Caribbean & Central America - January 2021

Central America faces an uphill battle to recover from the impact of two powerful hurricanes in the midst of the coronavirus (Covid-19) pandemic.

Hurricane ‘Eta’ hit on 3 November 2020, and those affected had no time to recover before ‘Iota’ followed on 16 November. There were 189 reported deaths from the two hurricanes, and an estimated 5.2m people were affected in Central America, according to an initial assessment by the United Nations (UN) published 27 November. Eta alone caused up to US$5.5bn in economic damages in the seven Central American countries, according to a preliminary estimate from the Inter-American Development Bank (IDB) published 23 November, and the Central American bank for economic integration (BCIE) estimates total losses of US$11bn for both storms in Central America.

The scale of the destruction was immense, and Vinicio Cerezo, general secretary of the Central American integration system (Sica), called for support from the international community. “This situation is even more dramatic than what we faced in 1998 after Hurricane Mitch”, Cerezo said. In Nicaragua, the storms damaged or destroyed around 43,000 houses, health facilities and schools, and damaged 98% of the road network, according to the UN, which said losses and response expenditures will cost the equivalent of 6% of Nicaragua’s GDP. Local journalists reported that communications networks were disrupted in 33 of 153 Nicaraguan municipalities, with some left off grid for days.

On 12 January Guatemala’s presidential planning secretariat (Segeplan) put the cost of damage, losses, and additional costs caused by the hurricanes in Guatemala at Q6.0bn (US$770m). The hurricanes produced the evacuation of 311,317 people and particularly affected the departments of Alta Verapaz, Izabal, Quiché, Huehuetenango, Petén, Zacapa, and Chiquimula (see sidebar). Segeplan said that as regards the scenarios regarding GDP growth prior to and after Eta and Iota, between 2018 and 2021, the impact of the hurricanes was expected to result in an additional 0.1% decline. A report published on 1 December by Central American law firm, Garcia & Bodan, said one in four agricultural exporters in Guatemala suffered crop damage, and at least 5% of that number suffered a complete loss of crops, while damage to roads and other infrastructure disrupted both imports and exports. At the end of December, the government said some Q296.1m for reconstruction would be taken from the 2020 emergency fund, but further funds would have to be approved by congress this year.

Dramatic footage of bridges being swept away by swollen rivers surfaced from Honduras, and the country’s busiest airport, Aeropuerto Internacional Ramón Villeda Morales in San Pedro Sula, was left underwater following both hurricanes. In a report published 21 December, the UN Economic Commission for Latin America and the Caribbean (Eclac) estimated that the storms will cause Honduras’ GDP to contract by an additional 0.8% in 2020. Maite Matheu, country director for NGO CARE in Honduras, said it would take at least a decade for the country to recover from the storms, underlining both short-term destruction and long-term impact on livelihoods. President Juan Orlando Hernández has promised a sustainable recovery plan, but details on funding are thin on the ground. The Guatemala-based think tank, Central American institute for fiscal studies (Icefi), estimates that 600,000 Hondurans will fall into poverty this year due to the impact of the hurricanes combined with that of the coronavirus pandemic. As a result, Icefi is calling for more action from the Honduran government, but national governments in affected countries are already suffering severe budgetary pressures due to the pandemic.

International institutions stepped up in response to the hurricanes, led by Sica and the BCIE working in conjunction with the World Bank (WB) and IDB. On 14 December BCIE announced a US$2.5bn support plan called the ‘Central American programme for resilient reconstruction’. The stated aim is “increasing the resilience and adaptation of the Sica countries to climate change”, but it also provides for emergency aid to help affected communities.

The BCIE will also manage and administer funds donated by other donators “at no administrative cost,” and the plan also provides for the creation of a Climate Change investment project preparation fund (FCC). This fund will “provide the countries with technical assistance resources for the creation of a set of priority projects for the adaptation to climate change which will allow to promote public investment for the construction of new resilient road and social infrastructure and resilient agriculture projects, as well as private investment for the construction and restoration of dams, resilient housing, using Public-Private Partnership (PPP) schemes and resources for MIPYME [Micro, Small, and Medium Enterprises] environmental investments”.

In addition, the IDB has promised US$1.2bn in new resources, as well as another potential US$500m in reassigned resources. “The IDB is totally committed to helping with the recovery and reconstruction of affected countries in Central America”, said IDB chief, Mauricio Claver-Carone. “The IDB will lead a historic cooperation effort between governments, multilaterals, and the private sector to accelerate the recovery and reconstruction of the region”.

The WB has also pledged US$150m to support Honduras’ recovery from the storms, with a focus on rebuilding roads and infrastructure. Some 200 pieces of infrastructure have been prioritised, along with the restoration and improvement of services including electricity and water, which the WB says will benefit 800,000 people. The plan also aims to “strengthen institutional capacity in the country to manage resilient and inclusive reconstruction and recovery from disasters”. Existing programmes have also responded in the wake of the storms. Nicaragua, Guatemala, Belize, and Panama are members of a multi-country risk pool called the Caribbean Catastrophe Risk Insurance Facility (CCRIF). Nicaragua was the first to join, in 2015, and the policy paid out US$30.6m to the country in mid-December. Other Sica members also have the possibility to join.

While international institutions have sprung into action to support Central America’s recovery, the fact remains that Eta and Iota caused widespread damage in a region that already suffered a significant infrastructure deficit. Recovery efforts will also be hampered by constraints on spending as national treasuries struggle to deal with the continued economic fallout of the coronavirus pandemic, leaving governments with difficult choices as to which areas to prioritise. In terms of weather patterns, the 2020 Atlantic hurricane season was the worst on record, according to the World Meteorological Organisation, and things look set to get worse.

Central America is one of the world’s most vulnerable regions to the effects of climate change, which scientists say is increasing the strength and frequency of tropical storms and hurricanes in the region, and the existing pledges of resources for reconstruction seem more like a sticking plaster in the face of systemic issues. Global measures to combat climate change may be way behind schedule, but the prospects for meaningful action increased with the election of Joe Biden as the next US president. In fact, Biden addressed Eta and Iota in a tweet, writing that “the increasing frequency of these powerful storms is another reason that fighting climate change will be one of my top priorities”. It would take years for the effects of new policies to be felt, assuming Biden sticks to his word and does take action, but long-term solutions to climate change and worsening hurricanes in Central America will have to come from both inside the region and the wider international community.

• Damages in Guatemala

Segeplan deputy secretary, Stuard Villatoro, told reporters that the social sector (housing, health, and education) was most affected, accounting for 48% of damages, followed by productive sectors (agriculture, agroindustry, tourism, and trade – 31%); infrastructure (15%); and the environment (7%).