Working in development is often difficult, as even the best-planned projects can have different outcomes than expected. In this IEG Project Lessons series, we take a close look back at the World Bank Group’s projects to assess what has worked, what didn’t, and why, to better inform future projects and investments.

This brief captures the lessons learned from evaluating the World Bank’s Bank’s Colombia Disaster Risk Management Development Policy Loan. To read the full evaluation,

Download the Project Performance Assessment Report (PPAR)

Background: The High Cost of Recurring Natural Hazards

Natural hazards strike Colombia incur significant costs . According to the Center for Research on the Epidemiology of Disasters, 155 events hit Colombia between 1970 and 2015, affecting 17.8 million people and causing damages of $7 billion (in nominal terms). Of these, the ten biggest disasters affected 15.3 million people; six of these accounted for damages estimated at $6.9 billion.

Four types of disaster account for 90 percent of all reported events in Colombia between 1970 and 2010. Floods constituted the most frequent disasters (72 events), affecting 16 million people and leading to damages of $3.7 billion. Earthquakes occurred less frequently (21 events), but each event affects more people and causes greater damages. Volcanic activities (10 events) are also very destructive. In 1985, the eruption of the Nevado del Ruiz volcano destroyed the town of Armero, killing more than 20,000 people and causing damages equivalent to 0.7 percent of GDP. Landslides, the second most frequent event (39 events), affect a relatively small number of people (32,495) and cause more limited damages ($400 million).

Over the last 30 years, the World Bank provided considerable knowledge products and financial support to Colombia to assist with the government’s disaster risk management efforts . It directed or redirected a total of $265 million to disaster reconstruction activities. In 2004, the government requested the preparation of a Natural Disaster Vulnerability Reduction Adaptable Program Loan (APL) series to help support the government carry out new policies to mitigate disaster risk. The first loan (APL1) was followed in 2006 by the Natural Disaster Vulnerability Reduction to Bogotá (APL2) aimed at reducing the city’s exposure to human and economic losses from natural disasters.

Read the report for more about Colombia’s national strategy to manage disaster risks

About the Colombia Disaster Risk Management Development Policy Loan

During the implementation of the first Adaptable Program Loan, the World Bank Group’s Board approved in January 2008 the development policy loan for disaster risk management with a catastrophe deferred drawdown option (CAT DDO) “in response to the request from the [middle income countries] for loans that better address countries’ immediate liquidity needs in the aftermath of natural disasters”. When this option became available, the Colombian government asked the World Bank to cancel the contingent component of the APL1 and use the released resources to fund a CAT DDO. The World Bank agreed, and approved a CAT DDO for $150 million in December 2008. After the government declared a national emergency, a requirement of the operation, the loan was fully disbursed in December 2010 at the government’s request, and the program was closed as scheduled on January 31, 2012.

The loan sought to strengthen the government’s program for reducing risks resulting from adverse natural events. More specifically, it aimed to support advances in four action areas to:

• Improve risk identification and monitoring, and increase awareness of risk by expanding coverage of a hazard monitoring network of seismic stations, volcanic monitoring stations, and automatic hydro meteorological stations.
• Increase prevention and mitigation measures for risk reduction by increasing the number of municipalities that have disaster risk management plans.
• Strengthen the national system for disaster management and prevention by reducing the number of people living in the high hazard zone of the Galeras volcano; and
• Reduce the fiscal vulnerability of the state to natural disasters by enabling the government to define a framework for contingent financing in the event of a natural disaster.

Based on the experience with this operation, the government requested a second CAT DDO for $250 million, which the World Bank’s Board approved in July 2012.

Performance Rating

The overall outcome is rated satisfactory, reflecting high relevance of the program’s objectives, modest relevance of program design, and substantial progress in all action areas. The significantly expanded disaster monitoring stations, provided timely information on seismic and hydro meteorological conditions around the country , making it possible to know more precisely who was at risk and what risks they faced. The national disaster risk management (DRM) authority assisted an increasing number of local governments to strengthen their DRM capacity, which led to 627 municipalities having DRM plans. DRM investments increased across all levels of government. Colombia made significant strides in improving the legal and institutional framework for DRM, but encountered various difficulties in the resettlement of the residents from the Galeras volcano zone. To reduce the fiscal vulnerability of the states to natural disasters, the government has advanced in gathering information to analyze the quality of insurance, calculating the contingent liabilities from associated with an earthquake returning every 250 years, defining a framework for contingent financing, assessing technical and legal options to improve public insurance, and improving the legal framework for infrastructure concession contracts.

Colombia has built a strong system for managing disaster risk in a gradual but steady way. This gradual approach is likely to persist as the authorities and the public are keenly aware of the importance of having a good DRM system given its high exposure to natural disasters.

Read the full report for more outcome assessments.

Lessons

IEG’s evaluation resulted in the following 3 lessons relevant to Disaster Risk Management using the CAT DDO instrument:

1) The CAT DDO can help advance the disaster risk management reform agenda and strengthen the clients’ system to respond to disaster risks. The Colombia experience shows that as a budget support operation, the CAT DDO shifted the World Bank’s counterpart on DRM issues from the Ministry of the Interior and Justice to the Ministry of Finance and the National Planning Department. This allowed the World Bank to establish dialogue with the government ensuring that financial dimensions of disaster risks are fully incorporated in the DRM system. With its renewal feature, the CAT DDO provided a platform for the World Bank and the government to maintain a long-term dialogue.

2) The CAT DDO complements other World Bank instruments supporting DRM reforms. In Colombia, the CAT DDO was part of a substantial DRM portfolio and culminated an engagement that included both knowledge and financial support over a long time. Even so, it took time for the CAT DDO concept to be accepted , but when the government was ready to take action, the World Bank was ready to assist. The common understanding of what needed to be done helped to ensure good implementation of the program despite lack of experience with this new instrument on the part of both the World Bank and the government.

3) The design and implementation of the CAT DDO in Colombia raised some issues that deserve further clarification. There was tension between the loosely defined requirement that “the borrower must implement a DRM program” and the government’s concern over maintaining access to the CAT DDO funds at all times. This concern led the government to opt for modest results indicators to ensure it would not lose access to the contingent line of credit due to missing program targets. It would be very useful for the World Bank to clarify further how this disbursement condition would be assessed and how it relates to the DRM program results monitoring.

Read the full Report

Read more about the Colombia Disaster Risk Management Development Policy Loan