Risk Governance Scan of Colombia

Chapter 7. Disaster recovery and reconstruction in Colombia

Abstract

This chapter gives an overview of Colombia’s disaster recovery and reconstruction process, particularly its ability to avoid the replication of risks in that process. As part of this, the chapter reviews the disaster recovery and reconstruction commitments in place and gives an overview of the disaster risk financing tools available for meeting these commitments in case of a disaster. It pays particular attention to Colombia’s approach to ensuring an efficient use of public resources for disaster recovery and reconstruction purposes.

Following disaster, prompt recovery of disrupted services and economic activity, as well as timely reconstruction of damaged assets are important to limit longer term negative impacts on people’s lives and economic growth. The reconstruction phase is an important opportunity to “build back better”, which means to avoid recreating the pre-existing risks as well as the creation of new risks. Clear legal responsibilities and budgetary arrangements facilitate successful and timely disaster recovery and reconstruction. The OECD Recommendation of the Council on the Governance of Critical Risks (OECD, 2014) suggests establishing governance arrangements that facilitate efficient use of public funds through procurement arrangements that protect from undue influence and corruption.

Facilitating disaster recovery and reconstruction: Building back better

When recovering and reconstructing assets left damaged or destroyed during disaster, vulnerabilities should be reduced rather than replicated to build long-term resilience (OECD, 2014). With Law 1523/2012, Colombia embraces this “build back better” principle as a core objective to adhere to in recovery and reconstruction in the aftermath of disaster, providing that recovery and reconstruction should result in more resilient assets. To ensure resilient recovery, the law designates the UNGRD as the lead agency to co-ordinate and plan disaster recovery and reconstruction efforts, recognising shared responsibilities by all societal actors. To ensure broad stakeholder consensus, Law 1523/2012 requires the UNGRD to develop recovery action plans in co-operation with the National Committee for Risk Knowledge and the National Committee for Risk Reduction. The National Committee for Disaster Management supports the UNGRD in the preparation of recovery and reconstruction efforts. The National Plan for Disaster Risk Management (Plan Nacional de Gestión del Riesgo de Desastres, PNGRD) provides that a National Disaster Recovery Strategy (Estrategia Nacional para la Recuperación ante Desastre Nacional) should be in place by 2021 along with sectoral recovery strategies to establish a shared approach to recovery and reconstruction processes (UNGRD, 2015).

Post-disaster damage assessments

Following the declaration of a public calamity or disaster in Colombia, damages caused by the disaster are to be assessed to guide recovery and reconstruction efforts, and inform the provision of central government support. This is in line with the OECD Recommendation (OECD, 2014) that calls for the investigation and the assessment of damages and losses derived from disasters as soon as possible after they occur. In Colombia, responsibility for carrying out post-disaster damage assessments lies with the respective municipal or departmental government of the affected area. To ensure a coherent assessment of damages for all disasters, the UNGRD has designed a standard method for early damage assessment to be carried out as soon as possible after the event. A more detailed damage assessment is to be carried out once relief operations have ended. All damage assessments should be submitted to stakeholders that are part of the National Crisis Room (see Box 6.4 in Chapter 6). The results are used to inform the design and financing of recovery action plans (UNGRD, 2013).

Disaster recovery and reconstruction commitments

In terms of financial assistance for disaster recovery and reconstruction, Law 1523/2012 requires the central government to provide financial support for recovery when a public calamity or disaster has been declared. The level of financial support and the type of asset for which support will be made available are not prescribed in the law. The only exceptions are transport infrastructure assets under the authority of the National Roads Institute (Instituto Nacional de Vías, INVIAS) and the National Infrastructure Agency (Agencia Nacional de Infraestructura, ANI), whose recovery assistance is regulated by Law 1682/20131 and Decree 4165/2011).2

Central government recovery funding may be requested once subnational and sectorial resources have been exhausted. However, Law 1523/2012 does not specify any cost-sharing agreements. Negotiations are currently underway to change this for subnational governments. (OECD/ World Bank, Forthcoming).

Unclear rules on “who pays what” following a disaster may lead to delays in recovery and reconstruction, as well as a higher financial burden for the state. Reviews of public spending in the aftermath of disasters suggest broad commitments to provide financial support, such as in Law 1523/2012, may lead to higher than necessary payments for recovery and reconstruction (OECD/ World Bank, Forthcoming). The OECD recommends to develop rules for compensating losses that are clearly spelled out at all levels in advance of emergencies to the extent that this is feasible (OECD, 2014).

Past practice in Colombia shows that government compensation was made available for a wide range of damaged or destroyed public assets, going beyond public transport infrastructure, to include for example damages incurred by state-owned enterprises (Ministry of Finance and Public Credit, 2011; World Bank, 2011; OECD, 2018). Specifying cost-sharing arrangements across levels of government could be beneficial in managing expectations regarding available recovery and reconstruction support. Canada’s disaster financial assistance arrangements (Box 7.1) may offer inspiration for specifying cost-sharing arrangements for central government disaster recovery support in Colombia. Cost-sharing arrangements could also integrate considerations for avoiding payments for repeated damages so as to reward prior investments in disaster risk reduction, such as is the practice of FONDEN in Mexico (see Box 5.2 in Chapter 5).

Financing arrangements for disaster recovery and reconstruction

Disaster recovery and reconstruction is cost-intensive and requires a quick mobilisation of substantial funds. Given the broad explicit and implicit disaster-related contingent liabilities the Colombian government faces, various pre-funding mechanisms are in place.

The National Fund for Disaster Risk Management (Fondo Nacional de Gestión del Riesgo de Desastres, FNGRD), a reserve fund managed by the UNGRD (see Box 3.2 in Chapter 3) is the main central government instrument to finance disaster recovery and reconstruction. In the event of a disaster or public calamity, the board of the FNGRD decides on the allocation of resources, reflecting the provisions of the specific recovery action plans. Before requesting central government assistance, subnational governments are to provide support for disaster recovery and reconstruction. Law 1523/2012 requires municipal, district and departmental governments to set up their own disaster risk management funds. However, as with the FNGRD, Law 1523/2012 does not provide for concrete budgetary arrangements that determine the level of available funding on an annual basis. To ensure that predictable and sufficient resources are available for disaster recovery, Costa Rica’s National Emergency Fund (Fondo Nacional de Emergencia) requires all public institutions to allocate 3% of their budget surplus per year to the fund. Mexico’s Fund for Natural Disasters (Fondo de Desastres Naturales, FONDEN) requires at least 0.4% of programmable federal spending to be distributed to FONDEN (OECD, 2013; Colombian Ministry of Finance and Public Credit, 2011; Kellet, Jan; Caravani, Alice; Pichon, Florence, 2014; OECD/ World Bank, Forthcoming).

In addition to the funds established by Law 1523/2012, Colombia has several other pre‑funding mechanisms for disaster recovery and reconstruction support in place. The Adaptation Fund (Fondo de Adaptación, AF)3 may, for instance, be tapped into for financing recovery and reconstruction, such as in the aftermath of the 2010/11 La Niña episodes. A Catastrophe Deferred Drawdown Option provided through the World Bank provides an additional USD 250 million that is made available in the event of a specific level of disaster for recovery and reconstruction purposes. A recently signed USD 1 billion catastrophe bond agreed between Colombia, Chile, Mexico and Peru under the Pacific Alliance further adds to the available resources for disaster recovery and reconstruction (Artemis, 2018). Finally, additional financing can be made available through either reassigned sectoral budgets or the general budget administered by the Ministry of Finance and Public Credit (OECD, 2014; Colombian Ministry of Finance and Public Credit, 2010)

The Ministry of Finance and Public Credit is committed to reducing the government’s fiscal vulnerability to disasters. It leads a multi-stakeholder technical working group on financial protection and carries out several projects under the PNGRD. One such project seeks to inform the design of disaster risk insurance instruments for central and subnational public assets, critical infrastructure, as well as for businesses and households. The insurance instruments should be available by 2025, with preliminary research on available insurance policies and public assets to be covered under way. In addition, the PNGRD provides that two parametric insurance instruments should be available by 2021. A seismic risk transfer instrument has already been designed as part of this project (UNGRD, 2018).

Box 7.1. Canada’s disaster financial assistance arrangements

In Canada, the vast majority of the federal government’s financial resources for post‑disaster relief and recovery are financed by the disaster financial assistance arrangements (DFAAs). The DFAA is financed through an annual budget that can be topped up with debt financing when earmarked funding does not suffice.

Reimbursements to subnational governments via the DFAA are made on a progressive scale. The threshold that needs to be met in order to qualify for federal reimbursements via the DFAA starts at CAD 3.07 (USD 2.53) per provincial citizen, resulting in initial thresholds ranging from CAD 114 450 (USD 94 162) in the relatively low-populated Nunavut region to over CAD 43 million (USD 36 million) in Ontario (Table 7.1).

Table 7.1. Expense thresholds under the disaster financial assistance arrangements, 2017

Province/territory	Population 2017 (Q1)	Initial threshold amounts in CAD (50% reimbursement)	Final threshold amounts in CAD (90% reimbursement)
Alberta	4 280 127	13 139 990	65 785 552
British Columbia	4 777 157	14 665 872	73 424 903
Manitoba	1 328 346	4 078 022	20 416 678
New Brunswick	757 771	2 326 357	11 646 940
Newfoundland and Labrador	529 696	1 626 167	8 141 428
Nova Scotia	952 024	2 922 714	14 632 609
Northwest Territories	44 263	135 887	680 322
Nunavut	37 280	114 450	572 994
Ontario	14 094 167	43 269 093	216 627 347
Prince Edward Island	149 383	458 606	2 296 017
Quebec	8 356 851	25 655 533	128 444 800
Saskatchewan	1 158 339	3 556 101	17 803 670

Source: (Public Safety Canada, 2018)

Once eligible disaster recovery expenses incurred by the affected provincial or territorial government exceed the initial threshold, at least half of the expenses eligible for financial assistance under the DFAA are reimbursable. The maximum federal reimbursement rate is 90% of eligible costs, when the final threshold of CAD 15.37 (USD 12.65) per citizen has been passed (Table 7.2) The cost-sharing formula is adjusted annually for inflation.

Table 7.2. Cost-sharing formula under the disaster financial assistance arrangements

Provincial/territorial expense thresholds (per capita of provincial population)	Provincial/territorial share (%)	Federal share (%)
First CAD 3.07	100	0
Next CAD 6.15	50	50
Next CAD 6.15	25	75
Remainder (over CAD 15.37)	10	90

Source: Public Safety Canada (2018).

Ensuring the efficient use of public resources for disaster recovery and reconstruction

To ensure an efficient use of public resources for disaster recovery and reconstruction, it is important to protect the funding process from any irregularity to preserve trust in public institutions (OECD, 2014). In Colombia, government support for disaster recovery and reconstruction is subject to the provisions of the Anticorruption Plan (Plan Anticorrupción y de Atención al Ciudadano), which promotes transparency and citizen engagement as mechanisms to ensure efficient use of public resources. Law 1150//2007 specifies these provisions, requiring transparency in the use of resources, which applies to the use of simplified procurement procedures for prompt disaster recovery and reconstruction (DNP, 2018).

Good practices from across the OECD may offer insights for Colombia to put these provisions into action and strengthen transparency and oversight throughout the recovery and reconstruction efforts. Italy’s Open Data Ricostruzione portal, for instance, collects information on the allocation and use of funds during recovery and reconstruction from the 2009 l’Aquila earthquake, and on progress in implementing public reconstruction works. All is publicly accessible, enabling oversight and transparency. A second good practice is Mexico’s the ReconstrucciónMX tool, which tracks assistance made available from FONDEN by cross-checking it with data from stakeholders involved in the recovery and reconstruction process. The ReconstrucciónMX tool also allows citizens to directly report on any observed misuses of the fund’s resources, creating a valuable accountability mechanism to prevent undue influence and illegitimate use of public assistance (OECD, 2016; Open Data Ricostruzione, n.d.).

References

Colombian Ministry of Finance and Public Credit (2011), Obligaciones Contingentes: La Experiencia Colombiana [Contingent Liabilities: The Colombian Experience], http://www.minhacienda.gov.co/HomeMinhacienda/ShowProperty?nodeId=%2FOCS%2FMIG_6047857.PDF%2F%2FidcPrimaryFile&revision=latestreleased.

Colombian Ministry of Finance and Public Credit (2010), Decreto 4819 de 2010 “Por el cual se crea el Fondo de Adaptación” [Decree 4819 of 2010 “Creation of the Fund of Adaptation”, http://sitio.fondoadaptacion.gov.co/index.php/el-fondo/normatividad/normatividad.

DNP (2018), Plan Anticorrupción y de Atención al Ciudadano: Mejor Gestión, Mejor País [2018 Anticorruption Plan and Attention to the Citizen: Better Management, Better Country], https://colaboracion.dnp.gov.co/CDT/DNP/PAYAC%202018.pdf.

Kellet, Jan; Caravani, Alice; Pichon, Florence (2014), Financing Disaster Risk Reduction: Towards a coherent and comprehensive approach, https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9027.pdf.

OECD (2016), Open Government Data Review of Mexico: Data Reuse for Public Sector Impact and Innovation, OECD Digital Government Studies, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264259270-en.

OECD (2014), OECD Recommendation on the Governance of Critical Risks, http://www.oecd.org/gov/risk/Critical-Risks-Recommendation.pdf.

OECD (2014), OECD Territorial Reviews: Colombia 2014, OECD Territorial Reviews, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264224551-en.

OECD/ World Bank (Forthcoming), Fiscal Resilience to Disasters: Lessons from country experiences, OECD Publishing.

Open Data Ricostruzione (n.d.), Home, http://opendataricostruzione.gssi.it/.

Public Safety Canada (2018), Disaster Financial Assistance Arrangement (DFAA), https://www.publicsafety.gc.ca/cnt/mrgnc-mngmnt/rcvr-dsstrs/dsstr-fnncl-ssstnc-rrngmnts/index-en.aspx.

UNGRD (2018), National System for Disaster Risk Management, Presentation at the OECD-UNGRD Colombia Risk Governance Scan Kick-off event, Unidad Nacional de Gestión del Riesgo de Desastres.

UNGRD (2015), Plan Nacional de Gestión del Riesgo de Desastres - una estrategia de desarrollo 2015 - 2025 [National Plan for Disaster Risk Management - a development strategy 2015 - 2025, http://repositorio.gestiondelriesgo.gov.co/bitstream/handle/20.500.11762/756/PNGRD-2016.pdf?sequence=27&isAllowed=y.

UNGRD (2013), Estándarización de Ayuda Humanitaria de Colombia: Colombia menos vulnerable, comunidades más resilientes [Standardisation of Colombia’s Humanitarian Aid: A less vulnerable Colombia, more resilient communities, http://portal.gestiondelriesgo.gov.co/Documents/Manuales/Manual_de_Estandarizacion_AHE_de_Colombia.pdf.

Notes

← 1.  https://www.mintransporte.gov.co/descargar.php?idFile=13089 (in Spanish, consulted on 30 July 2018).

← 2.  https://www.ani.gov.co/sites/default/files/u233/dec_4165.pdf (in Spanish, consulted on 30 July 2018).

← 3.  http://sitio.fondoadaptacion.gov.co/index.php/el-fondo/normatividad/normatividad (in Spanish, consulted on 30 July 2018).