"reconstruction
must not be at the expense of transformation"
Central America After Hurricane
Mitch
The Challenge of Turning a Disaster into an Opportunity
Central America
A. General Aspects
From October 21 to 31, 1998, Hurricane Mitch swept through
Central America with devastating fury, causing, according to ECLAC, more than 9,000
deaths, equal number of disappearances and 13,000 injured; some 460,000 people were left
homeless (seriously affected, housed in shelters) and millions were displaced. Direct and
indirect material losses have been estimated at about US$6.0 billion, of which two thirds
can be found in the primary sectors of production (agriculture, livestock, forestry and
fishery), 20% in the infrastructure of transportation and communication, and almost 13% in
housing and other social investments. Mitch is considered to be the most deadly hurricane
in the last 200 years in the Atlantic, stronger and more intense than Hurricane Andrew,
having caused the most serious material damage in history.
Hurricane Mitch hit Central America at a
critical moment in its history, during a period of hope, but at a time of difficult
transitions. Since the 1987 Peace Summits, the last decade has seen sustained efforts for
peace and democracy, economic reforms and regional integration, which have been in a
process of consolidation in the region. Enormous progress had been achieved, thereby
creating conditions for sustained development, the strengthening of the civil society and
better management of natural resources.
Economic growth in the region continued its recovery which
begun in 1997, after an abrupt drop in 1996. As a region, Central America grew
satisfactorily in 1998, and would have grown more so had it not been for the losses caused
by Hurricane Mitch. In the area of the environment, notable progress had also been made.
1998 was headed towards continuity of this process of economic and social development,
macroeconomic adjustments, modernization of the States and of a deepening of the process
of regional integration.
Central America is committed to respond to the effects of
Hurricane Mitch in ways that would attend to the needs of millions of Central Americans
affected by this disaster, which, at the same time, would strengthen the longer term
process of economic development and democratization. It is evident that the objective of
Central America is not that of rebuilding the same type of society and productive
structure so vulnerable to natural phenomena as the present one. As a result, Central
America sees the disaster caused by Hurricane Mitch not only as an immediate crisis but
also as a challenge. This phenomenon of nature is a call to action to find new schemes of
development in a form that would reduce the vulnerability of the society to future natural
phenomena, and that would strengthen democracy and the perspectives of future economic
development. An attempt to rebuild only what was lost would be a historical mistake that
would lead the region into a new cycle of disasters and would perpetuate old and new
structural, productive, social and environmental weaknesses.
At the inauguration of the first meeting of the Consultative
Group for the Reconstruction and Transformation of Central America, convened to confront
the problems caused by the Hurricane, the President of The Inter-American Development
Bank, Enrique V. Iglesias, urged the delegates of more than 50 donor governments and
multilateral organizations to look beyond the emergency and the financial situation of the
Central American countries in order to encourage a reconstruction that would transform the
region and overcome its former burden of poverty and inequality. Iglesias said that this
task must also sustain the recent and costly advances made by those nations in the area of
democracy and peace in addition to setting them back on the path towards stability and
economic growth and to strengthen the processes of structural reform and regional
integration that had been initiated during this decade. Likewise, he pointed out that the
central American nations are facing fundamental challenges that requires the support of
the entire international community. "That support is for economic development, it is
for social justice, and it is for the consolidation of their democratic life. Let us turn
the tragedy of Hurricane Mitch into the springboard for a great virtue, the virtue of
demonstrating international solidarity."
Delegations to the meeting held in Washington on December
10-11, 1998, pledged support for about US$6.3 billion to help the countries devastated by
Hurricane Mitch. This sum includes funds that had already been approved for emergency and
humanitarian assistance, tasks of immediate rehabilitation, programs for reconstruction
and transformation in the long term, and debt relief during the next few years. A high
proportion of this sum would be allocated to the countries most affected, especially
Honduras and Nicaragua. These contributions constitute an important first step in this
enormous challenge, which will be reviewed next May 25-28 in Stockholm during the second
meeting of the Consultative Group. At that time, donors will be able to review national
reconstruction and transformation plans and to confirm the commitments that were made in
December.
The Inter-American Development Bank announced that, for its
part, it expected to allocate about US$3.0 billion in financing and debt relief for the
Central American countries devastated by Hurricane Mitch in order to assist them in
rebuilding and transforming their economies during the next few years. Honduras and
Nicaragua, the nations hardest hit by Mitch would receive concessional loans from the Bank
during that period. The Bank also expects to grant Nicaragua debt relief under the HIPC
initiative for highly indebted poor countries, and is also committing itself to offer
similar help to Honduras as soon as it qualifies for the HIPC.
Likewise, during the meeting, several important advances made
in the area of debt relief were announced. The countries of the Paris club arrived at a
consensus on December 9, 1998 to offer an immediate moratorium of three years on payments
of bilateral debts to Honduras and a moratorium of two years to Nicaragua. The World Bank
announced that the Central American Emergency trust, created to help Honduras, Nicaragua,
El Salvador and Guatemala with the multilateral debts service, had received contributions
and pledges in the amount of US$100 million, and that more support is expected. Finally,
the World Bank and the IMF are evaluating the elegibility of Honduras to the HIPC
initiative of debt relief for highly indebted poor countries, as well as the decision
point for Nicaragua?s is access to HIPC. The IDB will be an important participant in this
reduction effort.
The Bank, in turn, is working with the subregion on diverse
initiatives so that reconstruction might result in a true transformation. The Bank held a
workshop on environmental lessons learned from Hurricane Mitch at the beginning of March,
1999, in San Salvador. Specialists from the Bank are preparing a plan of action to attend
to rural poverty in the country most punished by Mitch. Experts from the Bank are also
working with Central American authorities on topics of transparency of management of
public funds, with the objective of improving the state systems of contracts and
acquisitions.
During the first six months since the cataclysm, the Bank has
committed more than US$400 millon in financing to programs in Central America. After
having sent missions to Honduras, Nicaragua, Guatemala and El Salvador in order to
analyze, the magnitude of the resources damages caused by the hurricane, the Bank
collaborated with the Central American governments to redirect from operations already in
progress to emergency tasks. These reassignations, contributed to immediate disbursements.
The Bank approved in record time new loans for more than
US$338 million to support the reconstruction process, especially in the areas of
transportation, public health, education and housing. On the other hand, the Bank assigned
US$100 million to a new Fund for Central American Reconstruction, created to receive
donations from donnor countries. The Multilateral Investment Fund, administered by the
Bank, in turn, created a trust of US$12 million to assist micro-enterprises in Central
America that were affected by the consequences of Mitch.
B. Recent Situation in Cental
America
In 1998, the regional GDP grew more or less by the same
amount as the preceding year, raising the product per inhabitant by 1.6%. The Central
American countries have been progressing since 1997, recovering from the decline begun in
1993, and which had reached its lowest point in 1996 (see graph 1). This better
performance is the result of a favorable economic environment for the region, with a
process more highly accentuated by subregional integration open to the outside, with an
adequate macroeconomic equilibrium and in a relatively peaceful and socially harmonious
environment. Towards the end of 1998, the economic indicators were favorable with
tendencies somewhat better than the year before, until Hurricane Mitch which exacerbated
problems that were already evident as a result of the El Ni?o phenomenon.The region had
been receiving significant foreign revenues from exports as well as from net capital
inflows attracted by good macroeconomic conditions that promoted direct investment, and
repatriations of capita. This improved the fiscal situation, allowed the maintenance of
relative exchange stability, and the reduction of interest rates.
Graph 1
The international economic environment had been favorable
to Central America: the United States, its principal trading partner, continues to
experience significant economic growth with low inflation, international interest rates
have remained as stable as the capital markets, international prices for coffee have risen
with respect to preceding years, petroleum prices have been low until recently, to all of
which may be added the positive trend of "maquiladora" activity that is growing
in the region and the increase in family remitances.
Measures geared towards modernization of the State and to
strengthen the financial systems were implemented, supported by efforts to control the
financial imbalance in the public sector by maintaining discipline in monetary policy.
Without exception, although with the differences of degree, the countries continued to
introduce reforms geared to strengthening public revenues and to improve expenditures
management.
Progress has also been made in the privatization of the
state-owned communications and electric power enterprises , as well as in the concession
of services such as railways, mail, ports and airports.
Inflationary pressures have been abating, and some countries
have been able to maintain single digit inflation rates, although Hurricane Mitch might
modify this. As a result, salary increases in some countries have shown presented real
improvements.
Intraregional trade has shown an important recovery since
1997 in which it grew 13% (compared to 7% in 1996). Total intraregional exports and
imports decreased between 1970 and 1980, a period of crisis for the process of integration
(see graph 2). The propensity to trade intraregionally is still low in Central America, in
comparison to the trade in other subregions. In 1997 and 1998, the value of Central
American exports within Central America was about US$1.8 billion per year while total
exports of the subregion amounts to an annual average of US$9.0 billion, that is about
20%. Related to imports, at an annual average of US$18.0 billion, the proportion is only
10% (see graph 3).
Graph 2
Graph 3: Intraregional Trade (as % of Total Foreign Trade)
The five countries carried out negotiations whithin their
common market in 1998 that led to a reduction of the list of exceptions to interregional
commerce, which is now limited to coffee, sugar, ethyl alcohol, wheat flour and petroleum
derivatives. The other goods that originate in Central America are exempted from tariffs
at the intraregional level. At the same time, regional trade norms are being revised in
order to comply with the commitments assumed by each Central American country in the
recent multilateral trade negotiations in the framework of the World Trade Organization,
and a set of norms regarding regulations of origin, dishonest trade practices and
safeguarding mechanisms have come into force. The negotiations regarding the Northern
Triangle (El Salvador, Guatemala, and Honduras) and Mexico have also progressed. At the
Americas Summit in Santiago, Chile, the Central American Common Market (CACM) signed a
Framework Agreement with MERCOSUR that will strengthen integration and trade relations. At
that meeting, the Central American countries signed a communiqu? with Chile to accelerate
negotiations on free trade.
C. Hurricane Mitch and its
Consequences
The hurricane season which normally occurs between
July and November, had in 1998, characteristics of unusual force, causing desolation, loss
of life, and economic, social and environmental damages of enormous magnitude. The
concentration of events of great meteorological violence was historic: a dozen tropical
cyclones affected densely populated zones in the entire Caribbean basin.
These types of calamities, are not unusual in the region; in
1974, the region experienced great loss of human life and significant economic devastation
as a result of Hurricane Fifi. Natural disasters occur cyclically in the region, be they
climactic, seismic or volcanic in nature. Hurricane Mitch--the last and most powerful
storm of the 1998 season--has been classified as the most serious disaster ever to hit
Central America in many years. It was not only the force of the storm that touched down on
the coasts of the region, but also its extension, the rain that fell, and the apparently
erratic trajectory that it followed for several days.
Hurricane Mitch was formed in the southwestern sector of the
Caribbean Sea, 360 kilometers from Kingston, Jamaica, on October 21, 1998. In the
beginning, the system moved slowly towards the west, becoming more and more intense until
it became a tropical storm. Then, Mitch began to move to the northwest towards the
Nicaraguan coast. On October 24, it was classified as a hurricane.
By October 26, Hurricane Mitch had continued to gain
intensity and became a category 5 hurricane on the Saffir-Simpson scale, becoming one of
the most intense hurricanes in the last 200 years in the Caribbean. The pressure at the
center of the hurricane reached a minimum of 904 MB, the fourth lowest pressure recorded
in an Atlantic hurricane this century. At its greatest intensity, the winds registered
sustained velocities of 288 kms/hour, with wind gusts of up to 340 kms/hour. By then,
Hurricane Mitch was north of the Honduran coast.
The hurricane changed trajectory and began to move slowly in
a southeasterly direction, crossing through Honduras and arriving in El Salvador. During
the fives days from October 26 to the 31, it generated torrential downpours, overflowing
rivers and causing huge floods that affected the five Central American countries.
It was the rain and the extreme vulnerability of the
population, more than the hurricane winds, that caused the disaster. In Choluteca,
Honduras, during those five days, 914 mm (36 inches) of rain were recorded; that is to
say, 42 times the expected rain for that period under normal conditions (in 5 days, the
amount of rain that fell was equivalent to 212 days of an average year). Similar
quantities of rain were registered in Tela and La Ceiba on the northern coast of Honduras.
The extraordinary forces of Nature along with decades of
exploitation of natural resources without adequate environmental considerations and the
conditions of dire poverty came into combination to cause an unprecedented disaster. The
first and most particularly direct effect is the loss of human life. Particularly, poor
people, whose conditions of poverty increase their vulnerability. According to ECLAC, a
total of 9,214 deaths (of these, 5,657 in Honduras and 3, 045 in Nicaragua), 9, 171 people
missing (8,058 alone in Honduras), 13,042 hurt (of these, 12,275 in Honduras), and
3,465,000 affected (1,500,000 Hondurans and 868,000 Nicaraguans) are estimated.
Damages and direct and indirect production looses were also
estimated by ECLAC at the equivalent of US$5.9 billion, of which two thirds in the
productive sectors (agriculture, forestry and fishery, industry and commerce), 20% to the
physical infrastructure (water and sewage systems, energy, transportation and
communications), and a bit more than 13% to the social sectors (housing, health and
education). The direct damages were more than 51% of the total (about US$3.0 billion) and
the indirect ones--principally lost production due to loss of raw materials or future
losses due to damages to plantations, as well as lost revenues from industrial plants that
closed down or from diminished trademake the rest of the damages (US$ 2.9 billion).
Honduras was the most affected country, not only in total
number of deaths (66.4%) and missing persons
(87.9%), but also in material losses
(64.1%). In Honduras, total damages are estimated at US$ 3.8 billion, of which US$2.7
billion correspond to the productive sectors, another US$660 million to physical
infrastructure, and US$440 million to the social sectors. In addition, the hurricane had a
national scope in Honduras, affecting almost the entire population of 6 million
inhabitants. The number left homeless has been estimsted at 1.5 million. There were
damages in the 18 departments of the country, although the strongest and most constant
winds affected principally the north, particularly Cort?s and Col?n. Choluteca, in the
south recorded the greatest number of deaths.
In Honduras, more than 600,000 were either displaced or had
to seek shelter. This required extraordinary parallel activities for the distribution of
food, drinking water and medical services, which would have been impossible without the
opportune and decisive mobility of the government, the Honduran civil society and the
international community. The overcrowding in the shelters gave rise to the outbreak of
respiratory, intestinal, eye and skin diseases. More than 4 million people were without
water for some period of time.
For an important group of the population, especially in
Honduras and Nicaragua, the situation became very serious, since their source of
subsistence was lost in both rural and urban areas. Small farmers saw their crops
devastated, their animals lost, their lands useless; at the same time, in many cities, the
waters washed away the businesses of small artisans and businessmen; the water swept away
the tools from their workshops and their stands at the market, and there is little hope
for them of being able to recoup their losses in the short run. Even in the more formal
and modern sector, the risk of losing employment temporarily or permanently due to the
closing of businesses has grown.
Exports of Central American basic products will suffer more
in 1999 than in 1998, since the hurricane produced significant damage on permanent
plantations, thereby affecting their future productive capacity. In the Honduran banana
industry, very significant losses were recorded, since almost all of the plantations are
located in two of the areas most affected by the floods (belonging to the Tela Rail Road
Company and its Chiquita brand and to Standard Fruit). The Guatemalan banana industry was
also affected by the flooding of their plantations in Izabal. The Nicaraguan banana
industry was less affected because their plantations are smaller and the percentage
destroyed by the floods was lower. Coffee, the principal export of Honduras, recorded a
loss of new production of 500,000 bags, while 105,000 more were destroyed when the
warehouses that stored them were flooded; in Guatemala, 55,00 hectares of coffee plants
were affected by the prolonged rains and strong winds in the departments of Guatemala and
Alta Verapaz; in El Salvador, the excessive rain caused the loss of 3,700 tons of coffee.
In addition to the losses of life and in the productive
system, Hurricane Mitch caused significant damages to the environment, especially through
direct primary and secondary impact. The intense winds uprooted, defoliated and distorted
vegetation, disturbed the fauna, produced strong ocean swells and tides, caused landslides
and massive erosion of ground soil on mountain sides due to the voluminous and sustained
rains, and erosion to the beaches, etc. The direct secondary effects were seen in mountain
landslides, the formation of open gullies, the result of the hydric saturation of the soil
on surfaces that had been stripped of their original vegetation, massive deposits of
sediments in river and creek beds, as well as on beaches and reefs, formation of fluvial
islands, death of animals after the storm, flooding, avalanches, etc.
Central
America
Honduras
Nicaragua
El
Salvador
Guatemala
Costa Rica
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