The economic impact of Hurricane Mitch is estimated to be the equivalent of 30 years of development for the Central American region. Have we made any progress since then?
We discussed this with Joaquín Toro, Disaster Management Coordinator for the Latin America and Caribbean region at the World Bank.
What progress has been made in Central America in disaster risk management?
We cannot compare disasters, however, a few years ago we had Eta and Iota, which affected the same region, the same place as Hurricane Mitch. However, we had much smaller impacts in Hurricane Mitch.
Unfortunately, we lost thousands of lives in Honduras and Nicaragua. And fortunately, due to the efforts of early warning systems, evacuation, mitigation works that were done in the region, only, and unfortunately, a little more than 90 people lost their lives.
The economic impacts were also much lower.However, the region is quite exposed to all natural hazards. Climate change is not helping either. We are seeing stronger and more recurrent events. However, the region is quite exposed to all natural hazards. Climate change is not helping either. We are seeing stronger and more recurrent events.
Are there any examples of lessons learned from other countries that would be useful for the reality of Central America?
Colombia was one of the first to push for contingent credits. In fact, this along with experience in Turkey, the Bank developed contingent credit loans, the famous CAT DDOs, to begin to cover and protect that budget.
In the same line of risk financing, the Bank has also supported countries such as Mexico, Chile, Peru and Colombia to develop a risk transfer instrument to the private sector with catastrophe bonds. In fact, Mexico was one of the first countries to put them on the market.
The Caribbean region, for example, in the same area of financial risk management, has innovated a little more than 15 years ago, with the Caribbean catastrophe risk insurance, the CCRIF, which is an insurance pool that insures the State in terms of catastrophes. This has been exported to Central America and now several countries in the region, such as Guatemala and Panama, are part of CCRIF.
Interviewer: Álvaro G. De Pablo, Communications Associate at the World Bank.
About the Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund
The Central America and Caribbean Catastrophe Risk Insurance Program Multi-Donor Trust Fund, created in 2014, has facilitated access to high-quality sovereign catastrophe risk transfers by supporting CCRIF SPC, the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company. In addition, it has provided technical assistance to vulnerable countries, enhancing their capacity to manage the financial impacts of disasters.
The success of the fund has been driven by the active leadership of the steering committee and the support of key donors, such as the Federal Republic of Germany, through the Federal Ministry for Economic Cooperation and Development (BMZ) and its Development Bank (KfW), the U.S. Department of the Treasury, the Government of Canada, and the European Union (EU).
