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

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1 SOCIAL DEVELOPMENT DEPARTMENT Poverty and Social Impact Analysis ( PSIA) on

2 Why this PSIA? More than two thirds of the country s population and GDP are at hazard risk. And while uncertainty exists around specific impacts and scenarios, it is generally agreed that climate change will affect the country. Findings The Government of Mexico (GoM) has requested a Strengthening Social Resilience to Climate Change Development Policy Loan (DPL) of US$300 million to be presented to the Board for approval by the end of calendar year And yet, there is little empirical evidence on how climatic disasters and climate change will affect the most vulnerable.

3 The PSIA has three objectives Understand the level & spatial distribution of climatic risks in Mexico, and their possible implications for poverty. Assess the impact of climatic disasters and climate-related events on welfare, with a focus on the poorest households and municipalities. Findings Determine whether existing policies and programs mitigate the expected negative effects of such events.

4 Key hypotheses Hypothesis 1 poverty correlates with higher disaster risk Hypothesis 2 natural hazards increase poverty Findings Hypothesis 3 disaster risk management programs attenuate poverty

5 The poorest municipalities in Mexico are highly exposed to risk Overlaps Between Risk Stratification and the 125 Poorest Municipalities in Mexico Seismic Risk Entity Municipalities Risk High Medium Low Oaxaca Guerrero Chiapas Veracruz Puebla Durango Nayarit Total Hydro-meteorological Risk Findings: Risk - Poverty Entity Municipalities Risk High Medium Low Oaxaca Guerrero Chiapas Veracruz Puebla Durango Nayarit Total

6 Poor families are likely to bear higher losses on their housing from disaster risk. Findings: Risk - Poverty Pobreza de patrimonio (%) Riesgo total de vivienda en pobreza

7 And have low levels (in value and number) of critical public infrastructure for disaster emergencies (hospitals and roads) Findings: Risk - Poverty % acumulado de valor de activos Grafica 4.1. Curvas de Lorenz para valor de activos municipales (normalizados por poblacion) % acumulado de municipios distribucion_equitativa valor_escuelas valor_vivendas_enpobreza valor_hospitales valor_activospublicos valor_carreteras valor_puentes

8 High risk municipalities have good incidence of disaster safety nets (temporary employment and cash transfers), but low presence of civil protection units and hazard maps Findings: Risk Profile

9 Natural disasters can have sizable and persistent impacts on poverty and human development. Between : Counter-cyclical effects: Poverty increased between % for disaster-affected municipalities, with floods and droughts being the most harmful. Findings: Welfare Impacts Sizable impact. Municipalities affected by disasters lost 2 years of human development gains over the same period. Persistent: Poverty increased between % for municipalities affected by disasters during the 1990s.

10 Impacts are stronger in municipalities with lower human development and higher poverty. Contents Findings: Welfare Impacts Percentile Human Development Index Asset Poverty ** *** ( ) ( ) ** ( ) ( ) * ** ( ) ( ) ** ( ) ( ) Number of observations *** p<0.01, ** p<0.05, * p<0.1 Bootstrapped Standard Errors in parenthesis.

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

12 Progressive transfers to high exposure municipalities through catastrophic insurance program Average transfers between Cyclone exposure Support Obs High 1,738, Medium 1,565, Low 1,501, Findings: Risk Management Policies Flood exposure Support Obs High 1,798, Medium 1,563, Low 1,449, Nota: Note: Transfers in constant pesos (2009)

13 Does Progresa/Oportunidades protects its beneficiaries from droughts?. In a sample of rural households located in Central Mexico, droughts between 1998 and 2000 appear to reduce overall consumption. Preliminary findings also suggest that the conditional cash transfer program Oportunidades protect non-food consumption, but not food consumption. Findings: Risk Management Policies

14 PSIA work has been multidisciplinary, partly demand-driven and quantitative Multidisciplinary. Climate scientists, economists and actuaries work together. Partly demand-driven: Requests from Ministries, but also aiming to fill knowledge gaps. Findings Policy-oriented: Already providing key inputs for existing programs (i.e., Program for Risk Prevention in Human Settlements) or strategies (i.e., National Adaptation Strategy, 5 th National Communication on Climate Change). Emphasis on quantitative methods: Reliance on impact evaluation techniques.

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