October 23, 2019 / 10:24 PM / 19 days ago

Explainer: Chile's inequality challenge: What went wrong and can it be fixed?

SANTIAGO (Reuters) - Chile, known as one of Latin America’s wealthiest, most stable and peaceful countries, is in the grip of a political and economic upheaval with thousands of people protesting since Oct. 6 after the government increased public transportation fares.

People walk towards a pharmacy during clashes in Valparaiso, Chile October 23, 2019. REUTERS/Rodrigo Garrido

Some turned violent, with riots, arson attacks, looting and violent clashes with police. Thousands of Chileans defied a state of emergency and military curfews.

WHO IS BEHIND THE PROTESTS?

Chile’s weak and fractured opposition parties have allied themselves to, and expressed support for, the protests but have not led them. The same can be said for student unions.

Several different groups have emerged but none yet with clear representatives identifying a specific list of demands.

The government has described the vandalism as funded and coordinated. Interior Minister Andres Chadwick said vandals first attacked the metro and bus system before turning to looting and burning grocery stores to target the “country’s food supply chain.”

“That obviously reflects an intention ... to cause harm to citizens in their daily lives,” Chadwick said.

Guillermo Holzmann, a political analyst from the University of Valparaiso, said the protesters could be grouped into three: an ultra-left group which has a degree of funding and organization and is opposed to Chile’s free-market model; organized crime groups who took advantage of the unrest to loot and break into property, and ordinary Chileans who joined the protests to express their frustration at the high cost of living.

HOW DIFFICULT IS LIFE FOR ORDINARY CHILEANS?

Chile is Latin America’s golden boy for its clean governance, transparency and investor-friendly environment. Its economy has grown significantly thanks to a solid macroeconomic framework and on the back of a copper boom, allowing it to reduce the number of people living at the poverty level of $5.5 per day to 6.4% in 2017 from 30% in 2000, according to the World Bank.

However, Chile remains the most unequal country in the largely-developed Organisation for Economic Co-operation and Development (OECD), with an income gap 65% wider than the OECD average.

Half of Chilean workers earn $550 a month or less, according to the National Statistics Institute. A 2018 government study showed that the income of the richest was 13.6 times greater than those of the poorest.

Protesters told Reuters they were struggling to stay afloat because of the high costs of part-privatized education and health systems, rents and utilities, and a privatize pension system has been widely rejected for its low and often delayed payouts.

The discontent has led to widespread enthusiasm for populist proposals from the far left such as a 40 hour working week. One such proposal is making its way through Congress despite warnings by business it would lead to job cuts.

BUT INEQUALITY EXISTS EVERYWHERE. WHY DID CHILE EXPLODE?

Protesters told Reuters the government’s initially dismissive handling of protests about transportation fare increases, images of President Sebastian Pinera eating pizza on the first night of riots, coupled with the decision to call out the army, represented the straw that broke the camel’s back.

Rodrigo Pérez, a professor of development economics at Santiago’s Universidad Mayor, said there were particular pressures on Chile’s poor and middle class.

“There are other countries that have similar levels of inequality but if you take into account what those governments are doing to reduce those inequalities, you understand why perhaps (their populations) are not demanding as much as in Chile,” he said.

“In Chile’s case, the state is doing nothing in terms of redistribution or to diminish differences in people’s incomes.

“What ends up happening is that people get fed up. Chile has a population that is increasingly educated, that is increasingly aware of the things that are happening, so I think it becomes more difficult to pull the wool over their eyes.”

Protester Camila Tapia, a 23-year-old from the poor Santiago suburb of La Pintana, told Reuters that she came from working class parents and was determined to fight for better opportunities than they had.

“I am from the poorest class of Chileans but I was lucky and went to university,” she said. “When you get there, they open your eyes. They teach you that you have human rights. And they’re not respecting them.”

WHAT ARE PINERA’S PROPOSALS AND WILL THEY HELP CALM THE PROTESTS?

Pinera has proposed measures to address inequality around the provision of pensions and healthcare, balance out a rise in electricity bills, ensure a better flow of state funding to poorer communities and improve the treatment of victims of crime in the justice system.

He pledged to up the minimum pension by 20%, fast-track a law to introduce a state critical illness cover, cut prices of medicines for the poor, and guarantee a minimum wage of $480 a month.

The substance of his proposals was broadly welcomed by opposition politicians, many of whom had called for the specific changes he promised to make.

Emilia Schneider, president of the powerful University of Chile Student Federation, said the government was opting to fill the gap between what privatized public services paid out and what people needed to live on, instead of engaging in wholesale structural reform.

“Unfortunately these are cosmetic changes, which do not give substantive solutions and continue to put businesses and profits above our rights,” Schneider wrote on Twitter.

Nicholas Watson of Teneo Intelligence said getting buy-in from far-left political parties would be critical. The parties have roots in the student movement and had refused to attend discussions of the measures with Pinera.

“An important part of the challenge will be to ensure that the young are made to feel politically represented and that economic doors are genuinely open to them,” Watson said.

Others questioned how Pinera would fund the ambitious agenda, and push legislative changes through parliament, where his ruling, center-right coalition does not have a majority.

“We need to see it to believe it,” said Rosa Maria Solis Mapones, 60, a fruit seller outside a Santiago metro station. “He’s promised a lot all at once but I think it was a bit of a homemade remedy to pacify people.

“But if he doesn’t manage to change things, there will be an even bigger scrap than there is right now.”

Reporting by Aislinn Laing, Dave Sherwood and Fabian Cambero; editing by Grant McCool

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