(Bloomberg) -- Chile’s lower house of congress rejected a revised bill for a fourth round of pension withdrawals, definitively killing a contentious proposal that’s provoked months of investor ire and financial market volatility.
Lawmakers voted 89 in favor and 29 against the legislation on Friday, falling four short of the three-fifths majority needed to pass. The bill, which aimed to help families struggling amid the pandemic, could have forced pension funds to unload as much as $20 billion in assets, according to the Finance Ministry.
The pension funds are Chile’s largest institutional investor and have already shed $47 billion through three previous withdrawals. Friday’s vote removes a threat for the local bond market that would have borne the brunt of fresh asset sales. It also eliminates a driver of inflation that’s at a twelve-year high.
Read more: How Chile’s Pension System Became a Covid Piggy Bank: QuickTake
Chile’s top economic authorities, including Finance Minister Rodrigo Cerda and central bank President Mario Marcel, have repeatedly warned that a new round of withdrawals would reduce future pension payouts, weaken capital markets and create financial system risks.
The drawdowns have become wildly popular among Chileans as they provided families a key lifeline amid the pandemic-driven downturn. However, deputies opposing the bill argued that the Covid-19 situation is different now, with most people fully vaccinated and no municipality under full quarantine.
Left-wing presidential candidate Gabriel Boric, who is currently a lower house deputy, voted in favor of the bill, even after some of his main economic advisers criticized the idea.
Boric’s opponent in the Dec. 19 runoff vote, Jose Antonio Kast, is also against the proposal.
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