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Coronavirus threatens middle-class families in Chile as they fear slide to poverty

“To get my own house was a dream,” said Cristabel López. “I felt like I had made it. Now there is just worry and uncertainty.”
Cristabel L?pez, 43, and her son, Felipe, 26, in front of their home in a Santiago suburb.
Cristabel López, 43, and her son, Felipe, 26, in front of their home in a Santiago suburb.Liam Miller / Pudumedia.com

SANTIAGO, Chile—When Cristabel López, 43, quit her studies after becoming pregnant at 17, the distant idea of owning a home where she could raise her baby seemed unrealistic.

Overcoming the odds, she realized her dream on the back of Chile’s economic boom, becoming a health insurance consultant and, at age 33, paid the deposit on a home in an up-and-coming middle-class Santiago suburb. Houses on the palm-lined street featured high-barred fences to ward off burglaries, but Cristabel was a homeowner — for most Chileans a signal of reaching the middle class.

COVID’s arrival to the country in March now threatens to undo everything for Cristabel, who shares the house with firstborn Felipe, now 26, and his sister Rafaela, 13. She and Felipe have lost all their work income due the pandemic.

Like millions of middle-class families in Latin America, they now hang over a financial precipice and face sliding back into the conditions of poverty Cristabel’s parents endured.

“To get my own house was a dream,” said Cristabel. “I felt like I had made it. Now there is just worry and uncertainty.”

Their suburb of Maipú — a cross-section of Chile’s middle-class with households of vastly varying incomes — has been decimated by COVID through job losses. There are now warnings that all of Chile’s middle class, which the government says makes up 70 percent of the population, is vulnerable.

Houses in Maipú, a suburb of Santiago.Liam Miller / Pudumedia.com

National statistics show unemployment reached 12.2 percent between April and June, the highest since 2010, but deeper consequences loom beneath these figures with poverty levels expected to revert 15 years.

“The absence of economic activity and the fact around a third of the population works in the informal sector has put all those people back to levels of poverty many people thought no longer existed here,” said Patricio Navia, a political scientist at NYU and Chile’s Diego Portales University. “It has turned out, as we always knew, the safety net in Chile is weak.”

A slump in copper prices—then a pandemic

Inequality across Latin America had fallen to all-time lows during the past two decades, but these progresses are in jeopardy. Chile’s neoliberal rise has been emblematic of the region, but now it finds itself in a unique position reeling from two major crises that began with massive protests over austerity in October and now the coronavirus.

One of the most unequal places in the world, Chile erupted in an angered social uprising five months before COVID arrived in March, with many of the vast middle class already straining under inequality. A $0.04 hike on Santiago’s metro system was enough to spark protests by students, which snowballed into marches against weak pension payouts, expensive education and healthcare, and living-costs.

Chile’s per capita GDP has increased over the rest of Latin America since its return to democracy in 1990, due to a copper boom. But the promised rewards have not been adequately felt outside the country’s rich 10 percentile.

The pandemic delayed an April referendum for a fairer constitution as Chileans quarantined inside their homes.

“Social scientists have been trying to warn the governments about it for decades,” said Emmanuelle Barozet, a social worker at Universidad de Chile who has been studying the country’s middle classes for 25 years. “There was a very real danger a shock to the system would place huge numbers of families in circumstances that would be difficult to recover from.”

The thunderbolt in Barozet and her colleagues’ economic modeling was a catastrophic price slump in copper. “We didn’t imagine it would be a pandemic,” she said.

Chile entered a total quarantine in June after initial efforts to curtail the virus with ‘dynamic quarantine zones’ — moving according to local outbreaks — backfired and left dangerously-few critical hospital beds.

Emmaneuelle Barozet is a sociologist at Chile University. Courtesy of Emmaneuelle Barozet

“They were overconfident,” said Barozet. “Many Chileans don’t get paid unless they go to work. Chile is not a society of salaried employees with protected employment. Nobody compensates for wage losses, so many were unable to comply with the quarantine.”

A subsequent total lockdown has flattened Chile’s curve and spurred newly-eased restrictions this month, including some free movement in downtown Santiago, but businesses largely remain closed and millions of Chileans are in limbo, with doubts that jobs will return.

Four-in-ten workers have no protections

“The fundamental problem that exists in Chile is that the median income is very close to the poverty line,” explained Barozet. “This means income in Chile is very low. Even if your government categorizes you as middle class with these earnings, you probably don’t have savings to help you cope with a shock.”

The slippery term ‘middle class’ is used broadly to describe anyone neither rich or poor and often chased as a status symbol by Chileans hoping to distinguish themselves from the poor or working class. But Barozet’s work reveals at least four sublevels, mainly divided by access to money and use of public or private education and health, with more people — and less stability — the lower one goes. A 2019 study by Chile’s SOL Foundation showed almost 40 percent of the employed workforce — 3.6 million people — worked without a contract and the protection this offers.

In addition, at least 50 percent of women do not work for a wage, meaning many households depend on a single income. Chile also has one of the highest levels of temporary or limited-term contracts — even for highly skilled positions like academics — which are easy for employers to terminate and difficult for workers to oppose with Chile’s negligible unions.

Upper-middle class families in the shimmering glass condos of ‘Sanhattan’, a nickname for a wealthy area of Santiago, live in conditions that are a far cry from Cristabel’s modest-but-colorful suburb. Those more privileged are also losing jobs, but not necessarily seeing costs reduced—as expensive private schools and health insurers continue to charge.

The downturn stopped Cristabel’s search for a replacement job after she was laid off in December, but disaster struck when her son Felipe’s $1180 contract at a mall as a perfume merchandiser was frozen in April. “I will most likely be fired,” said Felipe, a father of one. “Retail is changing forever, and I’m adrift.”

The pair will now join 4.4 million Chileans drawing against their own pensions to survive what comes next.

Felipe López with his mother, Cristabel, and sister, Rafaela.Liam Miller / Pudumedia.com

The Piñera government’s soft loan offers, followed by a single $630 grant for middle-class workers, was not enough to stop its own coalition members from helping force a controversial bill allowing Chileans to withdraw 10 percent of their pension fund, with 77 percent of those eligible applying. One-in-five Chileans withdrew everything in their fund because they had less than the minimum $1,300 saved.

“No serious economists or experts, right or left wing, advise to take money from pension funds,” said Cristóbal Bellolio, a political scientist in Santiago. “But it seems Chile has now had enough of experts, too.”

As the bill passed through the Senate, a popular phrase reverberated around Santiago: “Pan para hoy, hambre para mañana.” Bread for today, hunger for tomorrow.

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