Transcript damage and losses

Damage and Losses Evaluation
in Cases of Disasters
An Introduction to the ECLAC methodology
J. Roberto Jovel, Consultant
Why undertake a Damage
and Loss Assessment?
Any disaster brings about both destruction
and damage to physical assets, and changes
in the economic flows of the affected area
In most cases, estimates of direct damages
are made and allegedly represent the total
effect of disasters
However, the amounts of indirect losses that
arise in the medium term as a result of the
disaster may be of more significance to the
affected population
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Damage vs Losses:
El Salvador Eartquakes in 2001
Million US$
Direct damages
Indirect losses
Total
939
665
1,604
31%
64%
5%
Direct damages
Production losses
Increased costs/diminished revenues
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Damage vs Losses:
Argentine Floods in 2003
Million US$
Direct damages
Indirect losses
Total
662
2,216
2,878
12%
23%
65%
Direct damages
Production losses
Increased costs/diminished revenues
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Damage vs Losses:
Central America Drought in 2001
Million US$
Direct damages
Indirect losses
Total
...
162.2
162.2
8%
0%
22%
70%
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Direct damages
Production losses
Increased costs/diminished revenues
Relief assistance
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The Timing of Effects
Affect:
Living conditions
Economic development
Direct
Damages
5 yrs
Indirect
Losses
Time, months
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Usefulness of the Damage and
Loss Assessment
• To determine the amount and geographical distribution of
disaster effects (damage and losses)
• To estimate financial requirements for reconstruction and
medium and long term social and economic recovery
• To identify most affected sectors or areas that will require
priority attention in reconstruction and recovery
• To provide basis for designing strategic framework for
reconstruction and long-term economic and social recovery
• To identify mitigation activities in order to reduce effects of
future disasters
• To determine the capacity of affected government to face by
itself the reconstruction and recovery requirements and –
by default – to ascertain assistance requirements, whether
internally or from abroad
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The Damage and Loss
Assessment Tool
• The ECLAC experience in damage and
loss assessment in the Latin America and
Caribbean region
• The Handbook for Assessment of SocioEconomic and Environmental Effects of
Disasters
• A tool for
– dialog and communication with decision
makers
– analyzing risk under alternative scenarios
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Basic Concepts Utilized
• Origin of disasters
– Hydrometeorological
– Geological
– Man made
• Type of disaster
– Sudden
– Slowly evolving
• Types of effects:
– Direct damages
– Indirect losses
– Macro-economic effects
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Direct Damages
• Destruction or partial damage to
assets, including infrastructure,
stocks, production ready for
harvesting, natural resources,
etcetera
• They occur during or immediately
after the disaster
• They are measured in physical terms,
and a monetary value is assigned to
them
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Examples of Direct Damages
• Value of destroyed or damaged housing
• Value of destroyed or damaged household
goods within affected housing
• Value of destroyed or damaged
commercial buildings
• Value of stocks stored in commercial
buildings affected
• Value of lands eroded or silted by flooding
• Repair and reconstruction value of water
supply and sewerage, electricity, transport,
etcetera
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Criteria for the Valuation
of Direct Damages
• Present (book) value of assets,
adjusted for obsolence and
maintenance level
• Replacement value of assets
• Reconstruction costs including
measures for modernization,
mitigation and prevention
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Indirect Losses
• Changes in economic flows
• They include:
– Future production that will not be obtained
– Increased costs and decreased revenues in the
provision of services
– Cost of relocation into safe areas
– Humanitary (emergency) assistance costs
• They occur after the disaster
• Measured in monetary (not physical) terms,
at current prices
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Indirect Losses: Examples
• Agricultural production that will note be obtained
due to flood or drought, or that will not be sown
because of soil erosion
• Increased operational costs or decreased
revenues in the provision of water supply,
electricity or transport services
• Reduction in economic activity in the commerce
and tourism sector
• Investments required for relocation of activities in
safe areas
• Cost of humanitarian assistance during
emergency phase
• Costs incurred to avoid epidemics after disasters
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Total Amount of Effects
• Equivalent to the addition of direct
damages and indirect losses
• Expressed in monetary terms
• Usually underestimated, in view of
difficulty in estimating indirect losses
• No economic value is assigned to the
loss of life
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Macroeconomic Effects
• The impact of the disaster on the overall economic
performance of the affected country or region, as
measured on the main economic variables
• May not be added to the total amount of effects
previously described
• They occur after the disaster
– Short term, up to six months (emergency and rehabilitation)
– Medium term, 1 to 2 years (rehabilitation and
reconstruction)
– Long term (Structural changes, changes in development
prospects, non replacement of assets)
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Macroeconomic Effects..
• Measured as the difference in performance of main
macro-economic variables, after and before the
disaster
• Effects on following variables:
– Gross domestic product (GDP) at national and sectorial
levels
– Trade and payments balance
– Gross capital formation
– Public finances
– Level of debt and monetary reserves
– Changes in consumer prices and inflation
– Employment levels
– Personal and family income
– Morbidity and mortality levels
– Malnutrition and migration
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Effects on GDP: Hurricane
Mitch in Honduras
8
ANNUAL GDP GROWTH, %
6
4
2
0
1996
1997
1998
1999
2000
2001
2002
-2
-4
-6
-8
Before Mitch
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Projected before Mitch
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After Mitch
18
Effect on Sectorial GDP:
Mitch and Honduras
30
Sectorial GDP growth rate, %
25
20
15
10
5
0
-5
-10
-15
-20
Agriculture and
Livestock
1998 Without Mitch
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Industrial
1999 Without Mitch
Construction
1998 After Mitch
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1999 After Mitch
19
Effects on Foreign Sector:
Honduras and Mitch
4000
Million Dollars per Year
3500
3000
2500
2000
1500
1000
500
0
Exports
1998 Before Mitch
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Imports
1999 Before Mitch
1998 After Mitch
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1999 After Mitch
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Effects on Public Finances:
Honduras and Mitch
• Before the hurricane, fiscal deficit was
expected to be 2.5% of GDP in 1998
• As a result of the disaster, fiscal deficit
jumped to 3.6% of GDP in 1998 and to 8%
in 1999
• This was due to
– A drop in tax revenues due to diminished
economic activity
– Increased expenditures to meet requirements
for humanitarian assistance and rehabilitation
stages
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Effect of Disasters on Gross
Capital Formation
Disaster
Developing country
Industrial economy
Time
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Other Macroeconomic
Effects
• Due to damages in productive activities,
workers lose employment and income
• Workers in the construction industry,
however, may actually be in higher
demand and have higher income during
the reconstruction phase
• Consumer good prices may rise due to
lack of sufficient local production and to
speculation, thus increasing inflation rates
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Handbook for Estimating the Socioeconomic
and Environmental Effects of Disasters
www.eclac.cl/mexico
[email protected]
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