2012年-世界发展银行全球_FONDEN___Mexicos_Natural_Disaster_Fund--A_Review_74页_15mb

FONDEN: Mexico's Natural Disaster Fund – A Review Summary

Core Content

FONDEN, or the Fund for Natural Disasters, is a key financial mechanism in Mexico designed to support disaster relief and reconstruction. Established in the late 1990s, it has evolved into a sophisticated system for managing natural disaster risks, integrating both financial and technical approaches to enhance resilience and reduce fiscal exposure.

Main Points

• Purpose: FONDEN was initially created to finance the rapid rehabilitation of public infrastructure and low-income housing affected by natural disasters. It has since expanded to cover all stages of the disaster risk management (DRM) cycle, including prevention, preparedness, response, and recovery.

• Structure: FONDEN consists of two complementary programs:

  • FONDEN Program for Reconstruction: The primary budget account, which channels federal funds to specific reconstruction programs.
  • FOPREDEN Program for Prevention: A secondary program that supports disaster prevention through risk assessment, risk reduction, and capacity building.

• Funding Mechanism:

  • FONDEN is funded through the Federal Expenditure Budget.
  • The law mandates that at least 0.4% of the annual federal budget must be allocated to FONDEN, FOPREDEN, and the Agricultural Fund for Natural Disasters (CADENA), with FONDEN receiving the majority (around 87%) of the funds.
  • The minimum allocation is adjusted annually based on uncommitted funds from the previous year.
  • Additional resources can be transferred from other programs, such as the oil revenue surplus, if the initial allocation is insufficient.

• Operational Efficiency:

  • FONDEN is managed by the Ministry of Interior (SEGOB) and its General Coordination of Civil Protection.
  • The fund is supported by BANOBRAS, Mexico’s state-owned development bank, which handles the financial accounts.
  • The fund utilizes innovative technologies such as geocoding and digital imagery to improve the accuracy and efficiency of damage assessments.

• Risk Transfer Instruments:

  • FONDEN has pioneered the use of catastrophe bonds and parametric reinsurance to manage financial risks associated with natural disasters.
  • It issued the world’s first government catastrophe bond in 2006, worth $160 million, for earthquake risks in three zones.
  • In 2009, it issued a $290 million multi-peril parametric catastrophe bond for earthquakes and hurricanes, and in 2011, secured a $400 million excess-of-loss reinsurance treaty for government assets and low-income housing.

• Reconstruction Principles:

  • FONDEN adheres to the "build back better" principle, aiming to reconstruct infrastructure at higher standards and relocate vulnerable communities to safer zones.
  • It finances 100% of the reconstruction costs for federal assets and 50% for local assets, with the percentage decreasing after the first disaster if insurance is not purchased for reconstructed assets.

• Evolution and Adaptation:

  • FONDEN has continuously evolved to improve efficiency and effectiveness, incorporating new financial instruments and streamlining processes.
  • It has introduced mechanisms such as the Revolving Fund and Immediate Partial Support Mechanism to address funding needs in the early post-disaster phases.
  • The development of R-FONDEN, a probabilistic catastrophe risk model, has enhanced the fund’s ability to calculate risk metrics and allocate reinsurance coverage.

• Disaster Risk Profile:

  • Mexico is highly exposed to various natural hazards due to its diverse geography.
  • The country experiences over 90 earthquakes annually with a magnitude of 4.0 or higher, and significant exposure to hurricanes, floods, droughts, and forest fires.
  • By 2050, it is expected that nearly 90% of the population will live in urban areas, increasing vulnerability to natural disasters.

• Collaboration and Impact:

  • FONDEN is a collaborative effort between the Mexican government and the World Bank, with the latter providing advisory and technical support.
  • The fund has been used as a case study for other governments to understand and implement effective disaster risk management strategies.
  • The system is continuously refined to incorporate new insights and improve disaster preparedness and response.

Key Information

• Funding: Minimum annual allocation is 0.4% of the federal budget, equivalent to around $800 million in 2011.
• Funds Allocation: FONDEN covers 100% of federal reconstruction costs and 50% of local costs.
• Risk Transfer: Utilizes catastrophe bonds and reinsurance to manage financial risks.
• Institutional Framework: Managed by the Ministry of Interior and supported by BANOBRAS.
• Technological Use: Incorporates GIS and digital imagery for damage assessments.
• Evolution: From a simple budget line to a comprehensive disaster risk management system.
• R-FONDEN: A key tool for calculating risk metrics and improving reinsurance coverage.

Conclusion

FONDEN represents a significant advancement in disaster risk management for Mexico, serving as a model for other countries to adopt. Its integration of financial and technical strategies, use of innovative risk transfer mechanisms, and commitment to "build back better" principles highlight its effectiveness in managing natural disaster risks while promoting resilience and sustainable development. The system continues to evolve to meet the growing challenges of disaster exposure in a rapidly urbanizing country.