Natural Disasters Fund Director General Ministry of Interior, Mexico Secretaría de Gobernación SEGOB NATURAL DISASTERS FUND FONDEN Rubem Hofliger Natural Disasters Fund Director General Ministry of Interior, Mexico

Background In attention to the government’s concerning to increase their capacity to attend the damaged caused by natural phenomena without altering the public finances, by 1996 the Natural Disasters Fund (FONDEN) was created. Although with the FONDEN constitution the trouble related to avoid a lead off on the regular programs resources was in a way solved, there were not a legal regulation which provides the correct control and transparency in the money application; therefore in 1999 the first FONDEN rules were issued, which has had over the years many substantial modifications to accomplish that the procedures be held with maximum efficiency and opportunity. = Presence of disasters caused by nature The Natural Disasters’ Fund (FONDEN) was created in 1996 Federal Government

Emergency and/or Disaster (meanwhile and afterwards) Disaster Time Line Disaster Prevention (before) Emergency and/or Disaster (meanwhile and afterwards) FONDEN Trust FOPREDEN FIPREDEN FONDEN Days To Weeks Hours, Days to Months Months to years Days, Weeks to Months. Immediate Fund Occurrence of the phenomenon EMERGENCY DECLARATION AID SUPPLIES FOR THE POPULATION How it is detonated? DISASTER DECLARATION RECONSTRUCTION RESOURCES All federal plans and programs are activated in order to attend the disaster

The FONDEN’ s purpose The FONDEN is a financial tool composed by many instruments and driven by various Federal Government Agencies which participates in their operation, which has as a main purpose to provide resources to the 32 Mexican States and to the Federal Agencies (that are in charged of federal infrastructure) to attend the harm and damages caused by a natural phenomenon, whose disaster’s magnitude overcame their capacity of response with their own budget. It’s a federal program which provide support in a complementary way to resources destined originally to attend natural disasters. Therefore, to get the resources approved it’s necessary that the federal and local entities justified that the disaster surpasses their financial standing, with regard to not have sufficient resources in its normal programs to attend the damages caused by the disaster.

damaged infrastructure risk transfer instruments The FONDEN instruments Immediate Fund: it’s purpose is to provide resources for the aid supplies acquisition to attend in an immediate way the urgent needs of the population in an emergency situation generated by a natural phenomenon related to life, health, alimentation, medical attention, dress, temporary shelter, as well as the rescue of people. 2. FONDEN Program: provide economic support for the reconstruction of infrastructure from the three orders of government damaged by a natural disaster; as well as for the affected dwellings of the low income population with no possibilities to access to an insurance and for the restitution of the forest resources, protected natural areas, rivers, lagoons, etc. 3. FONDEN Trust Fund: provides the resources from its patrimony to attend the actions foreseen in the FONDEN Program, as well as the contracting of insurances and risks transfer instruments. Aid supplies acquisition Reconstruction of the damaged infrastructure and the contracting of risk transfer instruments

The FONDEN procedures To attend the federal infrastructure, all the resources will be provided thru FONDEN, with the condition that the federal entities justified that they don’t count with resources in their budgets to pay by themselves the damages. The trustee of the Federal FONDEN Trust is in charge of delivering the approved resources to the contractor businesses of the Federal entities according to the reconstruction advances. In the event of damages in the infrastructure of the States and Municipalities, the supports provided by FONDEN will be until 50% of the cost of the damaged local infrastructure. The resources will not be deposit in the State FONDEN Trust anymore. Now the federal entities will be in charged of the reconstruction of 50% of the local infrastructure. If they don't have the capacity to do it all, it can be convene with a third party or with the state or municipality.

Execution SEGOB is in charged of the coordination of the whole process, since the occurrence of the natural disaster until the approval of the total resources, as well as monitoring the correct application of the resources in each and every reconstruction program by attending as a member in the local FONDEN trust Committees. The execution of the reconstruction works corresponds to the Local States and to the Federal Entities. The reconstruction of the federal infrastructure suffer no changes; the federal entities will be in charged of the reconstruction and FONDEN will paid 100% of the cost directly thru the FONDEN trust. For the States to access the resources, they will have to go thru all the FONDEN process and then once the evaluation is done they will have to sign a contract with the federal government in which they will let the federal entities reconstruct 50% of their damaged infrastructure.

Ask for the confirmation FONDEN PROCEDURES Natural Phenomena Local State Technical entity Ask for the confirmation of the occurrence of the natural phenomena Issues an opinion regarding the occurrence of the natural phenomena I. Geológicos Natural disaster Dictamen ? II. Hidrometeorológicos Beginning 1/2 Negative End Positive III. Otros Notifies the State That his request is positive

$ APIN FONDEN PROCEDURES Installation of the evaluation committee SEGOB Delivery of the evaluation results Installation Local FONDEN Trust Committee/ SHCP Local State Each sector evaluates and determine the amounts required for the reconstruction and Request the issue of the natural disaster declaration Approve the list of urgent actions to be realized by each sector Local State Issue and publish on the national official newspaper the natural disaster declaration Present to the Committee their preliminary lists of works and actions to be done 2/1 2/3 Request for the rapid response resources to realize urgent actions Federal Agencies Authorizes the rapid response resources to realize the urgent actions Ask for resources to attend the evaluation Local State Ask for advances to start the reconstruction $ APIN

Federal FONDEN Trust National Committee FONDEN PROCEDURES Federal Entities Federal FONDEN Trust National Committee SHCP SEGOB Approve the advances Issue a positive opinion for the documents of each sector so the resources can be approved Review and Present the final documents to access the resources for the reconstruction Authorizes the resources for the reconstruction and instructs the Trustee to allocate the money on the FONDEN local trust as soon as the state deposits his share Local State 3/2 Fin Call for a Committee session to authorize the use of the advances for the urgent works and actions for the reconstruction $ $

Change from a reactive system to a preventive system One of the main targets of the Mexican Government is precisely to transit from a disaster reactive system to a preventive system. To accomplish that, by 2004 two prevention programs were implemented: i) the Preventive Trust (FIPREDEN), and ii) the Natural Disasters Prevention Fund (FOPREDEN); which can be used by federal entities, as well as by the mexican states for the execution of preventive projects, focusing on risk reduction, eradicate vulnerability and exposition of public infrastructure and dwellings of low income population. With more resources invested in prevention, we are achieving to avoid large disbursements of resources to attend the damages caused by natural disasters. Reactive Preventive

US $25 million dlls average New challenges TODAY DESASTRE Prevention Reconstruction $$ Prevention budget per year: Average reconstruction resources per year: $ US $25 million dlls average US $580 million dlls average Balance: Not investing in prevention lead to excessive material and social costs which also compromise the sustainable development of our country 12

... main financial instrument to New challenges TOMORROW DESASTRE Reconstruction Prevention $ FOPREDEN ... main financial instrument to invest in prevention FONDEN ... diminish Investment in prevention per year: Average loses per year: Balance: $ minimum 20% of the average losses The prevention, understood as an investment, will represent in the near future substantial savings, which could be used in the development and economic growth of the country 13

Preventive aspects of FONDEN The 4 preventive concepts of the (FONDEN): Improvements and additions. Risk transfer instruments. Local state funds. Specialized equipment to prevent and attend natural disasters.

FOPREDEN, FIPREDEN, IMPROVEMENTS AND ADITIONS Preventive aspects of FONDEN 1. Improvements and additions 2004-2009 FOPREDEN, FIPREDEN, IMPROVEMENTS AND ADITTIONS FONDEN VS FOPREDEN, FIPREDEN, improvements and additions: $1.53 $ FONDEN: $3,35 1 $ 2.26 Improvements and additions: in the reconstruction budget, it’s possible to include mitigation actions to avoid future damages thru specific reconstruction norms that will reduce the vulnerability before future disasters FOPREDEN, FIPREDEN, IMPROVEMENTS AND ADITIONS $1.53 billions FONDEN $ 3.35 Billions

Preventive aspects of FONDEN 2. Risk transfer instruments Since 2004, the Mexican Government has been working intensely in different schemes to protect the FONDEN patrimony, by transferring the risks through an insurance policy or a risk transfer instrument (e.g. cat bonds), as well as encouraging and providing incentives to the federal entities and to the local states to insure their assets and infrastructure, in order to gradually decrease the impact on federal and local budgets when a natural disaster of large proportions occurs. The FONDEN legal regulation search to promote the insurance culture, compelling the Federal Agencies and State Governments to compromise to incorporate in their next budgets and annual programs, the sufficient resources to insure the infrastructure damaged by a disaster that will be reconstructed with FONDEN resources, before receiving the supports for the reconstruction.

Preventive aspects of FONDEN 3. Local states funds Attending to an eminently preventive spirit, we seek that in a medium time limit all the States count with their own natural disaster fund, in order to decentralize this function from the federal government and avoid that all natural disasters that occur in the country continue being attended with federal resources.

Preventive aspects of FONDEN 4. Specialized equipment to prevent and attend natural disasters. This program was created to attend the necessities that the federal entities that belongs to the National Civil Protection System have, to count with the appropriate and sufficient equipment to help the states and municipalities to attend all kinds of different situations caused by disasters of any kind.