World Bank Documentdocuments.worldbank.org/curated/en/503301541437599160/...Leading up to 2008, Costa Rica's macroeconomic performance was one of the strongest in Latin America, with

The World Bank Costa Rica Catastrophe Deferred Drawdown Option (CAT DDO) (P111926)

Document of The World Bank

Report No: ICR00004369

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-75940)

ON A

LOAN

IN THE AMOUNT OF US$65 MILLION

TO

THE REPUBLIC OF COSTA RICA

FOR A

DEVELOPMENT POLICY LOAN WITH A

CATASTROPHE DEFERRED DRAWDOWN OPTION (CAT DDO)

October 17, 2018

Social, Urban, Rural and Resilience Global Practice

Central America Country Management Unit Latin America and the Caribbean Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 31, 2017)

Currency Unit = Costa Rican Colones (CRC)

CRC 1 = US$ 0.0018

US$1 = CRC 569.75

FISCAL YEAR

January 1–December 31

ABBREVIATIONS AND ACRONYMS

AyA Costa Rican National Water and Sanitation Institution (Instituto Costarricense de Acueductos y Alcantarillados)

Cat DDO Catastrophe Deferred Drawdown Option

CCA Climate Change Adaptation

CCRIF Caribbean Catastrophe Risk Insurance Facility

CEPREDENAC Coordination Center for the Prevention of Disasters in Central America and the Dominican Republic (Centro de Coordinación para la Prevención de los Desastres en America Central y República Dominicana)

CNE National Commission for Risk Prevention and Emergency Management (Comisión Nacional de Prevención de Riesgos y Atención de Emergencias) Before 1999: National Emergency Commission (Comisión Nacional de Emergencia)

CPS Country Partnership Strategy

CRSC Costa Rica Seismic Code

DPL Development Policy Loan

DRFS Disaster Risk Financing Strategy

DRM Disaster Risk Management

EMP Emergency Management Plan

ENSO El Niño-Southern Oscillation

GDP Gross Domestic Product

GFDRR Global Facility for Disaster Reduction and Recovery

GoCR Government of Costa Rica

ICR Implementation Completion and Results Report

IDF International Development Fund


INS National Insurance Institute (Instituto Nacional de Seguros)

M&E Monitoring and Evaluation

MAG Ministry of Agriculture and Livestock (Ministerio de Agricultura y Ganadería)

MIDEPLAN Ministry of National Planning and Economic Policy (Ministerio de Planificación Nacional y Política Económica)

MoF Ministry of Finance (Ministerio de Hacienda)

NRM National Risk Management

NDP National Development Plan

NEF National Emergency Fund (Fondo Nacional de Emergencias)

NLM National Land Management

PCGIR Central American Comprehensive Disaster Risk Management Policy

PDNA Post Disaster Needs Assessment

PDO Project Development Objective

SICA Central American Integration System (Sistema de la Integración Centroamericana)

TA Technical Assistance

Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez

Sector Manager: Ming Zhang

Project Team Leader: Doekle Geert Wielinga

ICR Team Leader: Doekle Geert Wielinga and Melanie S. Kappes


TABLE OF CONTENTS

DATA SHEET

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN............................................................ 8

2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES ........................................................ 13

3. ASSESSMENT OF OUTCOMES ....................................................................................................... 19

4 ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME ....................................................................... 28

5 ASSESSMENT OF BANK AND BORROWER PERFORMANCE ................................................................. 29

6 LESSONS LEARNED ....................................................................................................................... 32

7 COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS ....................... 34

ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES ............................. 36

ANNEX 2: BENEFICIARY SURVEY RESULTS.............................................................................................. 39

ANNEX 3: STAKEHOLDER WORKSHOP REPORT AND RESULTS .................................................................. 40

ANNEX 4: SUMMARY OF BORROWER’S ICR AND/OR COMMENTS ON DRAFT ICR ....................................... 41

ANNEX 5: COMMENTS OF COFINANCIERS AND OTHER PARTNERS/STAKEHOLDERS.................................... 43

ANNEX 6: LIST OF SUPPORTING DOCUMENTS ....................................................................................... 44

ANNEX 7: MATRIX OF ADDITIONAL UNOFFICIAL INDICATORS .................................................................. 46

MAP................................................................................................................................................. 47


Page 1 of 47

A. BASIC INFORMATION

Country: Costa Rica Program Name:

Costa Rica Development Policy Loan (DPL) with Catastrophe Deferred Draw Down Option (Cat DDO)

Program ID: P111926 L/C/TF Number(s): IBRD-75940

ICR Date: 10/15/2018 ICR Type: Core ICR

Financing Instrument: DPL Borrower: Government of Costa Rica

Original Total Commitment:

US$ 65.00 million Disbursed Amount: US$ 65.00 million

Revised Amount: US$ 65.00 million

Implementing Agencies: Republic of Costa Rica, Ministry of Finance (Ministerio de Hacienda)

Cofinanciers and Other External Partners:

B. KEY DATES

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 06/30/2008 Effectiveness: 03/05/2009

Appraisal: 08/07/2008 Restructuring(s):

Approval: 09/16/2008 Mid-term Review:

Closing: 10/30/2011 10/30/20171

C. RATINGS SUMMARY C.1 Performance Rating by ICR

Outcomes: Highly Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Satisfactory

Borrower Performance: Highly Satisfactory

1 The operation was renewed twice by 3 years each time. According to official guidance, a DPL with Cat DDO can be renewed up

to four times for a total of 15 years.


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C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Highly Satisfactory Government: Highly Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

NA

Overall Bank Performance:

Satisfactory Overall Borrower Performance:

Highly Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments (if

any) Rating

Potential Problem Program at any time (Yes/No):

No Quality at Entry (QEA): None

Problem Program at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. SECTOR AND THEME CODES

Original Actual

Sector Code (as % of total Bank financing)

Public Administration

Other Public Administration 8 8

Transportation

Other Transportation 8 8

Water, Sanitation and Waste Management

Other Water Supply, Sanitation and Waste Management

84 84

Theme Code (as % of total Bank financing)

Finance 25 25

Finance for Development 25 25

Disaster Risk Finance 25 25

Urban and Rural Development 75 75


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Disaster Risk Management 75 75

Disaster Preparedness 25 25

Disaster Response and Recovery 25 25

Disaster Risk Reduction 25 25

E. BANK STAFF

Positions At ICR At Approval

Vice President: Jorge Familiar Calderon Pamela Cox

Country Director: Yaye Seynabou Sakho Laura Frigenti

Practice Manager/Manager: Ming Zhang Guang Zhe Chen

Program Team Leader: Doekle Geert Wielinga

Armando Eduardo Guzman Escobar

ICR Team Leader: Doekle Geert Wielinga and Melanie Simone Kappes

ICR Primary Author: Melanie Simone Kappes

F. RESULTS FRAMEWORK ANALYSIS Program Development Objectives (from Project Appraisal Document)

The overall development objective of the proposed operation is to enhance the government ’s capacity to implement its disaster risk management program for natural disasters.

Revised Program Development Objectives (if any, as approved by original approving authority)

n.a.


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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at Completion or Target

Years

Indicator 1: Strengthened regulatory and institutional framework for Disaster Risk Management (DRM) through an enhanced capacity of CNE to coordinate and incentivize DRM activities.

Value quantitative or qualitative)

Adoption of Law No. 8488 and its regulation.

Enforcement of Law No. 8488 and its regulation are in place.

Achieved. The GoCR continues enforcing Law No. 8488 and its regulation.

Date achieved 09/16/2008 10/28/2011 10/28/2011

Comments (including % achievement)

Key aspects of the law and regulation that were implemented successfully include but are not limited to the development of NRM policies and plans, mainstreaming of DRM into sectoral plans, and organization of national risk forums.

Indicator 2: Well-funded and functional Fondo Nacional de Emergencias as part of the Disaster Risk Management Program


The Emergency Fund is well-funded and functioning.

The National Emergency Fund (NEF) remains well-funded and functional as part of the DRM Financial Strategy through 2011.

Achieved. The NEF continues to be well-funded and functioning with sufficient resources to for example, cover the immediate response to any emergency.

Date achieved 09/16/2008 10/28/2011 10/28/2011


The NEF has been equipped with sufficient resources to serve its purpose throughout project implementation as the GoCR's responses to several disasters demonstrate, and since 2011 contributions amount to mandated 3% of all gov. agencies’ fiscal surplus.

Indicator 3: Key line ministries annual programs include risk analysis and risk reduction initiatives.


DRM has been incorporated in the 2006–2010

DRM remains in the NDP and included in the

Achieved. DRM remains in the NDP


Page 5 of 47

National Development Plan (NDP).

line ministries annual programs.

and is included in the line ministries annual programs.

Date achieved 09/16/2008 10/28/2011 10/28/2011


DRM continues to be part of the national development agenda, being included in the 2011–2014 and the 2015–2018 NDPs. Furthermore, 25 sectoral master plans include DRM considerations.

Indicator 4: An increased proportion of projects approved by the Ministry of National Planning and Economic Policy (MIDEPLAN) have properly integrated DRM considerations.


Incorporation of disaster risk analysis in the Ministry of National Planning and Economic Policy (Ministerio de Planificación Nacional y Política Económica, MIDEPLAN) screening of investment projects

An increased proportion of projects approved by MIDEPLAN integrate DRM considerations

Achieved All new projects approved by MIDEPLAN use risk information and include DRM considerations

Date achieved 09/16/2008 10/28/2011 10/28/2011


Risk information and DRM considerations are included in all projects (100%).


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(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at Completion or Target Years

Indicator 1: NA

Value quantitative or Qualitative)

Date achieved Comments (incl. % achievement)

G. RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived

GEO IP Actual Disbursements

(US$ millions)

01 10/14/2008 Satisfactory Satisfactory 0.00


03 11/25/2009 Highly Satisfactory Satisfactory 15.04

04 04/29/2010 Highly Satisfactory Satisfactory 24.06

05 02/23/2011 Highly Satisfactory Highly Satisfactory 25.32














Page 7 of 47

H. RESTRUCTURING (IF ANY)

Not Applicable


Page 8 of 47

1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN

1.1 Context at Appraisal

Macroeconomic Context at Appraisal

1. Leading up to 2008, Costa Rica's macroeconomic performance was one of the strongest in Latin America, with gross domestic product (GDP) growth reaching 8.8 percent in 2006 and 6.8 percent in 2007, compared to the region’s average growth of 5 percent and 4.5 percent, respectively. Costa Rica’s strong economic performance resulted from a combination of internal and external factors. On the internal front, these included relatively high business and consumer confidence, low i nterest rates, growing private consumption and investment, high activity in the construction sector, and robust growth in domestic manufacturing, especially in high-tech industries. On the external front, these included strong external demand for the country’s exports due to robust world growth and considerable increases in tourism and foreign direct investment inflows.

2. Inflation in Costa Rica was increasing after a period of relatively lower inflation from 2006 to mid-2007. This development was driven in large measure by the high prices of food and oil, when after a steady decline through August 2007, it moderated to an annual rate of 8.6 percent and headline inflation reversed its declining trend, reaching 10.8 percent at end-2007. This reversal was driven principally by the evolution of oil and international food prices and by domestic pressures associated with growing domestic demand under tight supply conditions. The evolution of food price inflation was particularly worrisome given the impact it had on the poor. Year-on-year food price inflation reached 21 percent in December 2007, with likely severe effects on the poorest, who devoted an average of 45 percent of their income to food. The Government had put in place well-targeted transfer programs to help cushion this impact.

3. Costa Rica’s fiscal performance was strong in 2007. The Central Government posted a surplus of 0.4 percent of GDP, its best performance since the mid-1950s, while the public sector closed with a surplus of 0.6 percent of GDP. The combination of high growth rates and relevant administrative measures introduced by the Government had contributed to a significant increase in tax collection: over 27 percent per year in the last two years. This, in turn, led to an increase in the tax -to-GDP ratio of 1.5 percentage points over that period. Higher tax revenues, together with lower interest rates on public debt, allowed for increased spending in priority areas, while simultaneously reducing public debt, which dropped considerably. Net public debt fell to a record low of 38.4 percent of GDP in 2007, from 54.1 percent of GDP in 2004.

4. At appraisal, Costa Rica’s macroeconomic framework was considered adequate for this operation and the outlook for 2008-2010 was broadly positive. A gradual moderation of growth was expected due to the global environment, marked by the slowdown of the U.S. economy and rising fuel and food prices. It was recognized that a sharper slowdown in the United States would have a direct negative impact on exports, investments, and the country’s external situation. However, Costa Rica was deemed to be in an adequate position to respond to such shocks owing to its sound fiscal policy and constant efforts to improve tax collection. Further, Costa Rica had sizable foreign exchange reserves and


Page 9 of 47

continued taking steps toward a more flexible exchange rate regime in the context of the transition to inflation targeting.

Disaster Risk Management (DRM) in Costa Rica

5. Due to its geographic location and geotectonic characteristics, Costa Rica is highly exposed to a large variety of natural hazards. According to the ‘Natural Disaster Hotspot’ study financed by the World Bank,2 Costa Rica ranks number two in the world among countries most exposed to multiple hazards, with 36.8 percent of the total area exposed to three or more adverse natural phenomena. The study estimated that 77.9 percent of Costa Rica’s population and 80.1 percent of the country’s GDP is in areas at high risk of multiple hazards, including floods, cyclones, landslides, earthquakes, and volcanic eruptions. Major disasters before this operation included floods in November 2005 and December 2007 that caused US$25 million and US$80 million of damage, respectively. Tropical Storm Alma (May 2008) affected 20 counties, directly affected 21,000 people, destroyed over 1,150 houses, cut off more than 130 roads, and resulted in about US$40 million in direct economic losses.

6. Facing frequent and severe disasters, the country has built an efficient and effective disaster response and management system over the years that has gained legitimacy among the population. Following the eruption of the Volcano Irazú in 1963, the Office of Civil Defense was established in the same year. Further, a Nacional Emergency Commission (Comisión Nacional de Emergencia, CNE) was organized, something that in the following years became a common practice following major emergencies to implement extraordinary funds approved by the Legislative Assembly. After the eruption of the Volcano Arenal in 1968, Emergency Law No. 4.374 was approved in 1969 to establish a Special Emergency Fund with the CNE being tasked to manage the fund as well as coordinate emergency response through a single command approach. Law No. 7.914 of 1999 additionally assigned CNE the coordination of risk prevention, and while the acronym remained CNE the name was changed into the National Commission for Risk Prevention and Emergency Management.

7. In 2006, the country initiated a new phase of modernization that resulted in substantial progress toward strengthening its institutional and legal framework and in mainstreaming DRM in its development program, anchored in the National Development Plan (NDP) 2006–2010. Specific steps that demonstrate progress include (a) the process of updating the Costa Rica Seismic Code (CRSC) from 2002, resulting after project approval in an updated version of the CRSC in 2010; (b) the inclusion of the consideration of natural hazards, ‘geo-aptitude’,3 environmental fragility, and geotechnical protection prescriptions in land use plans; (c) strengthening of the institutional and legal framework, with particular emphasis on proactive actions to mitigate natural disaster risk and increase the country’s resilience; (d) creation of the advanced disaster risk financing framework with the National Emergency Fund (NEF) as key pillar; and (e) the strengthening of the emergency management framework with the adoption of Law No. 8.488 in 2005.

2 World Bank. 2005. Natural Disaster Hotspots: A Global Risk Analysis. 3 The Government of Costa Rica (GoCR) uses this term to describe the natural stability condition of geographic areas,

cons idering soil and subsoil conditions such as geodynamic activity that can affect this stability, especially in relatively young and dynamic geographic areas. https://www.setena.go.cr/documentos/Normativa/Decreto-32967.pdf

https://www.setena.go.cr/documentos/Normativa/Decreto-32967.pdf


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8. In this modernization phase and particularly under Law No. 8.488, CNE was significantly strengthened in its coordinating role and is responsible for leading DRM efforts to this day. CNE was reestablished as a multi-institutional system, tasked to lead all efforts related to risk prevention, emergency preparedness, and response. It is under the Presidency, and its board of directors is composed of a large number of ministries and key institutions, such as the Costa Rican Red Cross and the National Insurance Institute (Instituto Nacional de Seguros, INS), to ensure cross-sectoral coordination and incorporation of social and environmental considerations. The same law also established the National System for Risk Management, which is coordinated by CNE and integrates the risk reduction and emergency relief efforts of public entities, the private sector, and civil society at the national, municipal, and regional levels.

9. At approval of this operation, Costa Rica already had an advanced emergency financing system in place that allowed the country to face small to medium-size events with financing from its ongoing budget and existing reserves. In this system, the main source of financing for emergencies, rehabilitation, and reconstruction is the NEF, which is capitalized by mandatory transfers from public institutions (3 percent of financial surplus or profit from all government institutions) and donations from various sources. In addition, public institutions are expected to allocate their own contingent budget resources for relevant disaster activities at their discretion, which thereby enable them to use some of the resources to respond to impacts in their sector through the exception regime.4 Since 2002, the insurance of public assets is mandatory according to the General Law of Internal Control, Law No. 8.292.

Poverty Context in Costa Rica

10. Poverty has been much lower in Costa Rica than the averages for Latin America and Central America. Based on the national poverty line, the percentage of Costa Ricans living in poverty fell from close to 32 percent in 1989 to around 22–24 percent during 1994–2006. Over the same period, extreme poverty hovered at 6.5–7 percent. If the international poverty lines of US$2 and US$1 per capita per day for poverty and extreme poverty respectively, are used, only about 9 percent of Costa Ricans were poor and only about 2 percent were living in extreme poverty. Despite these low overall levels of poverty, the concentration of poor and extremely poor households was relatively high in some areas of the country, meriting focused attention to improve economic opportunities and basic and social services.

11. Income inequality, measured by the Gini coefficient, was also lower in Costa Rica than in neighboring countries and the Latin America region as a whole but, at 0.48 in 2004, was nonetheless higher than countries at similar income levels globally. Moreover, there was some evidence that income inequality had been rising from 0.44 in 1989. The administration was strongly committed to further reducing both poverty and inequality through rapid, equitable growth, improved targeting of social assistance and social services, and integrated interventions to revitalize areas of high po verty concentration.

12. Costa Rica has also been a world leader on environmental issues, ensuring that economic growth is not achieved at the expense of its rich natural endowments, and has successfully exploited

4 Exception regime refers to simplified fiduciary processes and controls that apply when a declaration of s tate of emergency is in effect.


Page 11 of 47

links between environmental protection and poverty reduction. It has set aside about 25 percent of its land to protected areas and has put in place innovative ways to pay its citizens for good environmental practices. The Government has also developed plans for more cost-effective ways to mitigate the impact of the many natural disasters on the population, especially on poor households.

13. A growing body of evidence demonstrates that the poor are the segment of the population most at risk from the impacts of natural and man-made disasters, particularly in terms of health and productivity. The GoCR recognizes the significant increase in poverty caused by major disasters, such as Hurricane Mitch (1998).5 Costa Rica’s National Emergency Law, Law No. 8488, and its regulation (reglamento) require that the GoCR shall implement actions aimed at reducing disaster risk, by among others improving the understanding of the country’s disaster risks, multi -hazard mapping, and identification of vulnerable groups, including the poor, to implement effective, targeted risk reduction interventions that contribute to protect their lives and livelihoods.

Rationale for World Bank’s Assistance

14. The 2008–2010 Country Partnership Strategy (CPS) recognized the Government’s efforts to mitigate natural disasters and its leadership among Central American countries in deepening the regional dialogue on natural disaster risk management. This operation contributed to one of the two CPS development priorities, namely ‘addressing emerging challenges to continued growth and competitiveness, including fiscal risk management’ and the specific development outcome of the development of ‘risk reduction strategies for emergency response and diversified risk management instruments’. Further, the operation was in line with the World Bank’s comprehensive framework for DRM and emphasis on disaster prevention, as opposed to only disaster response and emergency management. Finally, this operation contributes to the World Bank’s Twin Goals of ending extreme poverty and boosting shared prosperity since the poorest are most at risk from natural disasters and adverse impacts contribute to an increase in inequality.

15. The NDP 2006–2010 mandated the inclusion of DRM into all development policies. This Development Policy Loan (DPL) with Catastrophe Deferred Drawdown Option (Cat DDO) is in line with the NDP, which assigned CNE four goals related to DRM: (a) establishment of the National Risk Management System; (b) design and implementation of the National Risk Management (NRM) Plan; (c) strengthening of early warning systems; and (d) addressing risk management at the community level. In an international context, these actions contribute to the vulnerability reduction of the poorest in compliance with the Millennium Development Goals and several priority actions of the Hyogo Framework for Action (2005–2015).6

16. The GoCR had a very good understanding of the usefulness of this new World Bank instrument in the national context, as it complements existing risk financing tools and furthers the ongoing policy dialogue. As a result, the GoCR expressed its strong interest in the instrument to the World Bank, even before it was approved by the Board of Directors. On April 2, 2008, the GoCR requested a DPL with Cat

5 GoCR. 2007. Informe de la Implementación del Marco de Acción de Hyogo y las Buenas Prácticas de la Plataforma Nacional . 6 See https://www.unisdr.org/we/coordinate/hfa for information on the Hyogo Framework for Action.

https://www.unisdr.org/we/coordinate/hfa


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DDO. This operation resulted from the productive DRM policy dialogue with the GoCR and was not preceded by any other DRM project or technical assistance (TA).

17. The DPL with Cat DDO in Costa Rica was approved by the Board of Directors on September 16, 2008, shortly after the introduction of this new World Bank instrument on March 4, 2008, and was the first of its kind. The purpose of the DPL with Cat DDO instrument is to (a) enhance and develop the capacity to manage hazard risk, (b) provide immediate liquidity to bridge the budgetary gap after a natural disaster, and (c) safeguard ongoing development programs.7

18. The DPL with Cat DDO for Costa Rica was put in place to complement existing risk financing instruments in the country and particularly to provide protection for cumulative, medium-size, and major disasters. With its existing risk financing instruments, Costa Rica had access to adequate funding to face small to medium-size disasters. The DPL with Cat DDO was included as part of a second layer of resources available to the Government in case of medium- to large-size adverse events, or when cumulative events generate losses beyond the capacity of the NEF and the availabil ity of budget resources allocated by public institutions. As a quick and flexible source of financing, the DPL with Cat DDO was also considered to be useful to provide bridge financing, while other sources such as bilateral aid and emergency reconstruction loans are being mobilized.

1.2 Original Project Development Objectives (PDO) and Key Indicators

19. The overall development objective of the proposed operation is to enhance the government's capacity to implement its disaster risk management program for natural disasters.

20. The DPL with Cat DDO had four key indicators:8

• Strengthen regulatory and institutional framework for Disaster Risk Management (DRM) through an enhanced capacity of CNE to coordinate and incentivize DRM activities.

• Well-funded and functional Fondo Nacional de Emergencias as part of the Disaster Risk Management Program.

• Key line ministries annual programs include risk analysis and risk reduction initiatives.

• An increased proportion of projects approved by the Ministry of National Planning and Economic Policy (MIDEPLAN) have properly integrated DRM considerations.

1.3 Revised PDO and Key Indicators, and reasons/justification

21. Neither the PDO nor the Key Indicators were revised. However, additional indicators were agreed with GoCR. See Section 2.3 on M&E Design, Implementation, and Utilization.

7 World Bank. 2008. “Proposal to Enhance the IBRD Deferred Drawdown Option (DDO) and to Introduce a DDO Option for

Catastrophic Risk.” President’s Memorandum. 8 The use of indicators without specific targets in this operation reflects the s tate-of-the-art thinking at the time. It was cons idered that using specific targets could be seen as a conditionality for the disbursement of funds.


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1.4 Original Policy Areas Supported by the Program

22. The DPL with Cat DDO aimed to support two key policy areas of the Costa Rica Disaster Risk Management Program:

• Strengthening of the institutional and legal framework

• Mainstreaming disaster risk in the national development and investment programs

1.5 Revised Policy Areas

23. The policy areas were not revised.

1.6 Other Significant Changes

24. No other significant changes were made to the program.

2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES

2.1 Program Performance

25. The DPL with Cat DDO is a single-tranche operation with a 3-year drawdown period, which can be renewed up to four times, for a total of up to 15 years. This operation was renewed twice, resulting in an implementation period of 9 years. The GoCR requested US$65 million, the maximum possible amount of 0.25 percent of the country’s GDP at the time of loan approval. All four agreed prior actions were fulfilled at the time of World Bank approval of the loan (see Table 1. Policy Areas, Prior Actions, and

Status at Approval of the DPL with Cat DDO). The agreed drawdown trigger to access the funds was the occurrence of a natural disaster resulting in a declaration of a state of emergency by the President of Costa Rica through an Executive Decree, in accordance with Law No. 8.488 of November 22, 2005.

Table 1. Policy Areas, Prior Actions, and Status at Approval of the DPL with Cat DDO

Policy Area Agreed Prior Actions Status at Approval

Strengthening of

the institutional and legal framework

Adoption of Law No. 8.488 and its

regulation

Adopted.

Law No. 8.488 was approved by the Legislative Assembly on November 22, 2005 and published on

January 11, 2006. The regulation was published under Executive Decree No. 34.361-MP on March 13, 2008.

Implementation of a mandatory contribution of 3 percent of financial

surplus or profit from all governmental institutions to be transferred to the NEF.

Fully implemented.

The NEF was created under article 43 of Law No. 8.488, and further specifications regarding its funding are provided under the regulation (Decree No. 34.361-MP), particularly under articles 38 and

39.


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Policy Area Agreed Prior Actions Status at Approval

Mainstreaming disaster risk in the National Development and

Investment Programs

Incorporation of DRM in the NDP 2006–2010.

Achieved. The NDP 2006–2010 was approved by Executive Decree No. 33.608 on January 25, 2007.

Incorporation of disaster risk analysis

in the Ministry of National Planning and Economic Policy (Ministerio de Planificación Nacional y Política Económica, MIDEPLAN) screening of

investment projects.

Achieved.

26. Over the nine years of implementation, the GoCR used the entire amount of US$65 million for responses to three disasters through six drawdowns. These disasters included the Cinchona Earthquake, Tropical Storm Nicole, and Hurricane Otto. The lowest withdrawal amount was US$1.26 million (1.94 percent), and the highest amount was US$31.017 million (47.72 percent), see Table 2 for further details. The quickest withdrawal of funds after an adverse event was six months (first disbursement) and the slowest after almost two years (third disbursement). The open-ended nature of the state of emergency declarations in Costa Rica, which allow a declaration to be in force up to five years (see paragraph 33) gave the GoCR the opportunity to time withdrawals until exact financing needs were confirmed and in some cases use the DPL with Cat DDO to reimburse public funds already spent.

Table 2. Disasters and Related Withdrawals

Event &and Date

Information on the Declaration of Emergency

Disbursement

Number

Date of Withdrawal Request9

Value Date Disbursement

Amount (US$, millions)

Cinchona Earthquake

January 8, 2009

January 8, 2009 Decree No. 34.993-MP

9 cantons

1

Sent - July 2, 2009

Received - July 6,

2009

July 8, 2009 12

2-A

Sent - November 20, 2009

Received -

November 23, 2009

November

25, 2009 3.038

3

Sent - March 19, 2010

Received - March

25, 2010

March 30,

2010 9.02

4 Sent - December

17, 2010 December 30, 2010

1.26

TOTAL – Earthquake Cinchona 25.318

Tropical Storm Nicole

September 30, 2010

5 Sent - July 26, 2011 August 10,

2011 8.665

9 Date at which the letter was sent by the GoCR and/or date at which letter was received by the World Bank.


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Event &and Date

Information on the Declaration of Emergency

Disbursement

Number

Date of Withdrawal Request9

Value Date Disbursement

Amount (US$, millions)

September

28–29, 2010

Original Decree No. 36.201-MP, amendment

to decrees No. 36.251 and No. 36.423-MP to include additional cantons

Hurricane Otto

November 17–25, 2016

November 29, 2016

Decree No. 40027-MP Northern part of the country

6

Sent - June 29, 2017

Received - July 4,

2017

July 10, 2017 31.017

27. The Cinchona Earthquake, with a magnitude of 6.2 on the Richter Scale at a depth of 7.1 km and with its epicenter located 4 km southeast of Cinchona de Poás (Alajuela Province), took place on January 8, 2009, at 1:21 p.m. local time.10 Most damages and losses resulted from landslides (about 180 of different dimensions) on the slopes and along the rivers and creeks of volcanoes. The earthquake resulted in 22 casualties, 17 missing persons, about 100 injured, 986 persons displaced in total, and damages and losses of over US$500 million.

28. Tropical Storm Nicole affected Costa Rica between September 28 and 30, 2010, with heavy rainfall that led to landslides and floods. The saturated soils resulting from Tropical Storm Matthew (September 23–24, 2010) exacerbated the magnitude of these events and ultimately led to significant damage to the road network.11 Following these two events, the system that later developed to Hurricane Tomas affected Costa Rica during November 2–7 of the same year. Nicole and Tomas together led to damages of US$283.95 million, of which US$14.85 million was caused by Tropical Storm Nicole.

29. During November 17–25, 2016, Hurricane Otto, a Category 3 hurricane, passed over the northern part of the country as the first storm of hurricane strength that directly affected Costa Rica since records began in 1851. In addition to strong winds and gusts, Otto caused torrential rains, with accumulations of up to 300 mm in 24 hours in the northern part of the country and extreme cumulative rainfall during the entire event of up to 700 mm in the southern part of the country that resulted in landslides and floods. Impacts included significant infrastructure damage, disruption of critical services, 10 fatalities, and 10,831 persons directly affected, of which 7,425 were displaced. Overall damages were estimated at about US$186 million.

2.2 Major Factors Affecting Implementation

30. As this DPL with Cat DDO was the first of its kind to be prepared and approved by the World Bank, the team was confronted by the limitations of the newly established and often unclear procedures, as well as the lack of specific guidelines to inform its design and implementation. In

10 GoCR. 2009. Plan General de la Emergencia por sismo 6.2 Richter, Terremoto de Cinchona. 11 MAG-MIDEPLAN. 2011. Evaluación del Impacto Económico Provocado por los Fenómenos Ciclónicos Nicole y Tomas en Costa Rica en el Año 2010.


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combination with the urgent request of the GoCR to have the operation effective as soon as possible, the task team had to approach the process in a creative way drawing on experiences and formats from other World Bank instruments, since dedicated formats (for instance for the project concept note or the legal agreement) were not yet available. In addition, processes and requirements were not in place for the extension of the DPL with Cat DDO, and decisions were made as required.

31. The approval of the DPL with Cat DDO by the Board and its ratification by the National Assembly were very timely in response to the Cinchona Earthquake. The World Bank’s Board had already approved the operation, and ratification by the Government was pending when the Cinchona Earthquake occurred on January 8, 2009. On January 19, 2009, the National Assembly approved the DPL with Cat DDO, and on March 5, 2009, the loan became effective, allowing the Government to request the first withdrawal on July 2, 2009. Despite this being the first ever drawdown of a DPL with Cat DDO, funds were disbursed by the World Bank and were at the disposal of the Government within two days of receipt of the request. The successful withdrawal of funds by the Government and their availability in this post-disaster situation demonstrated the functioning of the instrument as intended at design.

32. The GoCR has shown strong political commitment to the DRM agenda throughout the life of the operation. Despite the Government changing twice over the implementation of the DPL with Cat DDO (in 2010 and 2014), including a change of the ruling party in 2014, neither the DRM program nor commitment to the DPL with Cat DDO was compromised. Aspects contributing to this stability and commitment were the high level of risk awareness, robust institutional and legal framework for DRM, and the solid governance structures that are in place. The Government elected in April 2018 has already shown its commitment to the DRM agenda by prioritizing the approval of the Disaster Risk Financing Strategy (DRFS) and revisions to improve the effectiveness of Law No. 8.488.

33. According to the National Emergency and Risk Prevention Law No. 8.488, the state of emergency ends with a decree issued by the Executive Power after three phases, namely response, rehabilitation, and reconstruction, are completed or automatically after a period of five years. As a result, the state of emergency often remains in effect for an extended period and allows the GoCR to manage budget and procurement processes more flexibly. In the case of the DPL with Cat DDO, it enabled the GoCR to withdraw funds related to a specific disaster months and even years after its occurrence. Funds attributed to disaster recovery are then used according to the respective Emergency Plan developed immediately after the event and approved by the CNE Directorate.

34. In 2014, discussions took place on the possibility of withdrawing funds in response to a drought triggered by the evolving El Niño event.12 While the general feasibility of using funds of the DPL with Cat DDO for drought response was discussed, the World Bank did not receive an official request in this regard.

35. The GoCR considered both additional financing as well as the revolving feature of the DPL with Cat DDOs; however, it did not pursue either of these two options. In 2015, discussions took place regarding additional financing of US$70 million (made possible by an increase in GDP), which would have

12 El Niño and La Niña are opposite phases of the El Niño-Southern Oscillation (ENSO) cycle. The ENSO cycle describes the

fluctuations in temperature between the ocean and atmosphere in the east-central Equatorial Pacific (approximately between

the International Date Line and 120 degrees west). National Oceanic and Atmospheric Administration. https ://oceanservice.noaa.gov/facts/ninonina.html.


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resulted in a total of US$135 million. However, this option was ultimately not pursued due to insufficient interest on the part of the GoCR. The revolving feature was discarded as well, partly based on the experience of El Salvador, where unfavorable market conditions showed the significant costs of such a transaction.

36. In 2016, the GoCR consulted the World Bank on the potential use of the DPL with Cat DDO to fund the response to the health crisis caused by mosquito-transmitted diseases. The World Bank informed the GoCR that to be able to evaluate the eligibility of a potential withdrawal to address the health emergency resulting from mosquito-transmitted diseases, a technical report justifying such a request would have to be prepared by the Ministry of Health and approved by CNE, in line with the emergency decree. The required technical report was not presented, and an official withdrawal request was not submitted to the World Bank.

37. To ensure that the operation had measurable indicators, the World Bank requested the introduction of additional indicators at the time of the second extension. Four new project progress indicators were added in 2014; however, they cannot be considered official since they were not added through a restructuring process. The additional indicators nevertheless supported monitoring of the operation and facilitated the ongoing DRM policy dialogue with the GoCR. The GoCR reported on these indicators periodically, and all targets were achieved at the completion of the project (see section 2.3 below and Table 7. in annex 7 for further details). Although not required by World Bank guidance, the current practice is that quantitative indicators are defined, and their targets can be increased at each extension of the loan closing date.

38. The GoCR made good use of the DPL with Cat DDO funds and was highly committed to advancing the DRM agenda; however, due to unstable macroeconomic conditions, a request for a third renewal was not granted by the World Bank. The macroeconomic situation deteriorated over the course of the second extension of the operation. The situation was discussed during a supervision mission in 2014, and the GoCR expressed its determination to address the fiscal deficit by reducing expenditures while protecting key public investments. However, the fiscal situation had not stabilized when the GoCR sent an official request for extension on March 23, 2017. The World Bank therefore did not approve this request. As a result of the operation not being renewed beyond October of 2017, the Government opted to request the final payout of US$31.017 million in June 2017 in response to Hurricane Otto, thereby u sing the residual funds of the DPL with Cat DDO. As with the prior events, the GoCR used these f unds in direct response to the damages caused by Hurricane Otto.

2.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization

M&E Design

39. The framework of policy areas, prior actions, and indicators was adequately designed and relevant for achieving the PDO, in agreement with the World Bank’s policies and procedures in place at the time of approval of this first DPL with Cat DDO. With the operation’s focus on strengthening the country’s institutional and legal DRM frameworks, along with mainstreaming DRM in the country’s development investment planning processes, the project’s M&E framework assessed the key areas of a comprehensive DRM program. The original set of indicators permitted monitoring progress toward


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achieving the PDO; however, a quantitative baseline and target values for indicators three and four would have contributed to improving the overall M&E and progress reporting during the life of the project. While the operation’s selected indicators allowed for the semi -quantitative tracking of progress, the level of expected progress over time was not defined and the extent of achievement beyond the specified targets could not be assessed quantitatively.

40. Based on the discussion in the previous paragraph, as well as from other ongoing DPLs with Cat DDO, more specific and measurable indicators were added during the second extension. The indicators added in 2014 were formulated, where possible, with quantitative baselines and targets. These include: implementation of five selected goals of the National DRM Plan 2010-2015, to supplement Indicator 1; design of a financial strategy for disaster risk management, to supplement Indicator 2; mainstream DRM in planning programs at the sub-national levels, to supplement Indicator 3; and increased capacity for incorporating disaster risk analysis in the public investment process, to supplement Indicator 4 (see table 7.1 in annex 7 for these indicators, their baseline values and targets, and value achieved at completion). While they contributed to continued monitoring and supervision, since they were not included through a restructuring process, they cannot be deemed official.

41. The design of the M&E for the Costa Rica DPL with Cat DDO acquired additional importance because of it being the first of its kind. Being the very first operation of its kind, the DPL with Cat DDO influenced the design of a series of similar operations in the region. At a later stage, it also informed DPL with Cat DDO operations in East Asia and Pacific, Africa, and more recently in Europe and Central Asia.

M&E Implementation

42. In accordance with the Loan Agreement, the Ministry of Finance (Ministerio de Hacienda, MoF) provided periodic progress reports, which included the status of achievement of the PDO Indicator targets; these reports also indicated the status of achievement of the indicators added in 2014 (see above). Implementation status reports were provided by the GoCR in accordance with the reporting schedule. The World Bank’s internal reporting team, including through the ISR, consistently rated th e operation’s M&E system as satisfactory throughout the life of the project.

M&E Utilization

43. The M&E reporting process enhanced communication between the various government agencies. The preparation of M&E reports required coordination between the three stakeholders and brought them together for discussions with the World Bank team. This process contributed to strengthening collaboration and exchange of information. The progress reports provided a rich narrative on recent enhancements that served as basis for discussions on the latest developments of the DRM agenda. With the set of indicators added in 2014, the Government particularly aimed at advancing and expediting the implementation of the NRM Plans.

2.4 Expected Next Phase/Follow-up Operation

44. The GoCR expressed strong interest in a new DPL with Cat DDO that would address the adverse impacts of climate change, to be pursued when the country’s macroeconomic situation would permit. With the closing of the DPL with Cat DDO and without access to another similar DPL operation, the GoCR


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is seeking alternative funding sources to bridge the gap in the country’s DRFS. The GoCR expressed interest in assessing the feasibility of using other risk financing instruments, including risk transfer instruments such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and Cat Bonds. More specifically, the GoCR requested support and technical guidance from the World Bank for the formulation of the legal framework that would allow the country to participate in the CCRIF. In November 2017, the MoF, in collaboration with MIDEPLAN and CNE, prepared the final draft of a comprehensive DRFS.

45. At the closure of the DPL with Cat DDO, the GoCR indicated interest in additional TA support to further strengthen its DRM program. The Government’s request focused on TA support for the completion of the country’s DRFS, aimed at reducing the Government’s fiscal vulnerability. The GoCR also requested TA to build capacity for carrying out Post-Disaster Needs Assessments (PDNAs) and Post-Disaster Recovery Frameworks to improve the accuracy and timeliness of the Government’s assessments of damages and losses triggered by adverse natural events. The World Bank is in contact with the GoCR in relation to these and other topics to identify opportunities for further collaboration.

46. Costa Rica is a sophisticated client with an appetite for new types of operations. This represents an opportunity to explore more than traditional products. For example, there is an active US$420 million operation designed as Program-for-Results Financing: Strengthening Universal Health Insurance in Costa Rica.

47. The new administration which took office in April of 2018 invited the World Bank to make a technical presentation to the ‘10th National Disaster Risk Management Forum in Costa Rica’. As part of the event, the World Bank team provided a one-hour overview on ‘Disaster Risk Losses and Public Finances’ and shared information on financial instruments available globally and regionally to reduce the fiscal impact of natural disasters. After the Forum, the President of Costa Rica instructed the new senior officials of the MoF, CNE, and MIDEPLAN to expedite the final review and adoption of the DRFS.

3. ASSESSMENT OF OUTCOMES

3.1 Relevance of Objectives, Design, and Implementation

Relevance of Objectives - Rating: High

48. The Project Development Objective (PDO) of this operation continues to be highly relevant to Costa Rica due to the continued high frequency and intensity of natural disasters. This puts the Government in a position where further reducing risk, responding to emergencies, and financing response and reconstruction in a sustainable way is a necessity. In 2016, Costa Rica was affected not only by Hurricane Otto, but also by several smaller events (such as the passage of Hurricane Matthew, activities of the Volcanos Turrialba and Rincón de la Vieja, several smaller earthquakes, floods, and strong winds), which nonetheless caused damages and losses and are a reminder of the multi -hazard exposure of the country. In October 2017, the month in which the DPL with Cat DDO closed, Tropical Storm Nate hit


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Central America and devastated Costa Rica through winds, storm surges, landslides, and floods and resulted in 14 fatalities and over US$580 million in losses.13

49. The 2016–2030 NRM Policy and the 2016–2020 NRM Plan are fully aligned with the 2015–2030 Sendai Framework and show the continued commitment of the GoCR to further strengthen and mainstream DRM. The 2016–2030 NRM Policy, issued on November 30, 2015, by Executive Decree No. 39.322-MP-MINAE-MIVAH, sets out the vision of ‘risk management as integral development concept’. The NRM Plan, approved by the CNE Directorate in March 2016, aims at consolidating the commitment of all governmental agencies, the private sector, and the organized civil society through concrete actions toward development that considers risk and takes forward-looking actions to avoid future disasters. The anchoring of DRM in Law No. 8.488, policies, and plans, as well as i ts reflection in the current NDP 2015–2018, also indicates the continued relevance of the operation’s objectives.

50. Throughout the implementation of the DPL with Cat DDO, engagement strategies between Costa Rica and the World Bank recognized the significance of disaster risk and included activities to strengthen the Government’s DRM capacities and risk financing. The CPS (FY12–FY15) recognizes the high level of exposure of the country to natural disasters and dedicated one of its three ‘clusters’ 14 to ‘supporting the environment and disaster management’. The current Country Partnership Framework (FY16–FY20) continues to recognize Costa Rica’s significant risk for disasters, most likely affected by an increase in frequency because of climate change. The framework includes DRM under the objective of ‘expanding capacity to promote climate-smart and environmentally sustainable development’ through the indicator ‘maintain government capacity to respond to disasters, as measured by availability of policy and financial instruments for disaster risk management’.

Relevance of Design and Implementation - Rating: High

51. The selection of policy areas and implementation arrangements contributed to the achievement of the program’s stated objectives. All agreed targets of the original and additional indicators served as a basis for a rich dialogue on the overall DRM agenda. The first set of indicators was closely linked to further strengthening and promoting the implementation of the recently approved Law No. 8488 and its regulation, with a focus on several key topics. The second set of indicators supported and promoted the implementation of goals defined in the NRM Plans. The DPL with Cat DDO as a disaster risk financing instrument worked as anticipated and provided resources to complement the NEF and sectoral allocations for disaster response and recovery. The project design stood the test of time, and its relevance for the GoCR is reflected in the three renewal requests.

52. The DPL with Cat DDO was the spine of the World Bank’s engagement with Costa Rica on DRM and was complemented by several TA activities that strengthened the different pillars of DRM (see Table 3). All activities started almost in parallel with the preparation of the DPL with Cat DDO or soon after its approval and emerged through the World Bank’s technical dialogue with the GoCR. Several TAs contributed to achieving the indicators of the DPL with Cat DDO, such as the ‘Integration of Disaster Risk

13 GoCR CNE. 2018. Plan General de la Emergencia ante la Situación provocada por la Tormenta Tropical Nate, Decreto de

Emergencia No. 40.677. 14 Cluster is used in this context equivalent to pillar, objective, or component.


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Information in the Planning System of Costa Rica’. The TAs were also critical for enabling a close dialogue with the GoCR, not only on the specific activity and topic but also on general DRM aspects.

Table 3. Overview of Activities That Were Implemented Complementary to the DPL with Cat DDO

Techncial Assistance projects

Understanding

Risk Integration of

Disaster Risk Information in the Planning System of Costa Rica

(International Development Fund [IDF] – P120320).

Evaluation of disaster risk of the water and sanitation system and enhancing of the use of disaster risk information in the planning process of the Costa Rican National Water

and Sanitation Institution (AyA), using seismic risk modeling tools; this activity was part of the Central America Probabilistic Risk Assessment initiative (Water Partnership Program – TF096216).

Investing in Risk Reduction and Resilience

Feasibil ity study for a catastrophe

insurance facility for public assets and design of a Catastrophic Risk Transfer Vehicle (Global Facility for Disaster Reduction and Recovery

[GFDRR] – TF094233).

Input for the evaluation of participation in the CCRIF (GFDRR)

Strengthening of Risk Governance

—

Enhancing preparedness for more efficient response and

building back better

Presentation of the methodology of PDNA and recovery

frameworks (Bank Budget)

Pilot project on early warning systems for hydrometeorological hazards, in collaboration with the

World Meteorological Organization (GFDRR - TF097160).

3.2 Achievement of Program Development Objectives

53. This operation has fully achieved the PDO as well as the instrument’s objective to provide financial resources in the aftermath of a disaster. The operation served as a platform for the country’s cross-sectoral dialogue toward strengthening a comprehensive approach to DRM, and the World Bank was able to provide guidance and facilitate the strategic discussions. In three post-disaster situations, the DPL with Cat DDO provided financial resources to reduce the impact on the fiscal balance. Further details on these two aspects are provided in the following paragraphs.

A. PDO: Strengthen the policy and institutional framework for DRM through enhancing the government's capacity to implement its disaster risk management program for natural disasters

54. The GoCR achieved ambitious prior actions that show a strong commitment to strengthening DRM by going beyond emergency management toward a comprehensive approach to DRM. Composed of actions to mainstream DRM into development and project planning and strengthen risk financing, Costa Rica made significant progress toward more proactive DRM. The central prior action and basis for these enhancements was the enactment of Law No. 8.488 in 2005, which promotes risk prevention as a shared responsibility of all Government entities and sets out the foundation for realizing the paradigm shift from


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emergency management toward comprehensive risk management, strengthening risk reduction, and risk financing capabilities at all levels of government administration, from the national to the community levels. The law mandates the development of the NRM Policy as the overarching theme under which all Government institutions’ actions are carried out and Government resources are allocated to prevent the occurrence of disasters, as well as to have in place the procedures to properly address all phases of the materialized emergencies.

55. Over the course of implementation of the DPL with Cat DDO, the GoCR not only successfully completed all key indicator targets15 (including the targets added in 2014) but also made further significant progress in the two policy areas supported by this operation.

Policy Area 1 – Strengthening of the institutional and legal framework Rating: High

Indicator 1: Strengthened regulatory and institutional framework for Disaster Risk Management (DRM) through an enhanced capacity of CNE to coordinate and incentivize DRM activities (supplemented by the 2014 additional indicator “implementation of five selected strategic goals of the national DRM Plan 2010–2015)

56. Between 2009 and 2017, the GoCR, led and coordinated by CNE, made significant strides toward strengthening the country’s regulatory and institutional DRM framework, as reflected in the successful implementation of Law No. 8.488 and its regulation (Decree No. 34.361-MP). This includes the development of National Risk Management Policies and Plans, mainstreaming of DRM into sectoral plans, organization of yearly National Risk Forums, strengthening of the NEF and the mechanisms for its capitalization, as well as the procedures for the declaration of the state of emergency, and emergency management.

57. The NRM Policy and Plans were adopted and implemented. On February 25, 2009, the first NRM Plan (2010–2015), developed through a highly participatory process, was approved by the CNE Directorate. The plan comprises seven key pillars, of which five are dedicated to prevention and two to preparedness and emergency management. The NRM Policy was finalized in 2015, and subsequently the next five-year NRM Plan (2016-2020) developed, incorporating lessons learned during the implementation of the first plan and in line with the NRM Policy. Both NRM Plans closely intertwine DRM and poverty reduction and recognize the particularly high impact of adverse events on the poorest (see paragraph 76). National Risk Forums have been held on a yearly basis, during which the policy and plans were discussed and progress toward their implementation was assessed. NRM Plan Monitoring Committees were put in place, and a monitoring tool was developed to track the resources allocated to DRM-related activities by ministries and government agencies at all levels. Against the supplemental Indicator 1 target of implementing five selected strategic goals of the national DRM Plan 2010–2015, a total of seven selected goals were achieved (see table 7.1, annex 7 for details).

15 Due to the qualitative nature of the targets it was not possible to surpass set goals, n evertheless, the GoCR continuously enhanced performance on a ll of them throughout the course of the project.


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58. Emergency management procedures and the financing of response and recovery adhered to provisions of the law and regulation. During the many emergencies that occurred since the passing of the law and regulation, the defined procedures and phases of emergency management were properly adhered to. Funds from the NEF were used to address disaster response and recovery, complemented by resources from the budgets of public agencies to cover needs in their respective sectors or areas of responsibility.

59. CNE’s coordinating role was significantly strengthened. The authority granted by Law No. 8.488 to CNE as the leading DRM agency in the country has contributed to enhance its institutional profile and convening power. It has facilitated and improved collaboration and coordination with key ministries, including the MoF, MIDEPLAN, and key line ministries responsible for disaster-sensitive sectors such as transport, housing, agriculture, environment and energy, health, and education, as well as with technical agencies, such as the National Meteorological Institute (Instituto Meteorológico Nacional), AyA, the Costa Rican Institute for Electricity, INS, and leading academic institutions. This enhanced coordination is reflected in the proactive role of line ministries—particularly the Ministry of Public Works and Transport (Ministerio de Obras Públicas y Transporte), Ministry of Agriculture and Livestock (Ministerio de Agricultura y Ganadería), the Ministry of Health (Ministerio de Salud), and Ministry of Public Education (Ministerio de Educación Pública)—in carrying out on-the-ground DRM investments, such as road network maintenance, retrofitting of health and educational facilities, enforcement of building codes and safe housing construction, and the execution of disaster risk awareness campaigns within their respective sectors. The new government administration has already shared its plan to make further improvements to Law No. 8.488 through revisions.

Indicator 2: Well-funded and functional Fondo Nacional de Emergencias as part of the Disaster Risk Management Program (supplemented by the 2014 additional indicator “design of a financial strategy for disaster risk management”)

60. The NEF has played a key role in enhancing the GoCR’s capacity to finance emergency response, recovery, and reconstruction in the aftermath of major adverse natural events. The NEF continues to be adequately funded with a sound capitalization strategy in place to serve its purpose as a national contingency fund. Throughout project implementation, CNE, with the strong support of the GoCR’s General Controller’s Office, was able to increase the resources collected from government agencies and transferred to the NEF to the mandated 3 percent of all government agencies’ profit or fiscal surplus. Based on a historical analysis of government liabilities from previous catastrophic events, the GoCR determined that, on average, the Central Government and agencies responsible for addressing humanitarian needs in the aftermath of a natural or manmade crisis in the country require about US$8 million per event. CNE has implemented provisions, as part of the NEF fund management strategy, to ensure that adequate liquidity is available at all times to address any evolving emergency.

61. The GoCR is taking steps to further strengthen the NEF by separating funds for emergency response from resources dedicated to risk reduction. While the NEF’s current mandate and governance structure have been effective and efficient in financing the GoCR’s emergency response as well as promoting risk management activities, a key recommendation made during the preparation of the 2016–2020 NRM Plan was the need for an amendment to Law No. 8.488 to allow for resources currently earmarked to the NEF to be credited instead to two separate funds. The NEF would continue to focus on


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emergency response and emergency management interventions, while the new fund would focus on financing disaster risk reduction and management. The main objective of separating the se functions is to ensure the financial sustainability of activities in both DRM areas, as well as allow the allocation of financial resources and their utilization.

62. The GoCR made further progress in its risk financing approach by including risk financing in the NRM Policy under pillar four—sustainable financial investment, infrastructure, and services—and developing a DRFS. The latter has thus resulted in achieving the target of supplemental Indicator 2 (see table 7.1, annex 7 for details). The NRM policy addresses financial availability under Guideline 18 and financial sustainability for response to disasters under Guideline 19. The risk financing strategy builds on an understanding of fiscal risks and an evaluation of risk financing and transfer mechanism s, by considering a combination of various financial instruments for the retention and transfer of financial risk, complemented by strengthening the physical resilience of public infrastructure. The strategy document is under final review, and the new government administration has committed to its endorsement in the near future.

Policy Area 2 – Mainstreaming Disaster Risk in the National Development and Investment Programs Rating: High

Indicator 3: Key line ministries annual programs include risk analysis and risk reduction initiatives (supplemented by the 2014 additional indicator “mainstream DRM in planning programs at the sub-national level”)

63. The GoCR has significantly enhanced mainstreaming of DRM at the national and subnational levels, thus meeting the targets of supplemental Indicator 3 (see table 7.1, annex 7). DRM continues to be a part of the national development agenda and was included in the 2011–2014 and the 2015–2018 NDPs. The 2015–2018 NDP defines DRM and climate change adaptation (CCA) as a cross-cutting theme and emphasizes the importance of mainstreaming this topic and building capacity not only at the national level, but also at all subnational levels. As a result, DRM is reflected in the 2015–2018 NDP across sectoral development objectives related to public health, education, tourism, and other sectors.

64. The adoption of the 2012–2040 National Land Management (NLM) Policy provides a comprehensive framework and guidance for strategic planning of Costa Rica’s territory by promoting a long-term perspective and a focus on strong interinstitutional coordination. The NLM Policy, which was promoted by an enhanced multi-sectoral DRM policy dialogue led by CNE, underscores DRM and environmental sustainability considerations as overarching themes that shall guide all land interventions. It recognizes that decision-making processes on land management should take place at a level closest to the affected people and the territory where they live and promote transparency and accountability of public and private stakeholders. Leveraged by the technical support and guidance provided by CNE, the subsidiarity approach on land management is reflected in the inclusion of DRM considerations in 25 municipal master plans as well as increased DRM capacity in 23 municipalities.

65. To strengthen the foundation for mainstreaming DRM, the GoCR has made important progress in the institutionalization of knowledge. In August 2011, the GoCR issued Executive Decree No. 36.721-MP-PLAN prescribing the creation of a ‘Model for Evaluating the Vulnerability Produced by Natural


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Disasters Risk’. The application of this model is mandatory for land use planning, public investments, infrastructure and services, and risk transfer mechanisms.

Indicator 4: An increased proportion of projects approved by the Ministry of National Planning and Economic Policy (MIDEPLAN) have properly integrated DRM considerations (supplemented by the 2014 additional indicator “increased capacity for incorporating disaster risk analysis in the public investment process”)

66. The GoCR has made remarkable progress in the reduction of new risks by including DRM considerations in the preparation of public investments. In 2009, MIDEPLAN published the general methodological guide for the identification, formulation, and evaluation of public investment projects, which includes a chapter on risk analysis. It provides guidance on the evaluation of risk, cost -benefit analysis of mitigation measures, and risk reduction alternatives. The number of entities carrying out risk analyses and incorporating mitigation actions in project planning increased steadily. Since 2011, all new public investment projects registered in the MIDEPLAN Bank of Investment Projects incorporate risk information and DRM considerations.

67. MIDEPLAN developed and published the Technical Norms, Guidelines, and Procedures for Public Investment in Costa Rica under Decree No. 35.374-PLAN of July 2009, thus meeting the targets of supplemental Indicator 4 (see table 7.1, annex 7). Public officials were trained on the integration of disaster risk considerations in public investment decision-making processes. MIDEPLAN also developed a methodology to not only strengthen disaster risk considerations in the preinvestment phase, but also in all other phases of the investment process.

68. MIDEPLAN consolidated historical information on economic losses caused by past catastrophic events. To inform the design of public policies and development investments, MIDEPLAN has made available historical data on natural disasters. The information can be accessed by the general public at https://www.mideplan.go.cr/component/content/article.

B. Objective of the DPL with Cat DDO as an instrument for financial protection: Provide financial resources to the Government in the aftermath of natural disasters Rating: High

69. The GoCR used funds from the DPL with Cat DDO very strategically, by adopting a well-structured evaluation of needs and complementing other available risk financing instruments. The GoCR’s withdrawal requests against the funds of the DPL with Cat DDO took place between six months and almost two years after the official declaration of the respective state of national emergency following a catastrophic event. The GoCR demonstrated a very strategic approach to using its available disaster risk financing tools: for each qualifying emergency, NEF funds along with the line -ministries’ budget allocations for emergency response within their respective sectors were accessed first, before requesting resources from the DPL with Cat DDO.

70. As required by law, immediately after the declaration of a state of emergency, CNE prepared the respective Emergency Management Plan (EMP). The EMP provides detailed information on the economic and financial impact of materialized disasters across sectors. Based on the EMP’s damage

https://www.mideplan.go.cr/component/content/article.


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estimates, the GoCR decided whether to request withdrawals from the DPL with Cat DDO to partially bridge the financial gap by also taking into consideration the absorptive and implementation capacity of the government agencies to efficiently and effectively use the additional funds. Consequently, when adequate resources were readily available to address the financial needs resulting from the emergency situation, the Government decided not to immediately submit a withdrawal request against the remaining DPL with Cat DDO balance.

71. The GoCR deferred the submission of withdrawal requests against the DPL with Cat DDO until accurate information was available on the extraordinary expenses of ministries and agencies involved in emergency response. On several occasions, the GoCR used funds from the DPL with Cat DDO for reimbursement of funds already spent by government agencies, thus ensuring that ongoing development and social programs being carried out by those agencies were not adversely affected as a result of their emergency response.

72. Following heavy rains that affected the country in June 2015, the GoCR declared a state of emergency and responded to the event with its own funds. The GoCR was in close contact with the World Bank to ensure that the necessary administrative provisions were in place in case it decided to make use of Cat DDO funds. Ultimately, this was not necessary, as the situation could be addressed using NEF resources and emergency funds of the line ministries. The GoCR was also able to respond to the Sámara earthquake (September 2012)—which led to a declaration of a state of emergency and caused damages of about US$101.2 million—with its own funds.

73. DPL with Cat DDO funds were made available on time. The GoCR received the requested resources within two to five business days after the World Bank received the withdrawal request. This was due to the excellent communications and good professional rapport established between the GoCR and the World Bank team.

3.3 Justification of Overall Outcome Rating Rating: Highly Satisfactory

74. The objectives, design, and implementation of the DPL with CAT DDO were highly relevant. The GoCR has made excellent progress in strengthening the DRM framework. All policy targets have been achieved, and Costa Rica has made very strategic use of the financial instrument. In view of this, the overall outcome of the operation is rated Highly Satisfactory.

3.4 Overarching Themes, Other Outcomes, and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

75. The poor and most vulnerable parts of the population are affected disproportionately by disasters. The NRM Plan (2010–2015) and the NRM Policy (2016–2030) state that there is a tendency for the poorest to be particularly vulnerable to natural hazards since they often settle in high -risk and disaster-prone areas. Further, the disruption of public utilities, such as water and sewage systems, as well as communication and transport infrastructure during a disaster event, increases the probability of the poor and other vulnerable groups suffering from health issues and a reduction in their productivity.


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76. Strengthening the Government’s DRM program by enhancing its regulatory and institutional framework for DRM, as well as mainstreaming DRM, benefited the poor and vulnerable. Law No. 8.488 states the priority of responding to the needs of the most vulnerable. The NRM Plan 2010–2015 dedicated the first of seven pillars to ‘poverty reduction and increasing resilience’, and the NRM Plan 2016–2020 targets its first five pillars to ‘increasing resilience and social inclusion’. The specific objectives of the NRM Plan 2016–2020 include the development of a register of the population exposed to natural hazards, with a special focus on poor and handicapped persons, and the integration of the socially excluded population that is vulnerable to disasters in social programs to reduce exposure and increase resilience, as well as dedicated support to poor families affected by disasters. Through mainstreaming DRM across sectors and in NDP, risk considerations are linked to poverty reduction.

77. The availability of financial resources in the aftermath of disasters through the NEF, sectoral allocations, and the DPL with Cat DDO provide quick liquidity to address urgent humanitarian needs and early recovery. With the strengthening of the NEF as a key part of the policy matrix, this operation contributed to increase the immediate availability of funds for humanitarian aid and early recovery to assist those most affected by the natural disaster, without a need to divert funds from other sources. Using these funds, the GoCR was effective and efficient in the implementation of urgent emergency interventions to restore or improve the conditions of affected communities, particularly low-income rural and indigenous peoples’ communities that became isolated due to floods, damaged roads, or collapsed bridges. The GoCR’s timely actions contributed to reducing the negative impacts on the poor, as such interventions facilitated the delivery of humanitarian aid as well as access to health services, markets, employment, and the restoration and improvement of livelihoods.

78. The available contingency funds enabled the GoCR to maintain its commitment to strengthen the country’s pro-poor social agenda and programs. With the dedicated funds, the GoCR was also able to cover the most urgent needs and ensure that ongoing social and public programs could continue without interruption after the disasters.

(b) Institutional Change/Strengthening

79. The DPL with Cat DDO contributed to institutional change toward a comprehensive approach

to DRM and mainstreaming of DRM across sectors. Founded in Law No. 8.488, anchored in the NDPs,

and with support from this operation, the GoCR has made remarkable progress toward bringing together

the fragmented DRM initiatives and creating a comprehensive approach. This includes enhanced

communication and collaboration around DRM across sectors and involving the national and subnational

levels (see section 3.2 for more detail).

80. The operation has significantly enhanced the dialogue between the MoF, CNE, and MIDEPLAN.

With the topic of risk financing involving all three partner agencies, communications between them

enhanced significantly over the course of the operation. The development of a DRFS was an important

common platform for continued discussions and conversations that helped the three agencies to better

understand and appreciate each other’s role and contribution to DRM. While there is still room for further

improvement, a strong basis for collaboration is now in place, as demonstrated by the interagency

cooperation in the preparation of Executive Decree No. 36.721-MP-PLAN and the DRFS.


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81. The DPL with Cat DDO strengthened the GoCR’s capacity and experience on risk financing.

Discussions around the triggering of the DPL with Cat DDO in post-disaster situations and disbursements

and the development of a draft risk financing strategy (through the complementary TA) contributed to

significantly increase the GoCR’s capacity and experience on risk financing (see also section 3.2 B).

(c) Other Unintended Outcomes and Impacts

82. After a period of limited World Bank engagement in Costa Rica and without a permanent

presence in the country, this operation opened the door for closer collaboration. Having tested the

World Bank’s responsiveness with the DPL with Cat DDO, the GoCR requested further World Bank

engagement, and in April 2009, a US$500 million Public Finance and Competitiveness Development Policy

Loan with Deferred Drawdown Option (P115173) was approved by the Board.

83. Prior to the closing of of the DPL with Cat DDO, the GoCR decided to withdraw all remaining

funds for response and reconstruction following Hurricane Otto. The GoCR indicated that probably not

all funds would have been withdrawn to address the needs caused by this event, if the DPL with Cat DDO

would have had a third extension. The financial resources turned out to be key for the resilient

reconstruction (see CNE’s comment in annex 3, paragraph 2, bullet 3)

84. Although the amount of a DPL with Cat DDO is small when compared to the GDP (0.25 percent

at approval), it can be argued that not having the operation in place would have reduced the GoCR’s

capacity for a timely financial response to impacts caused by natural disasters and increase d the

country’s fiscal vulnerability.

85. The DPL with Cat DDO was very effective in promoting and facilitating the strengthening of the

legal DRM framework and policies, as well as the larger sustainability, poverty, and shared prosperity

policy frameworks of the country, accompanying relevant institutions over almost a decade in improving

preparedness, financial protection, and response capacities. With the non-renewal of the DPL with Cat

DDO, an opportunity was lost in supporting the GoCR in furthering the policy dialogue and reform agenda

on DRM and related topics (such as CCA).

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

86. Not applicable.

4 ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME

Rating: Moderate

87. The risks to achieving the PDO of this operation as well as the possible actions to manage them were satisfactorily assessed at appraisal. At this point, the risk to the operation’s outcome is considered Moderate for the following reasons:


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• At appraisal, fiscal risk was evaluated as Moderate. The GoCR managed the shocks from the 2009 global economic crisis well and recovered quickly; however, macroeconomic conditions deteriorated during the second extension, which led to the World Bank declining the GoCR’s request for a third extension. Throughout implementation of the operation, the GoCR has shown strong commitment to the DRM agenda across ruling parties (see paragraph 32) and despite the increasing challenges with regard to the fiscal situation, the Government continued to use the DPL with Cat DDO purely as an instrument to cover disaster response (see paragraph 98). The previous administration made efforts to reduce the deficit, for example, through a law to fight fiscal fraud and reforms on the expenditure side, and the new administration, elected after the closure of this operation, is planning a tax reform; however, the fiscal situation has not yet improved. While a continuation of the deterioration of the macroeconomic situation could jeopardize financial resources available for DRM, the new administration has so far confirmed the high relevance of DRM as part of the government agenda: during the mission in October 2018, the World Bank team was informed that funding of the NEF for 2019 has already been confirmed, and in addition, about US$79 million has been promised to be added to this fund to close financing gaps that arose from the response and reconstruction in relation to past emergencies. As a result, the fiscal risk is expected to be Moderate.

• Coordination risk, identified at appraisal as Low, has further decreased since cross-sectoral dialogue, as well as coordination between the MoF, CNE, and MIDEPLAN, has been enhanced and mechanisms have been put in place to ensure a participatory and collaborative approach to DRM (such as the yearly national risk forums). At this point, coordination risk is considered to be Negligible.

• Based on the continuous progress of the DRM agenda during the nine years of implementation of the DPL with Cat DDO (which was neither affected nor slowed down by the changes in government), institutional and political risks are expected to be Low. The legal framework for DRM is strongly anchored in the national development process, and Costa Rica continues to be politically stable. The newly elected government has already confirmed its commitment to the DRM agenda by prioritizing the endorsement of the DRFS and the update of Law No. 8.488.

5 ASSESSMENT OF BANK AND BORROWER PERFORMANCE

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry Rating: Highly Satisfactory

88. The design of this operation, which was the first of its kind, has proved to be highly successful and has served as a model for subsequent DPLs with Cat DDO, first in the Latin America and Caribbean


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region, later in Asia and Africa, and most recently in Europe. An interdisciplinary team prepared the operation very efficiently, moving from concept review to full board approval in only 2.5 months; this included an Operations Committee review of the operation. The DPL with Cat DDO became effective on time and was in place when the Cinchona Earthquake occurred in January 2009.

89. The team evaluated the potential relevance of a DPL with Cat DDO in Costa Rica correctly. The operation was and continues to be in line with the GoCR’s priorities for strengthening the DRM program, which has now been anchored in the NDPs, and the suite of disaster risk financing instruments has been amplified. Quality at entry was ensured through an appropriate evaluation of the macroeconomic situation and risks. The policy areas and prior actions set up a strong foundation for the operation, with the prior actions meeting or even exceeding requirements. In retrospect, the M&E framework could have been more quantitative and specific; however, the qualitative nature of the indicators led to the GoCR providing a rich narrative in each report, which served as the basis for a productive dialogue on the overall progress of the DRM agenda. The additional indicators introduced subsequently could have been incorporated in the legal documents through a restructuring process.

(b) Quality of Supervision Rating: Satisfactory

90. Throughout the operation, the World Bank regularly monitored implementation progress and maintained a close policy dialogue with the Government around DRM beyond this operation. The World Bank team was always available and regularly present in the country for strategic discussions and technical advice for the achievement of the goals of this operation and more broadly for strengthening DRM. Good communications and professional rapport were established between the GoCR authorities and the World Bank team. World Bank team members were often invited to participate in relevant DRM-related events (such as the National Risk Forums), even after the loan closed. Funds mobilized by the Worl d Bank for TA on key topics (see Table 3) not only complemented the operation well but also enabled the further consolidation of and communication with key GoCR agencies.

91. The close relationship between the GoCR and the World Bank was key to the constructive discussions on the strategy for withdrawal of DPL with Cat DDO funds during post-disaster situations. With no experience in the use of this instrument in any other country, and with numerous competing interests and priorities in the GoCR, this constructive dialogue proved critical for decisions on the use of the funds and set an example for other countries with DPL with Cat DDOs. In the process, the World Bank team became a trusted advisor on DRM, well recognized for its expertise and willingness to share its expertise with the country. The World Bank could perhaps have anticipated a deteriorating macroeconomic situation and made the GoCR aware that this situation would prevent the World Bank from extending the operation.

92. While the indicators added in 2014 supported monitoring of the operation and facilitated the ongoing DRM policy dialogue with the GoCR, they were not included in the operation though a restructuring process.


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93. The constructive technical and operational dialogue between the GoCR and the World Bank also enabled the timely processing of withdrawal requests. Disbursements were made within a few business days, ensuring timely availability of loan funds.

(c) Justification of Rating for Overall Bank Performance

Rating: Satisfactory

94. Based on the assessments of World Bank performance in ensuring quality at entry and quality of supervision, overall World Bank performance is rated Satisfactory.

5.2 Borrower Performance

(a) Government Performance Rating: Highly Satisfactory

95. The GoCR has shown outstanding ownership and commitment to the development objectives

of the DPL with Cat DDO and overall progress of the DRM agenda. Despite the Government changing

twice during the operation and staff turnover, the operation was not negatively affected (see paragraph

32). When the World Bank team suggested the introduction of additional indicators, the GoCR agreed to

embark on this process, despite being aware that there was no contractual obligation, and used this

process to further promote the DRM agenda. Law No. 8.488 continues to be the basis for DRM.

Mainstreaming DRM across sectors has made significant progress, and the topic is anchored in the overall

Government agenda as the NDP shows (see paragraph 63). The new administration that took office after

the loan closed is committed to further strengthen the law and endorse the DRFS (see paragraph 47).

96. The GoCR has been very disciplined and strategic about the use of the DPL with Cat DDO funds .

Being open to a constructive dialogue with the World Bank team and despite potentially conflicting

interests and priorities within the Government, the GoCR has developed its own approach to using the

funds, complementing the NEF and emergency funds allocated across sectors (see section 3.2 B). In

comparison, most other World Bank clients for DPLs with Cat DDO drew down the full balance at once

which, in some cases, led to a lack of funds to respond to subsequent emergencies. Government officials

shared lessons learned with their counterparts in other countries in the region—such as El Salvador,

Panama, and Guatemala, as well as with the Coordination Center for the Prevention of Disasters in Central

America and the Dominican Republic (Centro de Coordinación para la Prevención de los Desastres en

America Central y República Dominicana, CEPREDENAC),16 the regional specialized DRM organization—on

how to make the best use of this instrument.

16 CEPREDENAC was established under the authority of the Central American Integration System ( Sistema de la Integración Centroamericana, SICA), the economic and political organization of the Central American countries. SICA delegated

CEPREDENAC the responsibility of developing the Central American Comprehensive Disaster Risk Management Policy (PCG IR).

The PCGIR, whose development was also supported by the World Bank through an IDF grant, incorporates the lessons learn ed from the DRM policy dialogue between the GoCR and the World Bank regarding the development of national DRFSs.


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97. The GoCR’s implementation arrangements of working through governmental institutions were

aligned with the operation’s needs and worked well. During the implementation of this operation, the

three key agencies (MoF, CNE, and MIDEPLAN) made significant progress in coordination and

communication, which are critical not only for the sustainability of the achieved goals but also for the

continued rapid progress in further strengthening the DRM agenda.

98. The open dialogue maintained by the GoCR with the World Bank and the yearly progress reports

enabled effective M&E of the program’s progress. The GoCR furnished an ICR, which provides candid

observations and important lessons learned that are relevant for future DPLs with Cat DDO (see annex 4).

The GoCR has also been very transparent about the use of the funds, providing updates to the World

Bank, as well as a full listing in the Borrower ICR, despite this not being a requirement of the operation

since loan funds are for budgetary support.

99. Despite the deteriorating macroeconomic situation, the GoCR did not change its strategic

approach to using the DPL with Cat DDO funds in post-disaster situations, as a complement to other

contingency funds, and allocations for the NEF have been stable. The Government has also maintained its

ex ante approach toward reducing natural disaster risks.

100. Since the closing of the DPL with Cat DDO, the GoCR has continued to make significant progress

in strengthening the DRM agenda. As of October 2018, DRM is included as a cross-cutting theme in the

draft of the new NDP 2019–2022, with CNE contributing to two strategic areas, namely (a) human safety

and social development and (b) territorial planning and urban mobility. CNE is monitoring the advances

made in relation to the NRM Plan with all 360 involved institutions, with emphasis on the resources

allocated by the 25 municipalities to DRM and CCA activities. Part of this process will be to identify how

much funding agencies allocate for DRM and CCA, with the final objective of developing a budget classifier.

In addition, as previously mentioned, the allocation of resources to the NEF has been mainstreamed and

CNE plans to update the DRM Act, among others, to strengthen the allocation of resources to DRM.

(b) Implementing Agency or Agencies Performance

101. Not applicable.

(c) Justification of Rating for Overall Borrower Performance Rating: Same as Government Performance, that is, Highly Satisfactory

6 LESSONS LEARNED

Lessons Related to This Operation Being the First of Its Kind

102. This operation leaves behind a legacy that strongly informed and influenced subsequent DPLs

with Cat DDO, becoming an important global public good. The formulation of the PDO, framing of the

policy matrix, withdrawal strategy, and many other aspects of this operation have been the baseline and


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provide lessons for the preparation and implementation of subsequent DPLs with Cat DDO. While several

aspects of project design have evolved over time, the original blueprint of the Costa Rica operation is still

recognizable. For example, the change toward more specific indicators with quantitative baselines and

targets has taken place and includes the option of increasing targets at renewal.

103. The legacy of this operation is the strongest in the Latin America and Caribbean region, which

still has most of the World Bank DPLs with Cat DDO. Through the close relationship with its neighbors in

Central America, the Costa Rica DPL with Cat DDO helped strengthen the dialogue with the client on

financial protection against natural disasters and thereby opened doors to other instruments (such as

CCRIF) not only in Costa Rica but throughout the region. In addition, through the collaboration with

CEPREDENAC, the lessons learned in Costa Rica have been disseminated throughout the Central American

region and the Dominican Republic, contributing to raise regional awareness on the need for developing

comprehensive national disaster risk financing strategies. The DRM policy dialogue promoted by the Costa

Rica DPL with Cat DDO contributed to facilitating several countries in Central America to adopt the DPL

with Cat DDO as part of their disaster financing instruments.

104. From the Latin America and Caribbean region, the legacy has spread to Asia, Africa, and most

recently Europe, and countries in these regions have been making use of this instrument. The following

DPL with Cat DDO operations have been approved to date: Costa Rica (2008); Colombia, and Guatemala

(2009); Peru, El Salvador, and the Philippines (2011); Panama (2012); Colombia (2013); Sri Lanka (2014);

Seychelles and Peru II (2015); the Philippines II (2016); Serbia and the Dominican Republic (2017); and

Romania and Kenya (2018).

105. A number of key factors contributed to the successful piloting of this new instrument. Critical

aspects were the capacity of the GoCR, including strong DRM governance and an advanced understanding

of DRF, in combination with a cross-institutional World Bank team comprising representation from DRM,

Treasury, and the Legal departments, among others, and strong support from management.

Lessons Relevant for New Operations

106. Building on well-established institutional arrangements, an advanced understanding of disaster

risk financing instruments, and accompanied by a close dialogue with the World Bank, the GoCR was

able to make very strategic use of a DPL with Cat DDO. When the DPL with Cat DDO became active, Costa

Rica already had an advanced understanding of disaster risk financing. The NEF was in place, and financial

contributions of each ministry for emergencies and reconstruction were mandatory, as was the insurance

of public assets. Using the three DRF instruments complementarily, the GoCR used the DPL wi th Cat DDO

funds in response to several disasters, instead of using the entire loan funds in a single withdrawal after

the first event.

107. Disaster risk financing requires close collaboration between Finance, Planning, and DRM, and

therefore a DPL with Cat DDO offers the opportunity for establishing or strengthening the dialogue

between these government agencies. In the case of Costa Rica, this operation brought the MoF, CNE, and


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MIDEPLAN together to develop a dialogue and a common understanding, while previously there was only

a limited understanding of each other’s roles and contributions. With the support of complementary TAs

(for example, the development of a risk financing strategy), the collaboration was further strengthened.

108. The DPL with Cat DDO is often praised as an instrument that can provide quick liquidity after a

disaster; however, its flexibility and function to reduce the financial impact may be even more relevant.

Immediate liquidity may not always be required, since financial resources allocated to other purposes may

be used initially, as was the case in Costa Rica. However, replacing these funds is critical to avoid

compromising on development goals. The DPL with Cat DDO offers a flexible source of funds to close

funding gaps due to its soft trigger, namely the declaration of a state of emergency, in combination with

a withdrawal request. This allows governments to decide if, when, and how much to draw down.

109. With the DPL with Cat DDO forming part of a country’s DRFS, an exit strategy needs to be

developed before the operation closes. With the somewhat unexpected closing of this operation, Costa

Rica lost a flexible and convenient instrument in its overall DRFS. Earlier dialogue on the implications of

an inadequate macroeconomic situation and discussion of alternate arrangements would support

countries in such a transition.

110. To strategically use the DPL with Cat DDO funds it is critical to consider the implementation

capacity of the line ministries. With the first withdrawal of funds in response to the Cinchona Earthquake,

the Government realized that implementation capacity was limited and implementation requires time.

Learning from this experience, the GoCR adapted a withdrawal strategy of requesting smaller amounts,

based on its need for funds and absorptive capacity.

111. The TA to complement the DPL with Cat DDO proved critical in providing a platform for

continuous dialogue between the GoCR and the World Bank. The very close dialogue between the GoCR

and the World Bank was key to the success of this operation in advancing Costa Rica’s DRM agenda.

Several TAs complementing the DPL with Cat DDO permitted the World Bank to have frequent interactions

on a wider range of DRM topics than would have been possible otherwise.17 This process also enabled the

World Bank team to become a valued advisor for the GoCR on all aspects of DRM.

7 COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS

(a) Borrower/Implementing agencies

112. CNE provided the following written comments: (a) clarifications of the facts presented in

paragraph 6 (the text has been adjusted accordingly); and (b) emphasized the importance of the DRFS

being approved and implemented.

17 See Table 3 for further detail.


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113. The MoF informed that there were no comments on the ICR document, beyond those already

made during the validation meeting on October 2, 2018 (see annex 3).

(b) Cofinanciers

114. No cofinanciers were involved in this operation.

(c) Other Partners and Stakeholders

115. No partners other than the GoCR were involved in this operation.


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ANNEX 1: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES

(a) Task Team Members

Name Title Unit Responsibility/Specialty

Lending


Senior DRM Specialist LCSUW Task Team Leader/ DRM

Ana Maria Torres Short-term (ST) Consultant

LCSUW DRM

Emma Katrine Phill ips ST Consultant LCSUW DRM

Marcela Tarazona ST Consultant LCSUW DRM

Carlos Costa Posada ST Consultant LCSUW DRM

Edward Anderson ST Consultant LCSUW DRM

Niels Holm-Nielsen Senior DRM Specialist LCSUW DRM

Jose C. Joaquin Toro

Landivar

Senior DRM Specialist LCSUW DRM

Ana Daza Program Assistant LCSUW Team Support

Silvia Delgado Team Support LCSUW Team Support

Diane Stamm Translator LCSUW Translation

Maricarmen Esquivel ST Consultant LCSUW DRM

Marta Elena Molares-Halberg

Counsel LEGLA Legal

Catarina Portelo Senior Counsel LEGLA Legal

Ana Lucia Armijos ST Consultant LCSPE Economist

Lars Christian Moller Country Economist LCSPE Economist

Maria Ivanova Reyes

Peguero

ET Consultant LCSPE Economist

J. Humberto Lopez Lead Economist and Sector Leader

PREM Economist

Ricardo Tejada Financial Officer BDM Financial Management

Antonio Leonardo Blasco

Financial Management Specialist

LCSFM Financial Management

Luis Corrales ST Consultant LCSEN Institutional Specialist

Supervision

Name Title Unit Responsibility/Specialty


Senior DRM Specialist LCSUW/LCSDU/GSURR Task Team Leader/ DRM

Doekle Geert Wielinga Senior DRM Specialist GSURR Task Team Leader/

DRM Francis Ghesquiere Manager GSURR Manager

Ana Maria Torres ST Consultant LCSUW/LCSDU/FABDM/

FCMNB/GFMDR/GSURR

DRM


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Jose C. Joaquin Toro Landivar

Senior DRM Specialist LCSUW/LCSDU DRM

Luis Corrales ST Consultant LCSUW/LCSDU/AFTN2 Institutional Specialist

Claudia Ruth Soto Orozco

Junior Professional Associate

LCSDU/GSURR DRM

Emma Phill ips ST Consultant LCSUW DRM

Marcela Tarazona ST Consultant LCSUW DRM

Carlos Costa Posada ST Consultant LCSUW DRM

Edward Anderson ST Consultant LCSUW DRM

Luis Alberto Aviles Junior Professional Associate

LCSUW/LCSDU DRM

Rossella Della Monica ST Consultant LCSUW DRM

Melanie Simone Kappes

DRM Specialist GSURR DRM

Violeta Wagner Senior Program Assistant LCSUW/LCSWS Team support

Patricia M. Acevedo Program Assistant LCSWS Team support

Ana F. Daza Language Program Assistant

LCSUW/GSURR Team support

Sara Gey Feria Team Support LCSDU Team support

Claudia Patricia Pacheco Florez

Program Assistant GSURR Team support

Fernando Viana Braganca

Team Support GSURR Team support

Ricardo Antonio

Tejada

Program Manager/Senior

Financial Officer

BDM/TREVP Treasury support

Jose Ángel Vil lalobos Senior Financial Sector

Specialist

FCI Disaster Risk Financing

Antonio Leonardo Blasco

Senior Financial Management Specialist

LCSFM Financial Management

Maria Sierra Senior Financial Officer FABBK Treasury Support

Jose Simon Rezk Financial Management Specialist

GGODR Financial Management

Andres Mac Gaul Procurement Specialist GGODR Procurement

America Teresa Genta Fons

Lead Counsel LEGLA Legal

Antonio Cristian D’Amelj

Counsel LEGLE Legal

Andrea Kucey Senior Country Officer LCC2C Country Management Unit (CMU)

Trina S. Haque Country Operations

Adviser

LCC2C CMU

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)


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No. of Staff Weeks US$, Thousands (including Travel

and Consultant Costs)

Lending

FY09 19.68 102,621.32

Total: 19.68 102,621.32

Supervision/ICR

FY09 14.35 109,576.14

FY10 12.69 77,818.58

FY11 9.25 77,653.05

FY12 7.37 60,239.59

FY13 10.56 63,332.52

FY14 13.76 59,924.74

FY15 24.06 108,830.38

FY16 15.47 87,638.59

FY17 9.45 57,044.85

FY18 10.9 67,802.34

Total: 127.86 769,860.78


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ANNEX 2: BENEFICIARY SURVEY RESULTS

Not applicable.


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ANNEX 3: STAKEHOLDER WORKSHOP REPORT AND RESULTS

1. A validation meeting was held on October 2, 2018 to present the draft ICR and obtain comments. Participants included: from the MoF, the Vice Minister of Expenses, Sub-Director of Public Credit, and the Advisor of Debt Control and Management; from CNE, the President and the Director of Strategic Development; and from MIDEPLAN, the Minister and the Advisor of Public Investment.

2. The following comments were provided:

• The MoF emphasized the contribution of the DPL with Cat DDO in including risk financing and fiscal aspects in the DRM dialogue in Costa Rica, as well as the value of the DPL with Cat DDO in strengthening the dialogue between the MoF, CNE, and MIDEPLAN through the periodic reporting process and conversations with the World Bank team. The MoF also mentioned that the design and piloting of the DPL with Cat DDO led to several other multilateral agencies developing similar instruments and offering them to Costa Rica.

• CNE recognized the role of the World Bank team as the advisor in strategic discussions beyond the DPL with Cat DDO. The World Bank had an active role in the scenarios identified by the GoCR, for example in the DRM forums.

• CNE recognized the critical support the DPL with Cat DDO funds withdrawn in response to Hurricane Otto for resilient reconstruction, especially since Hurricane Nate resulted in significant damages and losses that exceeded available funds dedicated to emergency response and resulted in the GoCR having to obtain further credits.

• The GoCR indicated that with the closing of this operation, not only has a risk financing instrument been lost, but also a development tool. The Cat DDO made it possible to take advantage of externalities due to the convergence of factors following the approval of Law No. 8488 of 2006 and the necessity of promoting the DRM agenda. In this sense, strong indicators were established to promote the DRM agenda.

• The GoCR emphasized the need to replace the DPL with Cat DDO with another equivalent risk financing instrument.


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ANNEX 4: SUMMARY OF BORROWER’S ICR AND/OR COMMENTS ON DRAFT ICR

1. The GoCR has prepared a very detailed ICR in Spanish, that is available in the Project Files. The lessons learned, conclusions, and final considerations are summarized below:

Lessons Learned

2. A credit facility such as a DPL could have a much wider scope than just natural disasters. Natural disasters can turn out to be just the tip of the iceberg when considering much broader phenomena related to climate change and the need to adjust adaptation and mitigation policies. Therefore, while it is true that the country faces important financing needs related to the response to disasters, they are small in comparison to the funds that Costa Rica is designating towards CCA and mitigation. The impact of Bank support through a development instrument such as the DPL with Cat DDO could increase, if its scope included objectives related to climate change in Costa Rica.

3. Beyond climate change, it would be helpful to include other events under the umbrella of natural disasters, such as health and agriculture. In Costa Rica there were two events that were evaluated but not deemed eligible under the coverage of this operation: one on the impact of the drought in the northern part of the country on the population ; and the other, the increase in outbreaks of mosquito-transmitted diseases such as dengue, chikungunya and zika, which were related to the start of the rainy season and became a national emergency.

4. The DPL with Cat DDO as a financial instrument is highly flexible, timely and easy to activate, and therefore there was a tendency to quickly use the funds, thus not leaving resources for future events or to transfer the administration of funds away from the NCE. At the same time, internal mechanisms to ensure its continuity have not always been clear. There is a need to internally adjust procedures and norms to guarantee the adequate use of resources in a transparent way and ensure accountability. Further, the provided funds turned out to be rather limited, considering the direct losses of US$1,130 million due to disasters between 2005 and 2011, which equaled an annual average of 0.66% of GDP. This resulted in an intense discussion with the authorities to optimize the use of the resources, have funds available in eligible emergencies and when the fiscal situation does not permit the use of channeling of other resources. However, most importantly, this shows the country the importance to not only have access to an instrument of this nature but also subscribe to a larger volume of contingency resources, possibly with different creditors and multi-laterals.

5. While the DPL with Cat DDO was a credit facility with a revolving feature, where payments to the principal could reinstate the availability of credit, this option was never used. It turned out to be difficult to create awareness among the government authorities so that funds would be allocated in the budget for advance repayment, to restore the availability of the original amount.

6. The World Bank has provided great technical support, facilitating the strategic discussions in the country on DRM and beyond, in relation to climate change and the fulfillment of the development objectives of Agenda 2030.


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Conclusions and Final Considerations

7. While Costa Rica has made great progress in the subject of DRM before subscribing to the credit facility of the DPL with Cat DDO, the strategic objectives of this operation for policy development facilitated the structuring of interinstitutional efforts that permitted important improvements over the last 10 years.

8. The capacity strengthening in the MoF, CNE, MIDEPLAN, local governments, and other public authorities was demonstrated in the process of the formulation of medium- and long-term planning instruments ,such as: the NRM Plan; in monitoring instruments and control over public investments; in the generation of historic information that facilitates decision making; and in the incorporation of financial instruments that allow a better margin for financial maneuvering.

9. The finalization of this program during a delicate financial situation in the country takes away a key instrument that was part of a set of tools providing financial support when Costa Rica most needed it, and also a facility that generated cooperation, inter-institutional articulation, and commitment of the country on DRM before the international community. However, the decision is made, and Costa Rica will continue its efforts in this subject, hoping to again develop such an instrument in the future, taking into account the lessons learned during the last almost 10 years.


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ANNEX 5: COMMENTS OF COFINANCIERS AND OTHER PARTNERS/STAKEHOLDERS

Not applicable.


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ANNEX 6: LIST OF SUPPORTING DOCUMENTS

World Bank

IBRD, President’s Memorandum “Proposal to Enhance the IBRD Deferred Drawdown Option (DDO) and to Introduce a DDO Option for Catastrophic Risk”, R2008-0018, 2008

IBRD, Country Partnership Strategy for the Republic of Costa Rica, R43276-CR, July 25, 2008

IBRD and IFC, Country Partnership Strategy for the Republic of Costa Rica FY2012–2015, R60980-CR, June 10, 2011

IBRD, IFC, and MIGA, Country Partnership Framework for the Republic of Costa Rica, FY2016–2020, R94686-CR, April 23, 2015

GoCR

CNE, Plan Nacional para la Gestión del Riesgo 2010–2015, 2010

CNE, Plan Nacional para la Gestión del Riesgo 2016–2020

CNE, Política Nacional del Riesgo 2016–2030, Decreto Ejecutivo No. 39.322-MP-MINAE-MIVAH, 2015

GoCR, Creación del Modelo de Valoración de Vulnerabilidad ante el Riesgo de Desastres, aplicable a Amenazas Naturales, Decreto No. 36.721, 2011

GoCR, Decreto No. 34.993, State of Emergency following the Cinchona Earthquake, 2009

GoCR, Decretos No. 36.251 and No. 36.423, State of Emergency following Tropical Storm Nicole and Hurricane Tomas, 2010

GoCR, Decreto No. 40.027, State of Emergency following Hurricane Otto, 2016

GoCR, Informe de la Implementación del Marco de Acción de Hyogo y las Buenas Prácticas de la Plataforma Nacional, 2007

GoCR, Ley Nacional de Emergencia, Ley No. 4.374, 1969

GoCR, Ley Nacional de Emergencia, Ley No. 7.914, 1999

GoCR, Ley Nacional de Emergencias y Prevención del Riesgo, Ley No. 8.488, 2005

GoCR, Ley de Control Interno, Ley No. 8.292, 2002

GoCR, Plan General de la Emergencia por sismo 6.2 Richter, Terremoto de Cinchona, Decreto Ejecutivo No. 34993 – MP, 2009


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GoCR, Plan General de la Emergencia ante la Situación provocada por la tormenta tropical Nate , Decreto de Emergencia No. 40.677, 2018

GoCR, Plan Nacional de Desarrollo – Jorge Manuel Dengo Obregón 2006–2010, Decreto No. 33.608, 2007

GoCR, Plan Nacional de Desarrollo – María Teresa Obregón Zamora, 2011–2014, 2010

GoCR, Plan Nacional de Desarrollo – Alberto Cañas Escalante, 2015–2018, 2014

GoCR, Reglamento a la Ley Nacional de Emergencias y Prevención del Riesgo, Decreto Ejecutivo No. 34.361, 2007

MAG-MIDEPLAN, Evaluación del Impacto Económico Provocado por los Fenómenos Ciclónicos Nicole y Tomas en Costa Rica en el Año 2010, 2011

MIDEPLAN, Guía metodológica general para la identificación, formulación y evaluación de proyectos de inversión pública, 2009

MIDEPLAN, Normas Técnicas Lineamientos y Procedimientos de Inversión Pública, Decreto Ejecutivo No. 35.374-PLAN, 2009


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ANNEX 7: MATRIX OF ADDITIONAL UNOFFICIAL INDICATORS

Table 7.1 Additional Indicators with Baseline Target and Achieved Value

Indicator Baseline Value Target Values Actual Value Achieved at Completion

Implementation of five selected strategic goals

of the National DRM Plan 2010–2015

0 targets implemented

Implementation of 5 selected goals of the National DRM Plan 2010–2015

Achieved A total of 7 selected goals were achieved: (a) four under the National DRM Plan 2010–2015 and (b) two under the new 2016–2030 NRM Policy and the National DRM Plan

2016–2020 that are aligned with the 2015–2030 Sendai Framework. CNE put in place the monitoring committees for each management area of both the new NRM Policy and Plan: (a) Risk Reduction, (b) Preparedness and

Response, and (c) Recovery and developed the National Forum on DRM, which will include a progress report on the National DRM Plan2016–2020.

Design of a

financial strategy for Disaster Risk Management

No financial

strategy

Designing a financial

strategy for DRM

Achieved

A DRFS has been designed and incorporates inputs from some areas at the MoF, MIDEPLAN, and CNE. The new government administration committed to its adoption in the near future. The GoCR is evaluating its participation

in the CCRIF, as part of its DRFS.

Mainstream DRM in planning programs at

the sub-national level

DRM in planning programs at national level

only

Mainstreaming DRM in planning programs at subnational level with disaster risk

information

Achieved Development of 25 municipal master plans that include DRM considerations. A 2016–2020 NRM Plan monitoring tool was developed.

The tool will allow monitoring the resources that various entities assign to DRM activities. Additionally, it will bring inputs to CNE for supporting the subnational level in elaborating plans, which include DRM considerations.

Increased

capacity for incorporating disaster risk

analysis in the public investment process

Capacity for

incorporating disaster risk at minimum

Capacity building for

incorporating disaster risk in the public investment

process. Government officials trained in disaster risk analyses in

public investments

Achieved

MIDEPLAN updated and published ‘Technical Norms, Guidelines and Procedures for Public Investment in Costa Rica’. Public officials (who participated in continuous

training programs provided by MIDEPLAN and CNE) are now using improved methodologies developed by MIDEPLAN to better integrate disaster risk considerations into the public investment decision

processes. Additionally, MIDEPLAN developed an online information system tool that gives access to private and public decision makers to historical information on economic losses due to the occurrence of disasters.


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MAP

Documents

World Bank Documentdocuments.worldbank.org/curated/en/503301541437599160/...Leading up to 2008, Costa Rica's macroeconomic performance was one of the strongest in Latin America, with