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Not-so-natural disasters

Latin America and the Caribbean suffer on average 40 major natural disasters each year. In the last decade alone, hurricanes, earthquakes, landslides, floods, and lava flows have left an estimated 45,000 dead and millions homeless while costing the region some $20 billion in material losses.

No one has yet succeeded in stopping the eruption of a volcano, the shock of an earthquake or the passage of a hurricane. But there is compelling proof that the impact of such events can be mitigated through proper planning, substantially reducing the number of victims, damage to the environment, infrastructures and crops, and related loss of employment.

Managing risks. Until recently, each disaster has unleashed a distressingly predictable chain of events. Governments in the affected countries mobilize their invariably inadequate resources and issue an appeal to the international community for emergency aid and funds for reconstruction. The dead are buried, an effort is made to relieve the suffering of the homeless, the damage is calculated, and the cycle begins again. In many cases, inadequate structures are built on top of sites where their predecessors have been destroyed and rebuilt many times.

“Every government in the region engages in some sort of risk management—correctly or otherwise, consciously or unconsciously,” says Caroline Clarke, an IDB specialist in disaster prevention and risk management. “The decision to treat disasters as no more than emergencies, the result of unforeseen events, without making risk reduction a priority, constitutes a development policy fraught with implications for society and the economy. Recent disasters remind us that this traditional risk management strategy has already failed.”

The horror inspired by the ravages of Hurricane Mitch in 1998 forced a change of outlook. The IDB, which was deeply involved in helping with the rehabilitation and reconstruction of the four stricken countries (Honduras, El Salvador, Guatemala and Nicaragua), embarked on an unprecedented effort to address the root causes of the vulnerability to these disasters and to encourage radical change in national policies concerning prevention and risk management.

According to Clarke, there is very little point in continually taking on debt for the purpose of reconstruction, so that very little investment in development ever takes place. “When people see that a large part of the Bank’s portfolio in a country—programs for education, health and urban development—is redirected to restore services that had been there before, they realize that the reactive approach is unsustainable,” says Clarke. “The Bank faces the challenge of placing risk management at the top of its development agenda. It is determined to help countries acquire a culture of prevention and make a commitment that will translate into ongoing practice.”

At the end of 1998 the Bank adopted an operational policy that places disaster prevention on an equal footing with reconstruction. At its annual meeting in 2000, the Bank presented a plan of action that includes the elements needed to integrate risk management into the Bank’s operations and projects.

Development's Achilles' heel. The impact of disasters on economic performance and poverty, not to mention their cumulative long-term effects, undercuts development and growth in the region. Mitch made off with 16 percent of Central America’s GDP in 1998 and 81.6 percent of the GDP of Honduras in the same year. The hurricane shaved nearly a whole percentage point off the economic growth rate in the region in the following year.

Not surprisingly, the problems that hinder development in these countries are exactly the same as the reasons they are vulnerable to disasters: rapid, unregulated urban growth; the persistence of poverty; degradation of the environment; inefficient public policies, and ill-advised infrastructure investments. Moreover, Clarke says, disaster prevention and risk management are still “a novel idea” for many senior government officials in the region.

In order to end the cycle of vulnerability, the IDB’s Plan of Action proposes that governments adopt a strategy based on concrete measures. These include land use planning and incentives to situate residential buildings in safe areas; environmental and natural resource management; engineering works that strengthen public facilities such as hospitals, schools, water supply systems, and roads; training for the public in the adoption of preventive measures; and preparations to permit the identification and coordination of emergency care services.

Finally, financial systems must be prepared so that both the national economies will be in a position to respond properly to emergencies. This entails the presence of spending rules that can limit damage and preserve the stability of the country’s fiscal situation during the crisis, a firm credit policy, and adequate international reserves. Financial instruments must be in place to help pay for specific measures such as meeting requirements for liquidity through reserves, restructuring the debt and tapping standby lines of credit. Insurance markets that can absorb some of the risks associated with disasters should also be included in preventative measures.

The future. Despite the magnitude of these challenges, Clarke is encouraged by the actions of many countries to modernize their risk management systems. Some are spreading these responsibilities among a number of institutions so that the problem will be treated as more than a matter of emergency management. The Dominican Republic, for example, has devised a national risk management policy and is investing in training for both public and private organizations. Under the umbrella of the Puebla-Panama Plan, a regional development initiative, the meso-American countries are planning to upgrade their insurance markets to improve coverage for catastrophes.

Until recently, the recurrence of natural disasters in Latin America and the Caribbean was perceived as a matter of fate, an evil before which the region’s people could do little more than submit. Recent events have shown that this attitude is finally giving way to the conviction that proper prevention can break the vicious circle of destruction and reconstruction. People increasingly understand that where appropriate measures have been taken, vulnerability has been reduced. Helping to engender this culture of prevention is one of the prime objectives of the IDB. “If people think there is a remedy for these evils, they will ask for it,” Clarke concludes.

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