Chilean lawmakers urged to face COVID-19 united
Amid accusations that quarters of Chile’s fragmented opposition are playing obstructive rather than constructive roles during the pandemic, lawmakers urged greater political collaboration for the good of the country.
The calls come as Chile rolls out a multibillion-dollar COVID-19 response package. This will help protect the economy and incomes but erode debt metrics and require, according to Fitch, a fiscal plan including reforms to sustainably restore growth and stabilize debt.
A pension reform bill is among government draft legislation currently in congress. Pressure has also mounted for increased healthcare and education spending.
The country is forecast to enter recession this year and recover in 2021 – but with a bigger debt burden.
“Today, we’re in a crisis, and that requires a major, transversal political pact,” said opposition senator Felipe Harboe, a member of the center-left PPD party, citing the need to identity the major reforms needed and the associated "road map." He also said ideological flexibility was needed.
“The scenario today is highly complex, exceptional, and requires exceptional agreements.”
His view was echoed by lower house chairman and government coalition member Diego Paulsen, who told a webcast hosted by business grouping Icare: “United is the only way to exit this crisis. That’s the challenge we have in the political sphere.”
Harboe, meanwhile, warned that Chile would emerge from the crisis “poorer and more polarized” with the specter of fresh social unrest looming – and that political collaboration and give-and-take was vital to help propel the country forward.
The government of center-right President Sebastián Piñera does not enjoy a majority in either house of congress and has largely struggled to advance its legislative agenda.
A key role of the opposition is scrutinizing government policy and actions and suggesting alternatives or improvements – not automatically erecting obstacles, as that only harms citizens in the end, the webcast was told.
Minister of congressional affairs Felipe Ward, said: “The capacity to discuss, to seek dialogue, to reach consensus, is something that has served the country well.”
Lawmakers also explored populism, an issue that has gained prominence in recent days after the Community Party tried to begin a process of nationalizing the country’s seven private pension funds, or AFPs as they are known, to help boost state revenues. The initiative was killed in the lower house on constitutional grounds, although a fresh attempt has been launched via the constitutional reform route.
Harboe cited the importance of focusing on “doing the right thing” rather than what is “popular” and avoiding confusing public interest with interest of groups organized via social media.
The webcast was told that lawmakers submitting legislative initiatives that are unconstitutional creates false expectations among the public.
“In a democracy, respecting the rules of the game is fundamental,” said Paulsen.
FITCH
Against this backdrop, the rating agency said plans to improve the country’s fiscal profile were needed.
Fitch expects Chile’s 2020 fiscal deficit to widen to nearly 10% of GDP, compared with a previous forecast of 9.3%. Chile's debt-to-GDP ratio will rise to 36%, up more than 8pp from 2019, the agency said.
Fitch said that “deterioration in near-term economic and fiscal prospects increases the importance of formulating credible medium-term plans, including fiscal reforms on the revenue or expenditure side, to sustainably restore growth and stabilise debt.”
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