interest rate cuts, which has shaved 475 basis points from borrowing costs since July. Still, policymakers have signaled more cautious reductions ahead, citing global risks including geopolitical tensions and the US monetary policy.

In coming weeks, Chile’s government will publish its latest Public Finances Report, with estimates including growth and inflation. Marcel said there will be marginal changes in the administration’s forecasts.

“The main message that this report will have from the fiscal point of view is that it will affirm this year’s fiscal goals,” he said.

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