RISK AND VULNERABILITY: THE ECLAC EXPERIENCE OF THE IMPACT OF DISASTERS ON DEVELOPMENT Ricardo Zapata-Marti Focal Point for Disaster Evaluation June 2006

RISK AND VULNERABILITY: RISK AND VULNERABILITY: THE ECLAC EXPERIENCE THE ECLAC EXPERIENCE OF THE IMPACT OF OF THE IMPACT OF DISASTERS ON DISASTERS ON DEVELOPMENTDEVELOPMENTRicardo Zapata-MartiRicardo Zapata-MartiFocal Point for Disaster EvaluationFocal Point for Disaster Evaluation

June 2006June 2006

Ricardo Zapata-Marti 2CEPAL - ECLAC

Disaster management and risk Disaster management and risk management are not the same thingmanagement are not the same thing

Emergency management is crucialEmergency management is crucial Assessment of damage, losses and needsAssessment of damage, losses and needs Scale and time line to determine needsScale and time line to determine needs

Emergency assistance and restoring basic lifelines and Emergency assistance and restoring basic lifelines and servicesservices

Return to normalcyReturn to normalcy Resilient reconstruction (not rebuilding vulnerability)Resilient reconstruction (not rebuilding vulnerability) Mitigation and preventionMitigation and prevention Improve risk managementImprove risk management


How is risk defined, created and How is risk defined, created and appropriatedappropriated Risk is a complex formula of hazards (perils or Risk is a complex formula of hazards (perils or

dangers) and existing build vulnerability dangers) and existing build vulnerability (infrastructural, social, economic) (infrastructural, social, economic)

Anthropogenic origin (generation, amplification, Anthropogenic origin (generation, amplification, reduction and transfer) of riskreduction and transfer) of risk

Risk affects society in its entirety at all levels of Risk affects society in its entirety at all levels of damages, losses and needsdamages, losses and needs

Risk tends to be appropriated by the stateRisk tends to be appropriated by the state


Risk management and adaptation Risk management and adaptation (to changes associated to climate, socioeconomic and cultural factors)(to changes associated to climate, socioeconomic and cultural factors)

Damage, losses and costsDamage, losses and costs

HAZARDSHAZARDSBaseline dataBaseline data

modifiedmodified by changeby change

and and variabilityvariability

RISKRISKMulti hazards Multi hazards and tensionsand tensions

Severity of effects worsened Severity of effects worsened by vulnerabilityby vulnerability

and changes thatand changes that change patterns of change patterns of

riskrisk

MANGEMENT,MANGEMENT,TRANSFERTRANSFER

AND REDUCTIONAND REDUCTION

MITIGATIONMITIGATION

ADAPTATIONADAPTATION

EVOLUTIONEVOLUTIONRESILIENCERESILIENCE

VULNERABILITYVULNERABILITYLocal and sectorLocal and sector

specificspecificdiversitydiversity


News thatNews that

exemplifyexemplify

builtbuilt

vulnerabilityvulnerability


Latin America and the Caribbean: Affected population and casualites of disasters (1972-2005)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1972-1980 1980-1990 1990-1999 2000-2010(est)

2000-2005(evaluated)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Directly affected (primary impact) Fatalites


Latin America and the Caribbean: Dynamic impact of disasters (1972-2005)

2,639

11,719

62,935

48,929

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1972-1980 1980-1990 1990-1999 2000-2010 (est)

millions of current US dollars (Events assessed by ECLAC)

TOTAL Logarítmica (TOTAL)


Summary of natural disasters worldwideSummary of natural disasters worldwide 2,0052,005 AverageAverage

1995-20041995-20042005: 2005:

Percentage Percentage over over

averageaverage

Number of national level eventsNumber of national level events 428428 322322 132.92%132.92%

Number of affected countriesNumber of affected countries 127127 108108 117.59%117.59%

FatalitiesFatalities 89,91689,916 77,32077,320 116.29%116.29%

Affected population (millions)Affected population (millions) 160160 254254 63.02%63.02%

Economic damage and losses Economic damage and losses (millions of dls.)(millions of dls.)

159,000159,000 65,50065,500 242.75%242.75%

Source: OFDA-CRED, Newsletter, February 2006Source: OFDA-CRED, Newsletter, February 2006


Impact of disasters in Latin America and the Caribbean: observed evolution and average Impact of disasters in Latin America and the Caribbean: observed evolution and average impactimpact

DATEDATE (millions of dollars , 2004)(millions of dollars , 2004)

TOTALTOTAL DIRECT DIRECT DAMAGE DAMAGE

(to assets and (to assets and capital)capital)

INDIRECT INDIRECT (Flow losses)(Flow losses)

External External sector impactsector impact

1972-19801972-1980 78,08578,085 49,82749,827 28,25928,259 24,19824,198

1980-19901980-1990 101,251101,251 71,64071,640 29,61129,611 40,67140,671

1990-19991990-1999 31,36731,367 16,80116,801 14,56614,566 7,4677,467

2000-2010 (est)2000-2010 (est) 50,05050,050 29,51929,519 17,53117,531 7,7517,751

2000-2005 (assessed)2000-2005 (assessed) 25,02525,025 14,75914,759 8,7658,765 3,8753,875

1972-20051972-2005 260,753260,753 167,787167,787 89,96689,966 80,08780,087

Annual average a/Annual average a/ 6,3856,385 166,892166,892 89,43589,435 79,85279,852

a/ Simple average considering only damages obtained from ECLAC assessments: a/ Simple average considering only damages obtained from ECLAC assessments: not a scientific or complete assessmentnot a scientific or complete assessment

Source. ECLAC, on the basis of assessed eventsSource. ECLAC, on the basis of assessed events


Impact of disasters in Mexico during 2005Fatalities Primary affected

population TOTAL DIRECT

(Damage to assets

and capital)

INDIRECT (Flow

losses)

Emily, Stan y Wilma 98 2,942,119 4,642 2,098 2,543

Hurricane Emily in July(estimated damage to states and

national oil company PEMEX)

0 603,696 845 326 518

Yucatan, July 15-18 0 35,887 97 85 12

Nuevo León, July 15-18 0 40,385 69 58 11

Tamaulipas, , July 15-18 0 17,000 146 142 4

Quintana Roo, July 15-18 0 10,424 106 41 65

Pemex 427 0 427

Hurricane Stan in September 98 2,088,059 2,009 1,315 695Hidalgo 4 27,180 82 74 7

Puebla 3 50,725 87 77 11

Oaxaca 5 37,405 167 133 34

Veracruz 0 18,924 241 194 48

Chiapas 86 253,825 1,432 837 595

Hurricane Wilma 0 250,364 1,788 457 1,331Quintana Roo 219,214 1,739 429 1,310

Yucatán 31,150 49 28 21

Source: ECLAC / CENAPRED


CYCLONE PREDICTION IN THE ATLANTIC FOR 2006 CYCLONE PREDICTION IN THE ATLANTIC FOR 2006 (as of 31 May 2006)(as of 31 May 2006)

NumberNumber Percentage difference Percentage difference from averagefrom average

Indicator and climatic average for 1950-2000 in parenthesisIndicator and climatic average for 1950-2000 in parenthesis

Named storms (9.6)Named storms (9.6) 1717 177.10%177.10%

Named storms day (49.1)Named storms day (49.1) 8585 173.10%173.10%

Hurricanes (H) (5.9)Hurricanes (H) (5.9) 99 152.50%152.50%

Hurricane days (HD) (24.5)Hurricane days (HD) (24.5) 4545 183.70%183.70%

Intensity of hurricanes (IH) (2.3)Intensity of hurricanes (IH) (2.3) 55 217.40%217.40%

Intense hurricane days (IHD) (5.0)Intense hurricane days (IHD) (5.0) 1313 260.00%260.00%

Net total cyclone activity (NTC) Net total cyclone activity (NTC) (100%)(100%)

195195 195.00%195.00%

Source: Extended Range Forecast of Atlantic Seasonal Hurricane Activity and U.S. Landfall Strike Probability Source: Extended Range Forecast of Atlantic Seasonal Hurricane Activity and U.S. Landfall Strike Probability for 2006 - HTML Format, for 2006 - HTML Format, Philip J. Klotzbach and William M. Gray, 31 May 2006Philip J. Klotzbach and William M. Gray, 31 May 2006


Risk responsibility and transferRisk responsibility and transfer

Responsibility of risk lies not only in the state:Responsibility of risk lies not only in the state: Social responsibilitySocial responsibility Community actionCommunity action Share of private sectorShare of private sector

Risk transfer entails:Risk transfer entails: Internalizing investment in mitigation and prevention as part Internalizing investment in mitigation and prevention as part

of economic and social viability and benefitsof economic and social viability and benefits Use of institutional and financial instruments and policies to Use of institutional and financial instruments and policies to

reduce riskreduce risk


Risk, competitiveness and Risk, competitiveness and sustainabilitysustainability Competition beyond low cost production and Competition beyond low cost production and

competitiveness based on low pricescompetitiveness based on low prices Private investment as a tool to promote Private investment as a tool to promote

competitiveness and tradecompetitiveness and trade Risk arises from inappropriate valuation of Risk arises from inappropriate valuation of

sustainabilitysustainability Sustainability impliesSustainability implies

Appropriate use of natural resources, environmental Appropriate use of natural resources, environmental management to protect and preserve natural capital and management to protect and preserve natural capital and resourcesresources

Sustained economic growth rates (of production, trade and Sustained economic growth rates (of production, trade and investment) at appropriate level over time (avoid fluctuation, investment) at appropriate level over time (avoid fluctuation, variability and decline)variability and decline)


Risk, trade promotion and Risk, trade promotion and competitivenesscompetitiveness

Competitiveness not based on risk Competitiveness not based on risk externalities but on appropriationexternalities but on appropriation

Trade promotion to include trade in risk Trade promotion to include trade in risk reducing goods and servicesreducing goods and services There are important business opportunities in risk There are important business opportunities in risk

management through tradable goods and management through tradable goods and servicesservices


Risk valuation is necessary for Risk valuation is necessary for decision makingdecision making Risk is assessableRisk is assessable

Ex post through quantification of damage Ex post through quantification of damage and losses incurred in the past (use of and losses incurred in the past (use of ECLAC methodology)ECLAC methodology)

Ex ante based onEx ante based on Extreme case scenarios (designer events)Extreme case scenarios (designer events) Measuring damage and losses not incurred Measuring damage and losses not incurred

due to prevention, mitigation and investment due to prevention, mitigation and investment (cost-benefit analysis)(cost-benefit analysis)


HUMANHUMAN

-HealthHealth

-EducationEducation

NATURALNATURAL

-Clean waterClean water

-Clean airClean air

-Biodiversity and Biodiversity and ecosystem ecosystem (microclimate)(microclimate)

FINANCIALFINANCIAL

-Access to creditAccess to credit

-Land tenure and ownershipLand tenure and ownership

PHYSICALPHYSICAL

-Type and quality of Type and quality of settlement and settlement and housinghousing

SOCIALSOCIAL

-Social networks (security and Social networks (security and solidarity)solidarity)

-Family ties and extended familyFamily ties and extended family

-Violence and securityViolence and security


1

10

100HUMAN

SOCIAL

NATURALFINANCIAL

PHYSICAL

Past Current Mid-term Long term

- Networks and safety - Networks and safety systems (security, systems (security, solidarity)solidarity)- Extended family links- Extended family links. Violence and security. Violence and security

-Settlements and housingSettlements and housing- infrastructure (transport and other)infrastructure (transport and other)

- Clean (drinking) water- Clean (drinking) water- Clean air- Clean airBiodiversity and integrity Biodiversity and integrity of ecosystems (micro of ecosystems (micro climatic impactclimatic impact

-Credit accessCredit access- Land tenure and property legal protectionLand tenure and property legal protection

-Health

-Education


Disasters Impact on El Salvador´ s GDP

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Growth without disasters

Growth with Mitch, earthquakes, drought and hurricane Stan

MITCH

EARTHQUAKE

DROUGHT

STANSTAN


Impact of disasters on GDP: State of Impact of disasters on GDP: State of Gujarat, IndiaGujarat, India

-5

0

5

10

15

20

25

1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

SGDP with disasters Potential growth without disastrs

Logarítmica (Potential growth without disastrs) Logarítmica (SGDP with disasters)


Policy and regulatory deficitPolicy and regulatory deficit

Not evident that market assigns price-value to Not evident that market assigns price-value to prevention, mitigation and risk managementprevention, mitigation and risk management

State has a promotional and regulatory State has a promotional and regulatory responsibility in face of riskresponsibility in face of risk

Enforce and ensure regulations related to:Enforce and ensure regulations related to: Human settlements and land useHuman settlements and land use Construction codesConstruction codes Responsibility (accountability) of risk created by investmentResponsibility (accountability) of risk created by investment Liability in the face of risk generated and not appropriatedLiability in the face of risk generated and not appropriated


Risk management at all levelsRisk management at all levels

Save lives and infrastructureSave lives and infrastructure Preserve macroeconomic equilibriumsPreserve macroeconomic equilibriums Face vulnerability of small, non-Face vulnerability of small, non-

diversified and less developed diversified and less developed economieseconomies

Protect livelihood of more vulnerable Protect livelihood of more vulnerable social segments of the populationsocial segments of the population

Preserve / restore economic activityPreserve / restore economic activity


RECOVERYRECOVERYADAPTATIONADAPTATIONEVOLUTIONEVOLUTION

INSTRUMENTSINSTRUMENTS(Policies,(Policies,

resources, resources, Institutions)Institutions)

APPROPRIATIONAPPROPRIATIONRESPONSIBILITYRESPONSIBILITY

INFORMATIONINFORMATIONBaseline dataBaseline data

Data basesData bases

RISK RISK MANAGEMENTMANAGEMENT

TransversalityTransversality

Integration,Integration,

SustainabilitySustainability

Response:Response:AbsorptionAbsorptionSharingSharingTransferTransferCompensationCompensation


CRITICAL STRATEGIC CRITICAL STRATEGIC QUESTIONSQUESTIONS Not rebuilding vulnerabilityNot rebuilding vulnerability Tend to livelihoods rather than Tend to livelihoods rather than

housing needshousing needs Preserve habitat sustainability over Preserve habitat sustainability over

human settlementshuman settlements Urban and land planning to reduce riskUrban and land planning to reduce risk Financial and economic instrumentsFinancial and economic instruments


OPERATIONAL ASPECTS TO OPERATIONAL ASPECTS TO RESTORE ASSETSRESTORE ASSETS Linkages to national housing and social Linkages to national housing and social

development strategiesdevelopment strategies Property registration and asset protectionProperty registration and asset protection Technical aspects to consider:Technical aspects to consider:

Construction codes and normsConstruction codes and norms Informal, spontaneous construction and settlementsInformal, spontaneous construction and settlements Settlement and housing typology (urban / rural, construction Settlement and housing typology (urban / rural, construction

materials, construction practices)materials, construction practices) Social considerations:Social considerations:

Local practices and usesLocal practices and uses Cultural and ethnic diversityCultural and ethnic diversity Gender perspectiveGender perspective


The need for financial protection The need for financial protection instruments instruments Insufficient use of insurance and other risk Insufficient use of insurance and other risk

transfer mechanismstransfer mechanisms Inappropriate pricing of risk in the market: Inappropriate pricing of risk in the market:

A vicious circle in which “public goods” (the A vicious circle in which “public goods” (the state’s responsibility to protect lives and state’s responsibility to protect lives and property) become public calamitiesproperty) become public calamities

A virtuous circle to be promoted: transparent risk A virtuous circle to be promoted: transparent risk appropriation of risk, pricing and valuation appropriation of risk, pricing and valuation leading to risk reduction investmentleading to risk reduction investment


Financial strategiesFinancial strategies

Credits, subsidies and direct reconstructionCredits, subsidies and direct reconstruction Requirements and conditionsRequirements and conditions Supplementary financing and mitigation Supplementary financing and mitigation

resourcesresources Linkage to national social policyLinkage to national social policy Access to international financing and Access to international financing and

grants: ODA and NGOsgrants: ODA and NGOs


Risk transfer and “free riders” or the Risk transfer and “free riders” or the public good trappublic good trap

Risk transfer is not an externalityRisk transfer is not an externality Risk materializes in disastersRisk materializes in disasters Local and national levels of risk transferLocal and national levels of risk transfer National and international transfer of riskNational and international transfer of risk Sharing the cost of public goods (pricing and Sharing the cost of public goods (pricing and

taxation)taxation)


Available instrumentsAvailable instruments CAT bonds: parametric measurement and financial CAT bonds: parametric measurement and financial

derivativesderivatives Disaster contingency funds: multi annual funding Disaster contingency funds: multi annual funding

and recurrent operational budgetsand recurrent operational budgets Insurance and reinsuranceInsurance and reinsurance Levels of coverage / liability (geographic, regional, Levels of coverage / liability (geographic, regional,

national, local)national, local) Reduction of operational costs, transfer and risk sharing: Reduction of operational costs, transfer and risk sharing:

resource pooling, micro financing and micro insurance resource pooling, micro financing and micro insurance mechanismsmechanisms

Government support and promotion of insurance and Government support and promotion of insurance and protectionprotection

Insurance mechanisms for non documented tenure, Insurance mechanisms for non documented tenure, informality and lack of financial accessinformality and lack of financial access


Policy implicationsPolicy implications

Exposure to disaster risks is not unlike Exposure to disaster risks is not unlike exposure to other risks (financial, exposure to other risks (financial, commercial, social, political)commercial, social, political)

Exposure to risk has a positive correlation Exposure to risk has a positive correlation with poverty: disasters impacts are not with poverty: disasters impacts are not distributed homogeneously neither in distributed homogeneously neither in location nor in impactlocation nor in impact

Social impact is regressive: direct linkage Social impact is regressive: direct linkage between vulnerability and poverty, between vulnerability and poverty, vulnerability and marginalization, vulnerability and marginalization, vulnerability and gender or ethnicityvulnerability and gender or ethnicity


SUMMARYSUMMARYAppropriation to promote reduction of riskAppropriation to promote reduction of riskNeed for regulatory and institutional Need for regulatory and institutional

changeschangesMarkets as clearing houses to price risk Markets as clearing houses to price risk

(beyond insurance)(beyond insurance)Need for social policies for compensation, Need for social policies for compensation,

promotion and solidaritypromotion and solidarityRisk management is an investment / Risk management is an investment /

business opportunitybusiness opportunity Imperfect markets require Imperfect markets require

governmental interventiongovernmental intervention


Thank you.Thank you.

Reference material:Reference material:- Handbook for - Handbook for socioeconomic and socioeconomic and environmental evaluation of environmental evaluation of disasters disasters (www.cepal.org/mexico, (www.cepal.org/mexico, “desastres”)“desastres”)- Disasters and development - Disasters and development (series 2005)(series 2005)- Assessment documents - Assessment documents since 1970ssince 1970s

WEB PAGE:WEB PAGE:(www.cepal.org/mexico), (www.cepal.org/mexico),

desastres”)desastres”)

Documents

RISK AND VULNERABILITY: THE ECLAC EXPERIENCE OF THE IMPACT OF DISASTERS ON DEVELOPMENT Ricardo Zapata-Marti Focal Point for Disaster Evaluation June 2006