February 13, 2001

IDB REAFFIRMS SUPPORT FOR EL SALVADOR AFTER LATEST EARTHQUAKE, APPROVES $20 MILLION EMERGENCY LOAN

Program to provide temporary shelters for some 44,000 families and fund prevention measures to stabilize hazardous hillsides

The Inter-American Development Bank today announced the approval of a $20 million emergency loan for El Salvador, which has suffered two earthquakes in one month.

The first earthquake hit El Salvador on January 13, killing more than 800 people and destroying or damaging more than 220,000 homes. The second earthquake happened this morning and has caused at least 70 deaths, according to government reports.

"Besides expressing our solidarity, the Bank wants to redouble its efforts to help El Salvador overcome this latest tragedy," said IDB President Enrique V. Iglesias.

The emergency loan, prepared under the IDB’s special facility for countries hit by natural disasters, will help finance a program of El Salvador’s Social Investment Fund for Local Development (FISDL) that will help some 44,000 families. These families, who either lost their homes or cannot return to their properties due to the danger of landslides, will be able to acquire a basic shelter and jumpstart their rebuilding process.

The resources will also support preventive and control measures to stabilize hazardous hillsides in high-risk areas identified by El Salvador’s ministries of the Environment and Natural Resources and Agriculture and Livestock.

A small portion of the loan will be used to finance a detailed damage assessment conducted by the U.N. Economic Commission for Latin America and the Caribbean (ECLAC). This report will be presented in Madrid at a March 7 consultative group meeting of the international donor community organized by the IDB at El Salvador’s request.

Temporary housing at permanent sites

In response to the January earthquake, the Salvadoran government quickly took steps to aid affected families and support their safe and rapid return to their properties, providing them a package of assistance that would allow them to start rebuilding their homes.

A $15 million portion of the IDB loan will be used by FISDL to provide basic housing kits to families that lost their homes as well as to finance the clean-up and removal of debris. The kits consist of basic tools, nails, lumber to build frames, sheet metal for roofing and heavy-gauge plastic for walls. For families who have to move because their properties are in high-risks areas, the program will provide funds that will help them lease a lot with an option to purchase.

FISDL’s program is being carried out in cooperation with the municipalities, benefitting those that suffered the heaviest damage. Under the terms of the IDB loan, FISDL will sign agreements with each participating municipality outlining basic responsibilities for providing these services. Local governments, which have been registering affected families and the damaged in their jurisdictions, will distribute the housing supplies and supervise the removal of debris.

The municipalities will issue lists of beneficiary families every month and post them in public places. FISDL will post reports on contracts awarded using loan resources on a government website as well as hire an independent auditing firm to review expenditures under this program.

Prevention measures for unstable hillsides

A $3.9 million tranche of the emergency loan will support a program for the control of unstable hillsides in populated areas, a pressing concern for El Salvador ahead of the coming rainy season. The January earthquake, which was followed by hundreds of aftershocks, significantly increased the risk of additional landslides, putting communities across the country in peril.

The resources will finance the assessment of areas susceptible to landslides and the establishment of monitoring, early warning and alarm systems as well as the organization of community-based safety committees in high-risk locations. It will also support the design, construction and maintenance of small hillside stabilization projects by the Ministry of Agriculture and Livestock.

"This earthquake hit the poor especially hard. The immediate challenge is to help these families recover their basic living conditions and economic opportunities," said project team leader Caroline Clarke. "Equally as urgent is the need to reduce the country’s exposure to future disasters, and the IDB is ready to help El Salvador strengthen its risk management capacity."

The IDB loan was granted for a 25-year term, with a five-year grace period, at a variable interest rate. Interest will be subsidized by the IDB’s Intermediate Financing Facility.

Consultative Group Meeting

At El Salvador’s request, the IDB is organizing a meeting of the international donor community that will take place on March 7 in Madrid, ahead of a two-day regional consultative group meeting for Central America.

The meeting will give donors an opportunity to discuss ECLAC’s damage assessment report as well as a macroeconomic impact study prepared by the International Monetary Fund and the World Bank. The Salvadoran delegation will outline their national reconstruction plans and donors will indicate how they can support those efforts.

Other IDB actions

The IDB sent a 16-person mission to El Salvador right after the January earthquake to assess the damage and the country’s immediate financing needs. In collaboration with its San Salvador-based IDB staff and Salvadoran officials, the team identified approximately $110 million in resources that could be redirected from existing programs to repair and reconstruction efforts.

Members of the IDB team also met with top officials of El Salvador’s executive and legislative branches of government. During the mission, the National Assembly ratified three IDB loans totaling $164 million for state modernization, education and health programs. Part of these resources may be used to support the repair and rehabilitation of roads, housing, schools and basic health care units.

The Bank is currently preparing new loans for El Salvador for housing and secondary roads programs and a project to foster the sustainable management of the Bajo Lempa river basin. These loans, which might be used in part to support reconstruction efforts and natural disaster mitigation and prevention, could total about $200 million.