How to measure the cost of natural disasters? The case of El Niño" in Ecuador, 1997-1998"

Natural disasters, like the “El Niño” phenomenon often hit hardest on the poor. Yet it is often difficult to separate the effects on living conditions produced by the inclement weather conditions from general inadequacies in infrastructure and lack of economic development.

Furthermore, there may be controversy as to how to value damages due to the natural disaster: just to repair and rehabilitate or to reconstruct to prevent and enhance development. This methodological problem related to the measurement of the costs also affects policy choices. How much should one focus on emergency relief and what can be done to obtain better prevention against recurring weather shocks such as the El Niño phenomenon? Ecuador’s policy orientation appears to have been greatly oriented at reactive, relatively untargeted emergency relief, whereas this study recommends greater emphasis on pro-active and targeted developmental investment.

The policy choices are heavily dependent on how the impact of the natural disaster is conceptualized: what costs have been incurred and by whom? Is preventive action to minimize the impact of a next occurrence of “El Niño” a proper objective for preparing investment plans today or should these be elaborated with broader developmental objectives in mind? This paper raises a broad range of corresponding methodological questions, but provides concrete answers to only a few.

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Rob Vos
Inter-American Development Bank (IDB)
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