damage and losses evaluation in cases of disasters an introduction to the eclac methodology j....

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


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


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


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


The Timing of EffectsThe Timing of Effects

Time, months

Direct Damages

IndirectLosses

5 yrs

Affect:Living conditionsEconomic development


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


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


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


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


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


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


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


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


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


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)


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


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


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


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


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


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


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

damage and losses evaluation in cases of disasters an introduction to the eclac methodology j....

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