· Vulnerable Populations a Priority
· Immediate Liquidity after a National Disaster is Declared
WASHINGTON, July 10, 2012 – The World Bank Board of Directors approved a US$250 million development policy loan today to support natural disaster-related risk management in Colombia. The loan, which will serve to create 300 risk management plans in municipalities with a high incidence of vulnerable populations, is thus aligned with the central government strategy of preventing damage, reducing losses and controlling the fiscal volatility derived from adverse natural phenomena.
Disaster risk management is a priority for the Colombian government. The Andean country suffers from the highest rate of recurring natural disasters in Latin America. In the last forty years, disasters have caused US$7.1 billion in losses, while 10,000 people have died and more than 14 million have been impacted by floods and mudslides in the last thirty years. The floods caused by the La Niña effect in 2010 and 2011 alone affected 3.5 million, mostly low income, individuals.
“This loan leverages actions for risk knowledge, its reduction and disaster risk management as pillars of national policy and the National System for Disaster Risk Management, as established by the recent 1523 Law from April 2012,” said Carlos Iván Márquez Pérez, Director of National Unit for Disaster Risk Management.
This operation will have a positive effect on the most vulnerable groups by supporting government policies aimed at combating poverty through increased disaster risk management in Colombia.
World Bank reports demonstrate the positive impact of incorporating disaster risk management in public policies, planning and investment. In order to minimize the ever more frequent and increasing losses, a radical change in development policies and land and sectorial management practices is needed, according to those reports. They also describe the need to define responsibilities at the public and private level, including civil society, as part of the strategy to reduce the State’s fiscal vulnerability.
“Natural disasters have devastated millions of people in Colombia. Through these efforts, the country is improving its protection against disasters, placing itself at the global forefront in risk prevention,” said Gloria M. Grandolini, World Bank Director for Mexico and Colombia.
This initiative hopes to:
· Improve disaster risk management through the establishment of coordinated strategies, thus creating at least 300 municipal disaster risk management plans.
· Improve disaster risk management in land use planning.
· Improved policies and tools to reduce housing risks through municipal-level inventories, including housing in high-risk areas.
For the second time, Colombia made use of this innovative product known as Catastrophe Deferred Drawdown Options (CAT DDO). This instrument offers immediate liquidity whenever authorities declare a national emergency. In fact, it operates as a credit line and funds are only used when needed.
CAT DDOs form part of a menu of financial products and services offered by the World Bank with the objective of reducing vulnerability to natural disasters and provide fast disbursement mechanisms that include CAT Bonds (used by Mexico in 2009), climate insurance derivatives (Malawi in 2009, 2010 and 2011) and multi-country insurance pools (the Caribbean in 2007).
The service package offered by the World Bank in Latin America and the Caribbean also includes knowledge, technical assistance and facilitation services —which encourage the production of reports such as the “Colombia Disaster Risk Management Analysis” and the exchange of successful global experiences. World Bank programs focused on prevention and reconstruction in Colombia go back to the 1990s.
The Finance and Public Credit Ministry, the National Planning Department and the National Disaster Risk Management Unit will be responsible for coordinating and executing the program. The loan has a 18-year grace period, a fixed interest rate and matures on 15 February 2030.