Strategies for selected economic sectors

1. Energy in Costa Rica
2. Tourism in Jamaica
3. Agriculture in Ecuador
4. Strategies derived from the case studies

The managers of public and private sectoral agencies share a concern about the vulnerability of their sectors to hazardous events: What hazards threaten which services? Where are the weak links? How much damage might be done? How would the damage affect sector investment, income, employment, and foreign exchange earnings? What is the impact of losing x service in y city for z days? What investment in mitigation would resolve that problem? What is the cost-benefit of that investment? In the experience of the OAS the sectors that can benefit most from vulnerability assessments are energy, transport, tourism, and agriculture, since these sectors typify problems of disaster impact faced by developing countries.

Presented below are case studies of hazard assessments for the energy sector, the tourism sector, and the agriculture sector. The section ends with some strategies for conducting such assessments for selected economic sectors.

1. Energy in Costa Rica

In 1989 the Costa Rican Sectoral Directorate of Energy asked the OAS to assist in analyzing the vulnerability of the energy sector to natural hazards. The study first defined the nature of possible impacts. These included:

- Loss of infrastructure; associated investment losses

- Loss of income to the sector from forgone energy sales

- Effect on the production of goods and services; associated losses of employment income

- Loss of foreign exchange

- Negative impact on the quality of life

It was clear that the study would have to cover not only the main energy subsectors, but also the service and production sectors that could affect or be affected by the supply of energy. Thus it included the electric power system, the hydrocarbon system, railroads, roads, telecommunications, the metropolitan aqueduct, and the major economic production facilities. Existing information was analyzed for earthquakes, volcanic eruptions, landslides, hurricanes, flooding, drought, and erosion.

To evaluate the vulnerability of each facility, the study used two methods simultaneously: field examination and the preparation of a geographic information system which could overlay each hazard with each energy and service system. Figure 15 shows one of the GIS overlays: landslide threats to transmission lines. Matrices prepared to show impacts were rated as follows:

- No impact
- Potential threat, major or minor
- Confirmed threat, major or minor

Figure 15 - COSTA RICA: ENERGY SECTOR VULNERABILITY TO LANDSLIDE HAZARDS

Source: Adapted from Departamento de Desarrollo Regional/Organización de los Estados Americanos (OEA), and Dirección Sectorial de Energía/Ministerio de Recursos Naturales, Energía y Minas de Costa Rica (MIRENEM). Amenazas Naturales y la Infraestructura Energética de Costa Rica (San José, Costa Rica: Unpublished report, 1989).

A rapid examination of the threats yielded a number of serious problems. The confirmed major impacts caused by each hazard in each sector are shown in Figure 16. The most important problems were studied in greater detail and actions to deal with them were recommended. Some examples follow.

- The worst event would be a strong earthquake or volcanic eruption that breached Arenal dam or crippled the Arenal and Corobici hydroelectric plants, cutting off half of the hydropower in the country. The probability of such an event is low, but the magnitude of the catastrophe is so great it has to be planned for. The report recommended contingency plans for emergency generation and the establishment of new power plants outside the Arenal system.

- Two critical substations and two transmission lines are threatened by earthquakes, landslides, volcanic eruptions, flooding, and severe windstorms. The multiple hazards make the probability of occurrence moderate, and the loss of any of these components would cut off power from the Arenal system to the central region. The report recommended building a alternate transmission line that would bypass the four components.

- Landslides periodically damage one segment of the railroad that carries heavy petroleum derivatives from the refinery on the Atlantic Coast to a critical substation in San Jose. Since having the substation out of commission for a long time would be a major catastrophe for the region and rerouting the railroad would be too expensive, the report recommended equipping a West Coast port with facilities for handling a substitute supply which could be trucked to San Jose.

Figure 16 - NUMBER OF CONFIRMED MAJOR IMPACTS OF NATURAL HAZARDS ON ENERGY FACILITIES IN COSTA RICA

The Government found the recommendations valid and is now seeking financing for feasibility studies of the most critical ones. It is noteworthy that so many serious problems could be identified in a three-month study and, more importantly, that many were amenable to mitigation by relatively modest investments.

2. Tourism in Jamaica

The geographic and climatic setting of the Caribbean and the siting of tourism projects on or near the beaches combine to make Caribbean tourism especially vulnerable to disruption from natural disasters. In the island countries hurricanes are the most damaging hazard, but land-based flooding, landslides, earthquakes, and wildfires also exact a toll.

Direct damage caused by Hurricane Gilbert to property and equipment of the Jamaican tourism industry amounted about US$85 million. The indirect damage was much greater. In foreign exchange alone the cost from September to December 1988 was US$90 million-a particularly painful loss since the foreign exchange was needed to finance recovery programs. The temporary closing of hotels for repairs meant fewer visitors to the island, causing other indirect effects such as loss of income for the national airline and reduction in employment and the purchase of local goods and services.

The vulnerability of the tourism industry is not confined to its own capital stock, as was demonstrated by the Jamaican experience. Damage to roads, utilities, airports, harbors, and shopping centers also affected the industry. Conscious of the need to minimize damage from future events, the Government of Jamaica requested OAS technical cooperation in preparing an assessment of the vulnerability of the tourism sector to natural hazards and recommending mitigation actions.

The assessment disclosed that much of the damage to tourism facilities, as to other buildings, was due to lack of attention to detail in construction and maintenance, particularly in roof construction. Roof sheeting was poorly interlocked. Tie-downs of roof structures were inadequate. Nail heads were rusted off. Timber strength was reduced by termites, and metal strength by corrosion. Much glass was needlessly blown out because of faulty installation and poor design criteria, but also because windows were not protected from flying debris. Drains clogged with debris caused excessive surface runoff, resulting in erosion and scouring around buildings. Local water shortages developed because the lack of back-up generators prevented pumping. Although a major contributor to the damage, faulty building practices and maintenance deficiencies are easy to correct: it was calculated that proper attention to these matters would have increased the cost of construction less than 1 percent.

Long-term mitigation measures were also identified. The study recommended the protection of beach vegetation, sand dunes, mangroves, and coral reefs, all of which help to protect the land from wave and wind action. New construction sites should be evaluated for susceptibility to hazards. Setback distance from the shore should be enforced, and the quality of sewage outfall should be maintained to protect live coral formations.

In short, the preliminary study, conducted in one month, identified a number of possible actions that would substantially reduce the impact of future hurricanes and other natural hazards. The preliminary analysis indicated that many of these actions would have a high cost-benefit ratio. Subsequently, Jamaica requested IDB financing to undertake feasibility analyses of these proposals and to implement them. The ultimate objective of this work is for the tourism sector to arrive at a "practical and effective loss reduction strategy and program in response to the risks posed by natural disasters to the industry."

3. Agriculture in Ecuador

In Ecuador, as in most Latin American and Caribbean countries, agriculture is one of the most important sources of income, employment, investments, and foreign exchange earnings. However, it is perhaps the most vulnerable and least protected sector in terms of infrastructure and institutional support to cope with natural hazards. In the floods caused by the El Niño phenomenon in 1982-83, for example, the agricultural sector suffered 48 percent of the US$232 million in damage. Furthermore, besides generating inflationary pressures on domestic prices, the disaster had a significant impact on the balance of payments due to the loss of export crops and the need to import basic food products to compensate for domestic production losses.^6/

^6/ United Nations Economic Commission for Latin America and the Caribbean (ECLAC). Ecuador: Evaluation of the Effects of the 1982/83 Floods on Economic and Social Development (New York: ECLAC, 1983).

In 1990, the Ministry of Agriculture asked the OAS to assist in evaluating the vulnerability of the agricultural sector to natural hazards and identifying appropriate mitigation strategies to reduce it to acceptable levels. These strategies would be identified as project ideas or project profiles, some of which would be selected by local officials to be further studied and evaluated to determine their economic and technical viability.

The study, conducted at the national level, first defined 14 of the most important crops, grouped in three categories: basic food crops, strategic crops, and export crops. Key infrastructure support elements for the production, processing, storage, transportation, and distribution of agricultural products were also defined and geographically located. This information was overlaid in a geographic information system (GIS; see next section) with information on drought, erosion, floods, landslides, volcanic eruptions, and seismic hazards.

By relating province-level socioeconomic data to potential affected areas, the study was able to determine the impacts of natural events in terms of sectoral income, employment, investments, foreign exchange earnings, and national food security. On the basis of these criteria, 49 different situations were selected as the most critical. It was found, for example, that erosion hazards in Carchi Province would affect in the medium to long run 11,750 ha of the potato-growing area, which accounts for more than 43 percent of the national production and for 40 percent and 80 percent, respectively, of the employment and income produced by the sector in the province.

The most serious problems according to each of the five criteria were identified, and policy options that would achieve the best gains were established. It was determined, for example, that policies oriented to avoid unemployment should seek to mitigate flood hazards in Guayas Province and erosion hazards in Tungurahua Province. To protect foreign exchange earnings, the most effective actions would be to protect banana production in El Oro Province against drought hazards and to mitigate flood hazards in Guayas Province, especially in areas used for coffee and banana production.

Possible mitigation strategies were also identified as part of the study, and planned or on-going programs and projects in the Ministry of Agriculture and other institutions were identified as suitable for carrying out some of these mitigation strategies and more detailed studies. A report describing the major findings and recommendations was prepared and submitted to the Government for review. Based on these recommendations, a US$317,000 technical cooperation proposal for hazard mitigation activities within the sector has been prepared by the Government and is to be presented to outside agencies for financing.

4. Strategies derived from the case studies

The following observations are common to many sectors. Of course, many additional strategies apply to individual sector studies.

Sectors are useful units of analysis for examining hazard assessment and vulnerability reduction issues.

Sectors are recognizable and legitimate program subjects. Banks make loans on the basis of sectors. A sectoral approach fits the organizational structure of both international finance agencies and national governments. The knowledge and experience of most technical professionals is built around a sectoral approach. Information for the development diagnosis (Phase I of an integrated development planning study) is collected and analyzed on a sectoral basis. Sectoral studies need not be restricted to economic sectors: urban and rural sectors and the poor also make valid units of study.

Vulnerability reduction measures can be cost-effective, either as stand-alone projects or, more commonly, as component elements of overall sector development programs. Including such measures can improve the cost-benefit ratio of investment projects.

Sector vulnerability studies are a new approach which can be considered for inclusion in development diagnosis (Phase I) studies. Initial national-level studies allow for a quick and low-cost assessment of policies and projects at a profile level that can be examined in greater detail later.

Sectoral studies reveal previously unrecognized linkages between disasters and development. Often a sector is unaware of its role in the lifeline or critical facilities network. In many cases it has no strategy for dealing with abnormal situations resulting from any exogenous event. The complex interrelationships among the components of some sectors make it difficult to cope with the impact of a natural event. This is particularly true when the sector is more concerned with one set of components, such as the production or generation of power, than with another set such as transmission, distribution, and storage. Furthermore, sectors usually do not have an adequate understanding of the effect a curtailment of service can have on other sectors.

A sector may have to select between competing objectives to arrive at a vulnerability reduction strategy. Criteria that define those competing objectives include investment in the sector, income stream, export earnings, employment, and sector security. The cost of a component may be disproportionate to the impact of its loss as measured by one of these criteria.