Special lecture: Economic aspects of disasters Ricardo Zapata-Marti Regional Advisor Focal Point for Disaster Evaluation, ECLAC

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Special lecture Economic aspects of
disastersRicardo Zapata-MartiRegional
AdvisorFocal Point for Disaster Evaluation,
ECLAC

• Task Force for Emergency Preparedness
• Second Emergency Management CEO SeminarAugust
  12-14
• Lima, Perú

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The bottom line

• Experience over the recent years both in Latin
  America and Southeast Asia supports the notion
  that a comprehensive socioeconomic and
  environmental assessment of disasters leads to a
  profiling of disasters that enables the
  formulation of reconstruction of affected
  infrastructures (including the protection of
  critical infrastructures, with particular
  reference to public security in sectors such as
  health, water and sanitation, food security,
  energy, etc.).
• A comprehensive analysis of damage (physical
  destruction of assets in all sectors of a
  society, community or economy valued at
  replacement costs) and losses (income lost,
  production not realized, employment reduction,
  budget deficits associated wih post-event
  emergency and recovery expenditures and tax
  revenue losses incurred) allows
• a perspective on cross-cutting themes such as
  gender and disasters, ethics in risk management,
  environmental risk and the issues of governance,
• risk dialogue and consensus building based on
  assessments, and the mobilisation of resources
  for risk reduction

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New Gap

An additional deficit is created from the
pre-existing gap between the prevalent situation
vis-à-vis the development goals and the emerging
recovery objectives.
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• HUMAN
• Health
• Education
• Livelihoods
• Housing and shelter
• Cultural identity

• SOCIAL
• Social capital and social networks (solidarity
  and equity)
• Family ties, gender perspective and extended
  family networks and links
• Violence, security and rights

• NATURE / ENVIRONMENT
• Clean water, wage disposal and sanitation
• Clean air
• Biodiversity and integrity of ecosystems
• Climate variability and change

• PHYSICAL INFRASTRUCTURE
• Quality and resilience of human built environment
  (settlements and rural/urban planning)
• Transport and communications, energy and other
  basic lifelines
• Productive infrastructure
• Other built infrastructure (public services,
  government buildings)

• POLITICAL
• Governance
• Transparency
• Participation, inclusion and political rights
• Access to information

• FINANCIAL
• Access to credit
• Land tenure, legal rights
• Compensatory mechanisms and funds
• Insurance and financial protection

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Risk management and adaptation
Damage and costs
MANAGEMENT, TRANSFER AND REDUCTION MITIGATION
ADAPTATION EVOLUTION
HAZARDS Baseline modified by variability
and change
RISK Multi stresses More severely affected by
vulnerability but aggravated by changes in
hazards patterns
VULNERABILITY Diverse, local Sector specific
RESILIENCE
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An integrated framework, a systemic perspective
IMPACTS ON NATURAL NAD HUMAN SYSTEMS Food and
water resources Ecosystems and biodiversity Human
settlements Human health
CLIMATE CHANGE Temperature rise Sea level
rise Precipitation change Droughts and floods
Adaptation
Unwanted evolution
Adaptation and Mitigation
EMISSIONS AND CONCENTRATIONS Greenhouse
gases Pollution (air, water, soil, sea)
Socioeconomic development paths Economic
growth Technology Population Governance
Current paradigm
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Reasons for the increase in natural catastrophes
and natural catastrophe losses

• Global population growth (exponential
  development) in 1800, for example, there were
  one billion people living on the earth, today
  there are 6.3 billion.
• The rising standard of living in nearly all
  countries of the world produces growing
  accumulations of wealth which are hit in the
  event of a catastrophe.
• Concentration of population and values in
  conurbations the emergence of numerous mega
  cities - even in exposed regions (e.g. Tokyo 30
  million inhabitants)
• Settlement and industrialisation of very exposed
  regions, especially coasts and river basins,
  tourism in danger zones, e.g. Florida
• Vulnerability of modern societies and
  technologies, structural engineering, devices and
  equipment, networks problems involving suppliers
  too
• Increasing insurance penetration throughout the
  world, i.e. the proportion of insured goods is
  mounting globally. Consequently, insured losses
  are escalating even faster.
• Global changes in environmental conditions,
  climate change, water scarcity, loss of
  biodiversity

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ECLACs disaster assessments over the years
Period AFFECTED POULATION AFFECTED POULATION TOTAL DAMAGE AND LOSSES
  Deaths Primary affected population (millions of US dollars, at 2004 value)
1972-1980 38,042 4,229,260 78,085
1980-1990 34,202 5,442,500 101,251
1990-1999 32,648 2,518,508 31,367
2000-2010 (estimated) 18,032 35,478,470 50,050
1972-2005 122,924 47,668,738 260,753
Yearly average 3,725 1,444,507 7,902
Of which of meteorological or climatic nature 50,067 22,929,198 127,923
Source ECLAC led assessments since 1973 Source ECLAC led assessments since 1973 Source ECLAC led assessments since 1973 Source ECLAC led assessments since 1973
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Total insurance growth, penetration and density
by region
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Appropriation of risk needed to promote risk
reduction

• Need for institutional and regulatory changes
• Use of market to value (price) risk
• Need for social policies for compensation and
  promotion (provide gender, age, ethnic sensitive
  instruments)
• See risk reduction as a business opportunity
• Imperfect or inactive markets require government
  action / intervention

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LEVEL OF DISASTER IMPACT

• Indicates coping and adapative capacity

Excedence (residual or excedent risk)
Risk to be covered (financial gap)
Acceptable risk
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ESTABLISHING RISK FINANCING NEEDS
CAT bonds
Probability or return period
Risk type
50-200 years
Parametric coverage
Resource gap
Catastrophic risks
20-30 years
Contingency funds
Budget constraint
2-3 years
Reserve funds
Recurrent multi-hazard risks
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Policy implications

• Exposure to disaster risks is not unlike exposure
  to other risks (financial, commercial, social,
  political)
• Exposure to risk has a positive correlation with
  poverty disasters impacts are not distributed
  homogeneously neither in location nor in impact
• Social impact is regressive direct linkage
  between vulnerability and poverty, vulnerability
  and marginalization, vulnerability and gender or
  ethnicity

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Appropriation to promote reduction of risk (in
the face of extreme events and climate change)

• Need for regulatory and institutional changes
• Markets as clearing houses to price risk (beyond
  insurance)
• Need for social policies for compensation,
  promotion and solidarity
• Risk management is an investment / business
  opportunity
• Imperfect markets require governmental
  intervention

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The role of ECLAC in respect of disaster
assessment and risk reduction

• In response to its member countries, has over 35
  years assessed disasters socioeconomic impact
• Developed a methodological tool for damage and
  loss assessment (DALA), now recognized as the
  international standard for post-disaster
  assessment
• Has accumulated quantitative evidence that allows
  for economic analysis of risk, which may be
  extrapolated for disasters future impact and
  could be used to quantify partially the
  socioeconomic implications of climate change and
  approach the valuation of adaptation costs
• Has increased national capabilities and
  contributed to policy changes in Latin America
  and the Caribbean and in other regions, namely
  South East Asia in cooperation with ESCAP and the
  World Banks GFDRR

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• Thank you!
• http//www.eclac.org/
• http//gfdrr.org/
• http//www.proventionconsortium.org/
• http//groups.google.com/group/pdna-for-recovery
• http//www.recoveryplatform.org
• http//www.undp.org/cpr/iasc