Only 1% of disaster budget is spent on prevention, UN report warns

Despite various studies showing that responding to a disaster is four to seven times more expensive than preventing it, Mexico allocates 99% of its budget for disaster risk reduction to emergency response, leaving only 1% for prevention.

This situation places the country as one of those that invests the least in prevention within its disaster budget in the region, according to the United Nations with its Regional Assessment Report on Disaster Risk in Latin America and the Caribbean (RAR24), which highlights the low investment in preventive measures and the high cost of emergency response.

In 2023, Mexico experienced one of the worst natural disasters in Acapulco, Guerrero. For meteorological service experts, Hurricane Otis became an atypical phenomenon, going from category 1 to 5 in less than 24 hours. And according to the director of the United States National Hurricane Center (NCH), Michael Brennan, the way it intensified was very exceptional, practically breaking all records. The federal government estimated damage to 80% of Acapulco's hotels and 98.2% of homes.

“Latin America has expected annual economic losses in infrastructure of more than 58 billion dollars. And this does not take into account other expenses for direct and indirect losses, such as impacts on employment, education and health,” said Nahuel Arenas, head of the Regional Office for the Americas and the Caribbean of the UNDRR.

The RAR24 report, presented in February by the United Nations Office for Disaster Risk Reduction (UNDRR), indicates that, despite being the second most disaster-prone region in the world, Latin America invests less than 2% of its budget in prevention. This has led to most resources being allocated to emergency response and reconstruction, rather than strengthening capacities to reduce risks and prevent tragedies.

Between 2000 and 2022, the region recorded 1,534 disasters affecting 190 million people. In extreme cases, such as Hurricane Maria in 2017, the cost of recovery in Dominica was equivalent to 200% of its GDP. “We have lost everything that money can buy,” wrote Dominica’s Prime Minister Roosevelt Skerrit at the time.

“Nothing undermines development more than disasters. They set us back decades in development,” warned Nahuel Arenas.

Report highlights five countries' investment in risk reduction

-Guatemala: 2.32% of the budget between 2014 and 2023, with more than 98% allocated to response.

-Peru: 1.28%, of which 50% was used in corrective measures and 40% in response.

-Jamaica: 0.7%.

-Mexico: 0.29% of the national budget, with 99% used for response.

-Brazil: 0.06%, with more than 70% focused on reactive action.

“We chose these five countries (including Mexico) because they have at least made the effort to label their spending on risk reduction, which is an important step towards transparency,” Arenas explained.

Reaction and lack of insurance

The UN report stresses that responding to a disaster is significantly more costly than preventing it. The lack of adequate early warning systems and resilient infrastructure exacerbates the economic impact. Furthermore, insurance coverage in the region is insufficient: only 5% of economic losses resulting from disasters in developing countries are covered by insurance, compared to 40% in developed countries.

The Fonden

Mexico had the Natural Disaster Fund (Fonden), created in 1996 as a budgetary mechanism to deal with emergencies. However, with the elimination of various trusts in 2021, the Fonden changed its operating rules, reducing its response capacity.

This adjustment has generated criticism, as it limits the possibility of responding to disasters quickly and effectively. The lack of a robust financial scheme for disaster prevention and response could aggravate the situation in the country, which faces hurricanes, earthquakes and floods every year.

The RAR24 report makes it clear that Latin America and the Caribbean need a change of approach to disaster risk management. Increasing investment in prevention and financial resilience could prevent millions of dollars in losses and save lives in a region that faces major climate and natural crises every year.

Actions

Recommendations from the report to reduce the region's vulnerability to disasters:

• Implement multi-threat early warning systems, which can reduce the economic impact by 30% and decrease mortality by eightfold.
• Strengthen the resilience of public finances by promoting tools such as insurance to reduce the economic impact of disasters.
• Increase investment in prevention and corrective measures, rather than focusing spending on reactive actions.