Former Finance Minister Rodrigo Valdés joined criticism of the Government’s proposal to join the pension reform project, which President Sebastián Piñera announced last week.
In a letter published in the newspaper El Mercurio, Valdés called the source of funding for the extension of the Solidarity Pillar from 60% to 80% of the most vulnerable population “reckless”.
In its view, expanding the Solidarity Pillar is “a desirable and increasingly necessary step, given the planned damage caused by 10% withdrawals”. However, this proposal by Piñera, “without robust funding, is reckless”.
He later added that the slacks expected by the Treasury “are the result of a ugly and to some extent fanciful projection exercise. It assumes that tax revenues will grow 7.2% annually in 2023-2025 and expenditures only 0.4% per year in the same period.”
This “contradicts the healthy tradition of the past 30 years of avoiding the absurdity of proposing to finance permanent expenditures with income for once (such as the 5G tender) or with arbitrary high-growth projections and low expenditures.”
That is why, with this context, Valdés tested that there is “lack of coherence” in the Treasury, as the fiscal situation is now even worse than it was in 2018, due to the Covid-19 pandemic, so “there is no point in going through those promises (deficit reduction). It would have been foolish to try to meet them. But what seems incomprehensible is committing to increased permanent spending under a deteriorating situation.”
Valdés finally indicates that in the last reform of the Solidarity Pillar with respect to the Solidarity Forecast Contribution (APS) in scheduled retirement, retirees first exhaust their savings and then the tax supports them, meaning “that some of the spending for the extension of the Pillar will be paid later. Benefits for today, tax spending tomorrow. An astonishing similarity to 10% withdrawals.” In response, Valdés said that it hoped that “the Autonomous Fiscal Council will make the government see that its proposal is reckless.”
