Up to $1.6 billion will be made available to Honduras, Guatemala and Nicaragua over the next two years to invest in reducing their vulnerability to natural disasters
The Inter-American Development Bank (IDB) today presented a comprehensive plan to help Central America prevent and respond to natural disasters, making up $1.6 billion available to Guatemala, Honduras, and Nicaragua over the next two years. These countries can use part of the funds to finance priorities in areas such as developing resilient infrastructure, disaster risk management and providing basic services to vulnerable communities.
In addition to these resources, financial facilities will be created to respond to these challenges, and a knowledge agenda will be created to address resilience and structural problems linked to natural disaster risk management.
“Hurricanes Eta and Iota highlighted the urgent need to have resilient infrastructure, climate change mitigation and risk management in Central America to reduce the impact on people who have been affected,” said IDB President Mauricio Claver-Carone. “When the hurricanes hit, we responded immediately and in a coordinated fashion with other multilateral organizations, and today we are presenting a plan to continue helping the region.”
As a strategic partner, the IDB has been working for more than a decade to encourage the development of policies and investment aimed at improving Central America's risk management and adaptation to climate change. This has strengthened early warning systems and evacuation protocols as well as the agencies that oversee those areas. Even so, while the Index of Governance and Public Policy in Disaster Risk Management (iGOPP) developed by the IDB shows significant improvement, it also confirms that most of the countries in the region still have major gaps in their management of these kinds of risk.
In this context, the IDB has prepared a comprehensive natural disaster prevention and response plan. Based on the lessons learned from the responses to hurricanes Eta and Iota, the plan will be implemented in coordination with other multilateral organizations such as the World Bank, the Central American Bank for Economic Integration (CABEI), the Economic Commission for Latin America and the Caribbean (CEPAL) and other regional partners such as the Central American Integration System and partners in each country.
Besides the financial resources available to Honduras, Guatemala and Nicaragua, with the second pillar of the plan the IDB will develop new financial facilities to provide greater support both for dealing with catastrophes and risk coverage and adaptation to climate change. To provide vital financial relief to borrowers at a time of distress, in December 2020 the IDB approved the Principal Payment Option that allows for the deferral of principal debt payments for 2 years in eligible loan contracts after occurrence of an eligible disaster event and to repay those amounts in future repayments. It also launched a pilot program of so-called “catastrophe bonds” which offer coverage of risk linked to natural disasters and can be adapted to risks that countries wish to be protected against.
In addition, IDB Lab, which is the IDB Group's innovation laboratory, approved a new facility to tend to in an agile way micro- and small business affected by emergencies. This initiative, which has Fundación Covelo as a partner, will provide US$60 million to benefit 40,000 micro and small businesses affected the pandemic or hurricanes, through loans to get them back on their feet right away.
In the third and final aspect of the plan, the IDB is working to generate a knowledge agenda to encourage good practices in risk management. It will do this through a series of dialogues in the region, in which the experiences of other countries will be shared, such as that of New Orleans in the United States with Hurricane Katrina.
Although Central American countries have developed natural disaster warning systems, the challenge now is to move toward the prevention and management of vulnerability to such events, accelerating the implementation of adaptation plans and the development of resilient infrastructure.
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.