Damage and Losses Evaluation in Cases of Disasters An Introduction to the ECLAC methodology J....
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Damage and Losses Evaluation Damage and Losses Evaluation in Cases of Disastersin Cases of Disasters
An Introduction to the ECLAC methodologyAn Introduction to the ECLAC methodology
J. Roberto Jovel, Consultant
22 enero 2003 Roberto Jovel 2
Why undertake a Damage Why undertake a Damage and Loss Assessment?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
22 enero 2003 Roberto Jovel 3
Damage vs Losses:Damage vs Losses:El Salvador Eartquakes in 2001El Salvador Eartquakes in 2001
Million US$
Direct damages 939
Indirect losses 665
Total 1,604
64%5%
31%
Direct damages
Production losses
Increased costs/diminished revenues
22 enero 2003 Roberto Jovel 4
Damage vs Losses:Damage vs Losses:Argentine Floods in 2003Argentine Floods in 2003
Million US$
Direct damages 662
Indirect losses2,216
Total 2,878
23%
65%
12%
Direct damagesProduction lossesIncreased costs/diminished revenues
22 enero 2003 Roberto Jovel 5
Damage vs Losses:Damage vs Losses:Central America Drought in 2001Central America Drought in 2001
Million US$
Direct damages ...
Indirect losses 162.2
Total 162.2
0%
70%
22%
8%
Direct damages
Production losses
Increased costs/diminished revenues
Relief assistance
22 enero 2003 Roberto Jovel 6
The Timing of EffectsThe Timing of Effects
Time, months
Direct Damages
IndirectLosses
5 yrs
Affect:Living conditionsEconomic development
22 enero 2003 Roberto Jovel 7
Usefulness of the Damage and Usefulness of the Damage and Loss AssessmentLoss 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
22 enero 2003 Roberto Jovel 8
The Damage and Loss The Damage and Loss Assessment ToolAssessment Tool
• The ECLAC experience in damage and loss assessment in the Latin America and Caribbean region
• The Handbook for Assessment of Socio-Economic and Environmental Effects of Disasters
• A tool for – dialog and communication with decision
makers– analyzing risk under alternative scenarios
22 enero 2003 Roberto Jovel 9
Basic Concepts UtilizedBasic 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
22 enero 2003 Roberto Jovel 10
Direct DamagesDirect 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
22 enero 2003 Roberto Jovel 11
Examples of Direct DamagesExamples 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
22 enero 2003 Roberto Jovel 12
Criteria for the Valuation Criteria for the Valuation of Direct Damagesof 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
22 enero 2003 Roberto Jovel 13
Indirect LossesIndirect 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
22 enero 2003 Roberto Jovel 14
Indirect Losses: ExamplesIndirect 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
22 enero 2003 Roberto Jovel 15
Total Amount of EffectsTotal 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
22 enero 2003 Roberto Jovel 16
Macroeconomic EffectsMacroeconomic 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)
22 enero 2003 Roberto Jovel 17
Macroeconomic Effects..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
22 enero 2003 Roberto Jovel 18
Effects on GDP: Hurricane Effects on GDP: Hurricane Mitch in HondurasMitch in Honduras
-8
-6
-4
-2
0
2
4
6
8
1996 1997 1998 1999 2000 2001 2002
AN
NU
AL
GD
P G
RO
WT
H, %
Before Mitch Projected before Mitch After Mitch
22 enero 2003 Roberto Jovel 19
Effect on Sectorial GDP: Effect on Sectorial GDP: Mitch and HondurasMitch and Honduras
-20
-15
-10
-5
0
5
10
15
20
25
30
Se
cto
ria
l GD
P g
row
th r
ate
, %
Agriculture andLivestock
Industrial Construction
1998 Without Mitch 1999 Without Mitch 1998 After Mitch 1999 After Mitch
22 enero 2003 Roberto Jovel 20
Effects on Foreign Sector: Effects on Foreign Sector: Honduras and MitchHonduras and Mitch
0
500
1000
1500
2000
2500
3000
3500
4000
Mill
ion
Do
llars
pe
r Y
ea
r
Exports Imports
1998 Before Mitch 1999 Before Mitch 1998 After Mitch 1999 After Mitch
22 enero 2003 Roberto Jovel 21
Effects on Public Finances: Effects on Public Finances: Honduras and MitchHonduras 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
22 enero 2003 Roberto Jovel 22
Effect of Disasters on Gross Effect of Disasters on Gross Capital FormationCapital Formation
Gro
os
Cap
ita l
Fo
rmat
i on
Time
Disaster
Developing country
Industrial economy
22 enero 2003 Roberto Jovel 23
Other Macroeconomic Other Macroeconomic EffectsEffects• 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
Handbook for Estimating the Handbook for Estimating the Socioeconomic and Environmental Effects Socioeconomic and Environmental Effects
of Disastersof Disasters
www.eclac.cl/mexico
25Roberto Jovel22 enero 2003
[email protected]@jovel.org