RIO DE JANEIRO, BRAZIL – The low pensions are one of the main reasons for the protests that have been going on in the country for months.
Maria Angélica Moya Reyes says she simply cannot live on her pension and looks through her green glasses at the bank statement she is holding in front of her. She reads aloud the pension amount she received last month: the equivalent of around US$275 (R$1,100).
The trained nurse is thus one of the 80 percent of Chilean retirees whose pension is below the minimum wage of around US$459. Moya, who has worked all her life, finds this outrageous: “Abuse – that is what they call what this government does.”
The 65-year-old is not alone in this opinion. The low pensions are one of the main reasons for the dissatisfaction in the country, which has been expressed in continuous protests since mid-October.
Children step in
The Moya couple runs a small printing shop in the living room of their five-bedroom house in a district in the south of the capital Santiago. A computer and a printing press are installed there. A customer is having school class photos printed.
Maria and her husband, as the spirited senior clarifies, would only make it to the end of the month thanks to their business. As a self-employed man, her husband has never paid into a pension fund in his life.
The also 65-year-old has recently started receiving a minimum state pension, which was introduced in 2008 for people in a precarious financial situation. This amounts to US$143.
The joint pension of US$418 will not go far. Around a third of this is spent on gas, telephone, Internet and electricity bills. Luckily, the house is owned by the family, says Moya, so they do not have to pay rent. The cost of living in Chile is high.
One liter of whole milk costs US$1.02, a tube of toothpaste US$1.43. Maria Angélica and Luis Antonio, like many other Chileans of their age, are forced to continue working. To retire in the true sense of the word seems unthinkable.
What happens if one day they are unable to work for health reasons? Moya does not even allow the question. “We have to move on,” she says. Her son, a 32-year-old philosophy teacher visiting his parents, admits that in this case he and his brother would have to step in financially.
Later, he explains behind closed doors that they are already doing so today in some cases. But his mother is uncomfortable about this, she does not speak about it out of pride.
Maria Moya paid into a pension fund for 35 years. First, she worked as an assistant nurse, later as a nurse, then as a pharmaceutical sales representative. At the age of 53, she took early retirement, continued to work as a self-employed individual and saved money instead of paying into a private pension fund.
She knew that her pension would be lower, as a result, she says. But she is convinced that she would not get much more money today. Her friends, who regularly retired at the age of 60 and had paid into the pension fund for their entire lives, are just as badly off as she is.
David Bravo, professor of economics and pension system expert at the Catholic University of Santiago, backs up Moya’s statement with figures. “Pensions in Chile are low in absolute and relative terms,” he says. According to his calculations, they will continue to decrease in the future.
Chile’s pensioners today receive a pension that averages 40 percent of their monthly income from their last ten years of work, explains the former head of the presidential advisory committee on the pension system. According to Bravo, these low pensions are due to the inadequate design of the system in 1980 under military dictator Augusto Pinochet, who made a miscalculation.
Chile was the first country in the world to privatize its pension system. The government pledged that the pensions would amount to a solid 70 percent of the last salary. Since then, every insured person saves for retirement by paying ten percent of their income into one of six private pension funds (AFP) each month.
Those who enjoyed a sound economic situation were formally employed for a large part of their working life and were able to make regular payments into the pension fund, benefit from the system.
Chileans who only had little to contribute because their salary was low, or they were irregularly employed or unemployed, are paid only a small pension. As the statistics show, they make up the vast majority. “This is definitely not a social welfare system,” Bravo says with conviction.
Like a Mercedes-Benz?
It was José Piñera, the brother of the current president Sebastián Piñera, who designed and created the private pension system as Minister of Labor under Pinochet. He once compared it to a Mercedes-Benz because he thought it was so exceptionally good.
Maria Moya mocks this statement: “I can’t even afford a tricycle with my pension.” She laughs out loud. She says that this pension system should have been an advantage to all Chileans, but that is not the case, referring to the current demonstrations: The discontent in the streets speaks for itself.
Anger at the pension funds
Experts agree that the pension system needs urgent reform.
In their opinion, the contribution rate of ten percent is too low to provide pensioners with an adequate income. The retirement age is also too low at 65 for men and 60 for women, as life expectancy has risen by a decade since the early 1980s.
However, the anger on the streets is mainly directed against the six private pension funds. They charge an average 1.27 percent of each payer’s salary as a handling fee and invest the savings on the stock market. For years, they have been increasing their profits and paying out low pensions in the meantime.
According to economics professor Andrés Solimano of the CIGLOB think tank, this contradiction has led to the AFP losing its credibility among the people. Its capital amounts to more than US$214 billion, which corresponds to around 75 percent of the gross domestic product.
According to Solimano, its political and economic influence is thus considerable, particularly when it comes to reforming the pension system.
The slogan “No more AFP” is ever-present on the banners at the protests. The demand for a “dignified pension” is also prominent on many facades in Santiago. Maria Moya’s resentment is also focused on the AFP: They have enriched it with the Chileans’ money, but no one sees its profits in their accounts.
She believes that the private pension system, together with the private education system and the private health sector, are at the root of the country’s great social inequality.
“The system has had its day,” she says, rushes into her kitchen and comes back with a dented metal cooking pot. Like a savage, the red-haired little woman hits it with a spoon.
The “cacerolazo” – the beating of pots and pans – is a typical form of protest in many Latin American countries. She says with a broad grin that she is going to protest with it. Her pot looks accordingly battered. She says that she will go out on the streets many more times with it and that the protests must not stop.
A dignified life
President Piñera’s concessions apparently do not convince her. She does welcome the fact that a referendum on a new constitution is to be held in April 2020. But she does not believe that this will benefit the people.
“I have no faith in politicians.” She considers the government’s announcement to increase the minimum wage of around US$143 by 50 percent by 2022 to be a joke. It is not a solution. In her opinion, there is enough money in Chile to provide people with a decent life.
But she says she is unaware of where it is.