Financial disaster preparedness is a growing concern in Latin America and the Caribbean. Last year the region saw devastating earthquakes in Chile and Haiti and an active hurricane season that impacted Central America and Mexico. In addition, the La Niña-related weather phenomenon has brought severe flooding to Venezuela, Colombia and Brazil, among others.
Natural disasters can put a country’s fiscal accounts in disarray, undermining the government’s ability to respond to emergencies and implement actions to restore or mitigate the impact of such catastrophes on human life and the economy.
At the request of the governments of several member countries, the IDB has developed a financial risk management approach for natural disasters, aimed to help the countries be better prepared to deal with emergencies caused by catastrophic natural events.
The IDB approach is focused in developing tailor-made integrated programs to help the countries’ governments to better manage these financial risks, through the implementation of different innovative financing instruments and mechanisms, such as the Contingent Credit Facility and the Natural Disaster Insurance Facilities.
Currently, the Bank is working with 13 member countries to support their efforts to improve their disaster risk management capability and efficiency. Through the mentioned facilities, it is expected to provide during 2011 more than $500 million in financing to help the region meet extraordinary expenditures that may arise during emergencies caused by natural disasters of severe or catastrophic magnitude.
The IDB has already approved a $100 million loan for the Dominican Republic under its Contingent Credit Facility. During this year, the Bank will consider further contingent loans for Peru, Ecuador, Costa Rica, Panama and Honduras, totaling $500 million.
In addition, the IDB is expected to provide a $24 million loan to structure and launch an Insurance Facility for Catastrophic Natural Disaster Emergencies for the Dominican Republic. This insurance facility plans to provide the government with a five-year $100 million coverage for earthquakes and hurricanes of catastrophic magnitude.
Resources from the IDB contingent loans are rapidly disbursed upon Bank’s verification that a natural disaster of severe to catastrophic intensity has occurred in the territory of the countries. The proceeds will allow governments to cover extraordinary expenditures that occur during the emergency, in the immediate aftermath of a major event; including emergency medical equipment, vaccines and medication, facilities and equipment for temporary shelters, food for displaced people and livestock, emergency workers to assist victims, and short-term leasing of energy, transportation and communications equipment and facilities.
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