Disaster Risk Management in Mexico and Colombia – a Contribution to Development

Mexico and Colombia have suffered the high material and human costs that arise when natural disasters strike. In 2010 and 2011, floods affected 3.5 million people in Colombia. In Mexico, there are more than 90 earthquakes a year with a magnitude of 4.0 or more on the Richter scale.

Confronted with this vulnerability to disasters, the two countries have seen themselves forced to prepare for the possibility of a catastrophe, so as to protect citizens as well as the economy of the country.

“Between 1970 and 2010, disasters related to natural phenomena have caused more than 3.3 million deaths and US$2.3 trillion in material losses worldwide —slightly more than Brazil’s GDP in 2010,” writes Gloria Grandolini, World Bank Director of Mexico and Colombia in a recent blog on the topic.

“When disaster hits, we all know that the poor are its biggest victims. Because of this, any effort to generate greater resilience to disasters must be part of the global development agenda,” she writes.

Innovative Financial Products

Considering their high exposure to natural disasters, Mexico and Colombia work with the World Bank and other institutions to find better ways to face the risks that natural phenomena represent.

Colombia for example has the so called Catastrophe Deferred Drawdown Options (CAT DDO), a fund that allows the country to deal with the consequences of natural disasters.

It is an innovative financial product, because the amount is already approved, but it is only accessible when the consequences of a natural phenomenon (damage to the infrastructure or to economic activities) reach a determined level.

The World Bank Board of Directors recently approved a new CAT DDO of US$250 million that will finance the designing of plans so as to face these risks in 300 of the Colombian municipalities that are most vulnerable to natural disasters.

For certain areas of Mexico an innovative financial instrument also has been created, the Multi Catbond that is activated to cope with the consequences of a natural disaster "if the earthquake is of a magnitude greater than Mw 7.9, or the wind speed is above a pre-determined benchmark,” says Luis de la Plaza, World Bank Lead Financial Officer.

Cooperation and adaptation

To contribute to the development of better ways to face and overcome the consequences of natural disasters, the World Bank produced the report “Colombia Disaster Risk Management Analysis: A contribution for public policy development” (sp).

The publication, the first of its kind to be published in Latin America, analyzes the cause of risks to natural hazards and measures its growth, but also explains how national, departmental and municipal institutions have improved in their way to manage risks.

In Mexico as well, the government and the World Bank recently presented the publication “Improving the Assessment of Disaster Risks to Strengthen Financial Resilience”.

It shows what countries like France, Mexico, Turkey or Colombia, have done to manage disaster risk and stresses that international partners and global cooperation play a major role in these issues.

The publication serves as a guide to Ministers of Finance and to countries so that they improve their decision making and strengthen their financial resilience.