SANTIAGO, Nov 1 (Reuters) - As over a million people streamed through Santiago’s streets in a series of protest marches last week, one elderly couple stood out from the largely youthful crowd.
Amid the debris, tear gas and pot-banging youths, Norma Carrasco, 68, and husband Hernan Figueroa, 78, were protesting a grievance at the heart of swelling public anger in the South American nation: a pension system that has left many retired workers with scarce funds to get by.
Carrasco’s plight is key to understanding the potent violence that has seen buildings and buses burned, shut down the Santiago metro system, and forced President Sebastian Pinera to axe a third of his cabinet and cancel two major global summits.
On the city streets that same anger runs deep - even among the young, far from the age of pension payouts. Wages, living costs, healthcare and pensions dominate: the young have seen their grandparents struggle and do not want the same fate.
“For Chrissake, it’s enough. People are tired of all this, saturated. We need good salaries, pensions for our old folk,” said Octavio Solis, 43, a security guard, as he queued for unemployment benefit in Santiago. “It’s painful.”
The pension system, introduced decades ago under Augusto Pinochet’s 1973-1990 dictatorship, has been heralded as a model of privatization, imitated by other countries. But Chile’s retirees - once promised over 70% of their final salaries - often end up unable to meet the stringent requirements for paying into the scheme.
During recent marches, elderly protesters were feted by young members of the crowd, who carried banners highlighting the plight of pensioners. In one viral video, a young man wearing a hood and gas mask took the hands of an elderly woman to perform an impromptu dance.
In Carrasco’s case, she worked from childhood as a seamstress but now lives on just 100,000 Chilean pesos ($138) a month. Her husband of 50 years was also a textile worker and gets a slightly higher 140,000 pesos.
It is thanks only to their children that they survive, she said. “My two sons help us to pay our bills and we have to rely on what the state offers for medical care.”
MERCEDES-BENZ OR HUMPTY DUMPTY?
Chile’s pension system is a defined contribution scheme where workers pay at least 10% of their wages each month to for-profit funds, called AFPs. It was touted by its creator - Pinera’s brother - as the “Mercedes Benz” of pensions.
The local pension funds - which have billions of dollars in investment in Chile and overseas - were meant to be more sustainable than an earlier pay-as-you-go system.
In reality, many people in the Andean country are unable to pay in enough regular contributions to end up with sufficient payouts, while the third of Chileans who work in informal jobs, along with the unemployed and women leaving work to raise children, are often left short-changed.
Maria Luz Navarrete said she had worked as a civil servant for over three decades but at the age of 70 has to do a side job as a janitor to make ends’ meet.
“I keep working because otherwise the money doesn’t get me by,” she said.
Jorge Heine, an academic who served as a cabinet minister in a center-left administration in the late 1990s, called the pension system “a real disaster.”
“A lot of people switched from the old to the new system in the 1980s on the promise of being able to retire on a full pension. Instead, it condemned millions of people to misery,” he said.
The scheme’s defenders say that the issue is not the pensions system itself, but low wages, a weak job market, and an ageing population.
“Low pensions are the result of low salary levels, and the retirement period is too long in relation to the working period,” the chairman of AFP Habitat, Cristian Rodriguez, said at an event in August. “The discussion needs to be focused on the real problems, not the most popular ones.”
Marta Lagos, director of the polling firm Latinobarometro, said that the AFP system was less “Mercedes Benz” and more of a “Humpty Dumpty” model.
“It’s irreparably broken and can’t be fixed,” she said. “The state must subsidize a transitional period until a better solution can be found.”
The money that poured into the AFPs’ coffers - at present $216 billion, equivalent to 80% of gross domestic product - helped fuel an economic boom that saw a small elite flourish and gleaming glass and mirror towers come to dominate the skyline of Santiago.
Francisco Iturriaga Steck, president of Chile’s Union of Pensioners, criticized a lack of action from previous administrations, not only Pinera’s. Governments have struggled to push through reforms, including to the pension system, in an often-divided Congress.
“Now, we’re seeing hundreds of thousands of young people mobilizing out of fear of reaching old age with an insufficient pension, out of fear of living the same way they’ve seen their grandparents live,” said Steck.
Pinera himself has said he will increase the ambition of an existing pension reform bill making its way through Congress.
He has promised to increase the state’s contribution to basic pensions by 20% for the poorest, to subsidize some payments, and to raise employer contributions.
“We have listened with humility to the powerful voice of the people and their legitimate demands for urgent solutions to problems which we all know have dragged on for many decades,” he said at La Moneda presidential palace in Santiago last week.
Early signs suggest, though, that once again a lack of a majority in Congress could hamstring Pinera’s plans. Opposition parties have indicated they would not support attempts to fast-track pension reform if it only had peripheral changes.
On the streets, protesters were also unconvinced.
“The government doesn’t have a grasp of the problem,” said Francisca Astudillo, 27, a supermarket worker who took part in pot-banging protests around Santiago last week.
“A family friend died of cancer waiting for his pension to come, he needed it for medicine but waited two years. Until they deal with this properly, it won’t go away.”
Reporting by Aislinn Laing; Additional reporting by Natalia Ramos and Dave Sherwood; Editing by Adam Jourdan and Rosalba O'Brien