SOCIAL DEVELOPMENT DEPARTMENT

Poverty and Social Impact Analysis ( PSIA) on Building Resilience of the Poor to Disaster and Climate Risk in Mexico

Why this PSIA?

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings Conclusion

More than two thirds of the country’s population and GDP are at hazard risk. And while uncertainty exists around specific impacts and scenarios, it is generally agreed that climate change will affect the country.

The Government of Mexico (GoM) has requested a Strengthening Social Resilience to Climate Change Development Policy Loan (DPL) of US$300 million to be presented to the Board for approval by the end of calendar year 2011.

And yet, there is little empirical evidence on how climatic disasters and climate change will affect the most vulnerable.

The PSIA has three objectives

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings Conclusion

Understand the level & spatial distribution of climatic risks in Mexico, and their possible implications for poverty.

Assess the impact of climatic disasters and climate-related events on welfare, with a focus on the poorest households and municipalities.

Determine whether existing policies and programs mitigate the expected negative effects of such events.

Key hypotheses

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings Conclusion

Hypothesis 1 – poverty correlates with higher disaster risk Hypothesis 2 – natural hazards increase poverty Hypothesis 3 – disaster risk management programs attenuate poverty

The poorest municipalities in Mexico are highly exposed to risk

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings: Risk - Poverty Conclusion

Overlaps Between Risk Stratification and the 125 Poorest Municipalities in Mexico

Seismic Risk

Entity Municipalities Risk

High Medium Low

Oaxaca 58 57 1 0

Guerrero 21 21 0 0

Chiapas 20 8 12 0

Veracruz 15 2 10 3

Puebla 9 2 7 0

Durango 1 0 0 1

Nayarit 1 0 1 0

Total 125 90 31 4

Hydro-meteorological Risk

Entity Municipalities Risk

High Medium Low

Oaxaca 58 43 10 5

Guerrero 21 16 4 1

Chiapas 20 4 8 8

Veracruz 15 10 3 2

Puebla 9 6 3 0

Durango 1 0 0 1

Nayarit 1 1 0 0

Total 125 80 28 17

Poor families are likely to bear higher losses on their housing from disaster risk.

Building Resilience of the Poor to Disaster and Climate Risk in Mexico

Background Objectives Working Hypothesis Findings: Risk - Poverty Conclusion 0

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And have low levels (in value and number) of critical public infrastructure for disaster emergencies (hospitals and roads)

Building Resilience of the Poor to Disaster and Climate Risk in Mexico

Background Objectives Working Hypothesis Findings: Risk - Poverty Conclusion

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valor_escuelasvalor_vivendas_enpobrezavalor_hospitales

valor_carreterasvalor_puentes

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Grafica 4.1. Curvas de Lorenz para valor de activos municipales (normalizados por poblacion)

High risk municipalities have good incidence of disaster safety nets (temporary employment and cash transfers), but low presence of civil protection units and

hazard maps

Building Resilience of the Poor to Disaster and Climate Risk in Mexico

Background Objectives Working Hypothesis Findings: Risk Profile Conclusion

Natural disasters can have sizable and persistent impacts on poverty and human development.

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings: Welfare Impacts Conclusion

Between 2000-05: Counter-cyclical effects: Poverty increased

between 1.5-3.7% for disaster-affected municipalities, with floods and droughts being the most harmful.

Sizable impact. Municipalities affected by

disasters lost 2 years of human development gains over the same period.

Persistent: Poverty increased between 0.9-

1.6% for municipalities affected by disasters during the 1990s.

Impacts are stronger in municipalities with lower human development and higher poverty.

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis

Contents Findings: Welfare Impacts Conclusion

Percentile Human Development Index Asset Poverty

-.0060769** .025294*** 20 (.0025232) (.008047)

-.0049387** .019517 40

(.0020223) (.312334)

-.0031631* .011451** 60

(.0017112) (.005618)

-.0000746 .013336** 90

(.002127) (.0065494)

Number of observations 4860 4884

*** p<0.01, ** p<0.05, * p<0.1

Bootstrapped Standard Errors in parenthesis.

Climate change will have differentiated effects on rain fed municipalities, and this in turn on children malnutrition (low height for age < 5) in rural areas

Progressive transfers to high exposure municipalities through catastrophic insurance program

Building Resilience of the Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings: Risk Management Policies Conclusion

Average transfers between 2002-09

Cyclone exposure Support Obs

High 1,738,751 339

Medium 1,565,716 156

Low 1,501,942 225

Flood exposure Support Obs

High 1,798,787 303

Medium 1,563,135 207

Low 1,449,570 209

Nota: Note: Transfers in constant pesos (2009)

Does Progresa/Oportunidades protects its beneficiaries

from droughts? . Building Resilience of the

Poor to Disaster and Climate Risk in Mexico Background Objectives Working Hypothesis Findings: Risk Management Policies Conclusion

In a sample of rural households located in

Central Mexico, droughts between 1998 and 2000 appear to reduce overall consumption.

Preliminary findings also suggest that the

conditional cash transfer program Oportunidades protect non-food consumption, but not food consumption.

PSIA work has been multidisciplinary, partly demand-driven and quantitative

Building Resilience of the Poor to Disaster and Climate Risk in Mexico

Background Objectives Working Hypothesis Findings Conclusion

Multidisciplinary. Climate scientists, economists and actuaries work together.

Partly demand-driven: Requests from Ministries, but also aiming to fill knowledge gaps.

Policy-oriented: Already providing key inputs for existing programs (i.e., Program for Risk Prevention in Human Settlements) or strategies (i.e., National Adaptation Strategy, 5th National Communication on Climate Change).

Emphasis on quantitative methods: Reliance on impact evaluation techniques.