Distribution of emergency relief in post hurricane mitch nicaragua

The Distribution of Emergency Relief in Post Hurricane Mitch Nicaragua
by
Catherine Ambler
A thesis submitted in partial fulfillment
of the requirements for the
Degree of Bachelor of Arts with Honors
in Economics
Williams College
Williamstown, Massachusetts
May
9,2005
Abstract
This thesis assesses the distribution of emergency relief in Nicaragua after
Hurricane Mitch. It describes the household and community characteristics that
increased a household's probability of receiving aid in the first six months after the
hurricane. In all cases analyses are
broken down by three categories of aid-giver: the
government,
NGOs and international donors, and religious organizations. The thesis
finds little evidence of systematic targeting towards the most vulnerable households.
There were well-defined differences among the practices of the different aid-givers and a
strong overall emphasis on region, particularly for rural areas.
Aclcnowledgements
In researching and writing this thesis
I
have accumulated debts to many people.
On a personal note
I
would like to thank my friends for providing encouragement and
distraction and my parents for their unconditional support and enthusiasm.
I

would like
also to thank the many members of the Economics Department at Williams College from
whom
I
solicited help and feedback. Honors coordinator Professor Ralph Bradburd and
the Class of
2005
honors students deserve a special mention.
I
owe special gratitude to
two faculty members who guided me in my work: Professor Alan de Brauw led me to
this topic, got me started, and provided technical assistance and substantive feedback
throughout the process; and, finally, my advisor, Professor
Anand Swamy, has tirelessly
offered ideas, advice, reassurance, and prompt responses to more
emails than
I
(and
I'm
sure he) would care to count.
Table of Contents
1. Introduction
1.1 Hurricane Mitch and Nicaragua
1.2 Natural Disasters in Developing Countries
2. Describing the
Dataset
2.1 The Dataset
2.2 Variable Description
2.3 Summary Statistics
3. Regression Analysis

3.1 Household Models
3.2 Geographic Models
4.
Conclusion
CHAPTER
1:
INTRODUCTION
The promises of billions of dollars in international money for emergency relief
and reconstruction in the wake of the staggering human and material costs of the tsunami
that devastated coastal areas of Indonesia, India, Sri Lanka, and Thailand in late
December 2004 provides a stark example of the importance of effective responses to
natural disasters. Notwithstanding the continued vulnerability of developing countries to
natural disasters, the literature on the economic impacts of such disasters is remarkably
sparse and focuses mainly on institutional mechanisms for the management and reduction
of risk. Very little scholarly work has been done on the allocation and effectiveness of
the emergency relief money that flows into affected countries in the aftermath of a
disaster. Yet no level of risk mitigation in the affected region could have effectively
prepared people to cope with the effects of such a powerful disaster as the East Asian
Tsunami. Emergency relief is an essential component of the recovery process, and the
question of whether or not aid is reaching those who are most vulnerable is crucial to the
development of affected countries. Thus, economic studies of the distribution and impact
of disaster relief are potentially extremely important for the development of future
policies and strategies.
This thesis examines the targeting of emergency relief in Nicaragua in the six
months following the impact of Hurricane Mitch in October and November of
1999.
The
poor countries of Central America have long been some of the most vulnerable countries
in the world; their small populations have repeatedly been subjected to hurricanes,
earthquakes, and volcanic eruptions. Before the tsunami Hurricane Mitch had been the

worst natural disaster in recent memory. Almost 3,000 people were killed in Nicaragua
alone (PAHO 1998) and damage estimates for the country topped $1.5 billion (Lane
2000). Emergency relief was substantial. OECD countries sent $105.7 million in just
bilateral emergency assistance in 1999, only one of many sources of money to Central
America in that year (OECD 2004). However, evidence of government corruption during
the relief process and a lack of preparedness and coordination among other aid
organizations indicate that a systematic analysis of where that aid went is important.
This thesis is based on data from the
Encuesta de Hogares sobre Medicidn de
Nivel de Vida
(EMNV),
a livings standard survey supported by the World Bank LSMS
program.
A
full survey was taken in 1998 just before the hurricane, and a more limited
survey of only affected areas was taken six months after Mitch in 1999. Combining
household characteristics from
EMNV98 and responses to questions about the hurricane
and receipt of emergency relief from
EMNV99,
I
investigate the extent to which poverty,
the level of damage suffered from the hurricane, and a variety of other household
characteristics affected the probability that a household received emergency aid.
This study is the first empirical investigation of the Hurricane Mitch relief effort
in Nicaragua. It contributes to the general literature by expanding on previous work in
two ways. In my analysis of which households were more likely to receive aid I control
for community, recognizing that some households would be more or less
liltely to receive
aid simply because of where they were located. I

take this geographic analysis further by
also examining which regions
of
the country were most targeted and what characteristics
of communities affected a household's probability of receiving aid. Throughout the
thesis
I
also break aid receipts down by aid-giver to analyze the distinct targeting patterns
of the three main categories ofaid-giver: the government, NGOs and international
donors, and religious organizations.
The rest of this chapter describes the hurricane and relevant political and
economic conditions in Nicaragua, as well as providing a general background to natural
disasters in developing countries. Chapter 2 describes the data set and reports summary
statistics. Chapter
3
describes my regression models and discusses their results. Chapter
4
concludes.
1.1
:
Hurricane Mitch and Nicaragua
From October 22 to November 2,
1998
Central America was besieged by the
deadliest hunicane in living memory and one of the three deadliest in modem history.'
The storm began as an ordinary tropical depression, one of many that are identified and
named by National Hurricane Center in Miami every year. Most eventually lose strength
and fade away long before they ever hit land, but Mitch persisted. On October 24 it was
classified as a full blown hurricane with winds of up to
90

miles per hour. Despite still
being many
miles out at sea Mitch's fierce winds claimed their first seven casualties in
Costa
Rica. The hurricane changed course several times; first Cuba and Jamaica and then
Belize and Mexico braced themselves for the impact. But on October 26, with its winds
now reaching a monstrous
180
miles per hour, an unrelated high pressure system in the
atmosphere interacted with Mitch and left it idling off the Honduran coast for three days,
devastating the island of
Guanaja and causing intense rainfall across the rest of the
region.
1
Unless otherwise noted the information in these paragraphs is taken from the New York Times article
When Nature Rages
by James
C.
McKinley Jr., November
9,
1998
Beginning on October 29 Mitch moved inland and, despite being downgraded to a
tropical storm, it roamed across Honduras,
dunlping huge amounts of water wherever it
went. Floods and mudslides wiped out entire villages. In five days as much rain fell over
Honduras as usually falls over the course of an entire year. The heaviest rains moved
into northern Nicaragua, and on October 30 the department of Chinandega in the Pacific
region of the country experienced the wrath of Mitch at its greatest intensity. The
remarltable rainfall of that day, combined with five days of already heavy rain, proved to
be too much. The crater lalte of the Casitas volcano collapsed, causing a

mudslide of
mammoth proportions.
An
estimated
14
villages were covered in mud. As Mitch lost
steam it moved up through Guatemala and El Salvador before fizzling out as it entered
Mexico.
The aftermath of the hurricane was gloomy. Official death figures for the region
range from 9,000 to 11,000
(Charvkriat 2000), and almost 3,000 people died in Nicaragua
alone; almost a thousand more were unaccounted for (Pan American Health Organization
[PAHO] 1998). 567,752 were listed as injured and 36,368 more as affected (Sistema de
la
Integration
Centroamericana 1999 from Lane 2000). And human losses were only one
part of the story. Nicaragua's already poor infrastructure did not stand up well against
the power of the hurricane. More than 250,000 homes were affected and 870,000 people
were displaced (approximately one fifth of the population). 500 schools and 300 health
centers were damaged or disrupted and 25 percent of the transportation system was
severely affected; almost 60 bridges were "partially or totally damaged" (International
Monetary Fund 1999). Agricultural effects include the loss of one third of the 1998-99
banana crop and over half of the expected tobacco yields for that period (Foreign
Agriculture Service 1999).~ Productive agricultural assets such as livestock were also
destroyed in many cases. Estimates from the government of Nicaragua put total
hurricane damages at $1.5
billion-6 1 percent of the country's gross domestic product
(Lane
2000).
In

the November 8, 1998
Boston Globe
article "Storm sweeps away the gains of a
decade in Central America" David Marcus and Richard Chacon highlight the problems of
development left by the Mitch catastrophe. Though agriculture had been growing at an
average annual rate of
3.2
percent since 1987, for farmers like the featured Herman
Pasillos, who lost half of his
17
acre field, those gains meant nothing in the days after
Mitch. Pasillos still had to feed the eleven members of his family. The article comments,
"Pasillos' problem will be the country's dilemma: How do you start over when you have
almost nothing?"
The political situation of Nicaragua
Civil war, dictatorship, and U.S. intervention have plagued the recent history of
Nicaragua. The
U.S.
backed Somoza family held dictatorial power for much of the mid
twentieth century, but their dynasty collapsed in 1979 when it was deposed by the
Sandinistas, a socialist party that solidified its power with elections in 1984. The
Sandinistas attempted to implement socialist reforms but rising civil war intensified by
the illegal American support of the Contra rebel group thwarted many of their political
plans.
An
agreement was finally reached to hold democratic elections in 1990. Violeta
Chamorro, the candidate of a coalition of 14 opposition parties, was elected president and
served for seven years, ending the civil war and stabilizing the economy with market
reforms. She was succeeded by Arnoldo Alemiin, another member of the anti-Sandinista
More information available at

h~://www.fas.usda.govipecad2/articles/99-03/nicaragua.htm,
9
political coalition, who was president in 1998 when Hurricane Mitch hit. Shortly after he
left office in 2002
Aleman was arrested on coi-ruption charges including money
laundering, embezzlement, and electoral crime. In 2003 he was sentenced to a 20 year
prison sentence.
Though the new Nicaraguan government had been relatively stable, it had also
been permeated by corruption, raising questions as to how much a president like
Aleman
could be trusted to carry out a relief effort that was transparent and honest. Reports in La
Prensa, an independent daily newspaper in Managua, highlight the widespread fears of
corruption during that time. Large international
NGOs such as Oxfam International
attributed delays in the reconstruction process specifically to corruption in the
Alernan
administration. Similar concerns were voiced at the May 1999 co~lsultative group
meeting in Stockholm held to review the reconstruction process. Although
Aleman
returned from the meeting with the promise of $1.3 billion in aid from the international
community, that aid was conditional on total transparency, to be achieved through
in-
country supervision of the relief process by the donating countries. The Boston Globe
reported that many people were comparing the
Aleman government to that of the
Somozas, which stole millions in aid money after a 1972 earthquake. These considerable
criticisms of the
Aleman administration, both internal and external, are good reason to
suspect that the distribution of aid was far from politically blind.
The economic situation

in
Nicaragua
Decades of civil war, dictatorship, and foreign dependence have left Nicaragua a
very poor country. Consistently rated with Haiti as one of the two poorest countries in
the Western Hemisphere, purchasing power parity GDP per capita was only $2,300 in
2004. Nicaragua also has one of the highest debt to GDP ratios in the world,
accumulated during decades of reliance on foreign aid.
In
2003 external debt was 17.6
percent of GDP and in 1997, the year before Mitch, the government spent over half its
total revenue servicing the debt (Oxfam 1998). Yet, despite its debt burden, the
Nicaraguan macroeconomy had made some progress during the 1990s because of
diversification and a
red~lced dependence on foreign aid. GDP growth had been positive
through the mid 1990s; it was
5
percent in 1997 and the upward trend was expected to
continue. The vicious impact of Mitch caused growth to drop to 4 percent in 1998, but
international aid flows allowed growth to rebound to
6
percent in 1999, a pattern typical
of developing countries hit by a large natural disaster
(USAID 2002).
The 1998
EMNV
survey, completed just before Mitch struck, provides a picture
of the poverty situation in Nicaragua at the time of the disaster. The first column of
Table 1 shows the 1998 poverty rates by region. 47.9 percent of total households were
living in poverty and 17.3 percent were living in extreme
poverty,3 about a 2 percent

improvement in both categories from the 1993 survey (World Bank 200 1 c). Poor
households were (and still are) characterized by low levels of education, large families,
and reliance on agriculture. Poverty in Nicaragua also displayed regional and rural
patterns. Figure 1 shows the broad regions of Nicaragua: Pacific, Central, and Atlantic.
As one moves across the country away from the capital near the Pacific coast, poverty
increased. The two semi-autonomous, largely rural regions that make up the Atlantic
region had the highest levels of poverty while Managua (the capital city) and the rest of
the Pacific region had the least (World Bank
2001~).
3
The general poverty line is C$4,259 annual
(US$l.
10 per day) and the extreme poverty line is C$2,246
annual (US$0.58 per day).
A
person below the extreme poverty line is unable to meet his caloric
requirements.
Source: web.idrc.ca/en/
ev-27985-201-1-DO-TOPIC.hN
The Atlantic region is where most of Nicaragua's indigenous population lives,
groups that make up the bottom of the country's ethnic hierarchy. The region's
development has also been different from that of the rest of the country; incorporated into
Nicaragua
in
1894, its residents now enjoy a degree of autonomous rule because of their
indigenous heritage (Gonzalez 2001). Though it covers about half the country its sparse
population makes up only
10
percent of the total (World Bank 2001~). Its geography is
mostly humid tropical forests and swamps, and its economy is plagued by poor

infrastructure and underdeveloped
markets. The second poorest area, the Central region,
has been fully integrated into the development of the country, but it is more mountainous
than the Pacific coast, more rural, and more dependent on agriculture. Its infrastructure,
though better than that of the Atlantic region, ranks after that found in Managua and the
rest of the Pacific region. These poorer areas are also the most rural; Nicaragua's urban
centers (including Managua) are concentrated in the Pacific region (Corral and Reardon
2001). Rural poverty was higher than urban poverty in every region; overall, more than
two thirds of the rural population was poor in 1998, while less than one third of urban
inhabitants were living below the poverty line (World Bank
2001~).
Table
1:
Poverty rates by region
1998 1999 2001
National 47.9 47.9 45.8
Urban 30.5 30.3 28.7
Rural 68.5 69.0 64.3
Managua 18.5 18.5 20.2
Pacific Urban 39.6 39.0 37.2
Pacific Rural
67.1
63.1
56.8
Central Urban 39.4 39.4 37.6
Central Rural
74.0 77.6 75.1
Atlantic Urban 44.4 44.4 43.0
Atlantic Rural 79.3 80.6 76.7
Source: World Bank Poverty Assessment,

EMNV
1998, 1999,2001
To understand changes in poverty rates in the 1999 and 2001 surveys it is
instructive to appreciate where the impacts of the hurricane were the most intense. The
areas most visibly affected were in northwest Nicaragua, in the Pacific Rural region near
the
mudslide at the Casitas volcano. The Central Rural region was also acutely affected,
and the Atlantic region, the poorest part of the country, suffered the least amount of
damage.
Columns
2
and
3
of Table
1
show the 1999 and 2001 poverty rates. The 1999
post Mitch
EMNV
suggests that Nicaragua's overall poverty situation was not greatly
affected by the disaster. Between 1998 and 1999 the national poverty rate remained
unchanged; the only significant changes occurred in the Pacific Rural region where
extreme and general poverty both fell by about four percentage points, and the Central
Rural region where poverty rates in both categories increased by three to four points
(World Bank 2001a). These patterns continued through the 2001 EMNV; poverty fell
slightly across all regions and by more than 10 percent in the Pacific Rural area. The
Central Rural region is the only Mitch affected area that saw poverty rates rise between
1998 and 2001.
The World Bank Poverty Assessment attributes these changes in poverty rates to
the greater vulnerability of the Central Rural region because of its high dependence on
agriculture and the influx of investment into the Pacific Rural region as a part of the post

Mitch reconstruction process. (World Bank
2001c, 2003). The Pacific Rural region was,
for example, the only rural region that improved the percentage of its main access roads
that were paved between 1998 and 2001. The Poverty Assessment further argues that
national poverty reduction in 2001 was driven by broad economic growth supported by
increased investment related to the post Mitch reconstruction efforts. Additionally, crops
such as rice and beans, staples that make up large percentages of the diets of the poor,
have been supported by post Mitch programs. Consequently, their prices have risen
relatively less than other foodstuffs, driving the decline of extreme poverty. These
effects can all be attributed to the flow of money into affected areas aimed at repairing
the devastation left by the
h~rricane.~
However, this analysis does not identify affected and unaffected households,
making it unclear whether the investment that was driving the reduction in poverty was
actually accruing to those poor Nicaraguans who had been most affected by the storm or
whether the gains were coming from relatively undamaged households benefiting from
community based aid and reconstruction projects. Evidence from Benjamin Davis and
It
should be noted that these poverty numbers are based on consumption expenditure. Though aid may
have been able to reduce poverty measured in this way, it
is
possible that asset levels were unable to
recover.
A
poverty line based on assets could tell a different story.
Marco Stampini's (2002 and 2003) panel study of movements in and out of poverty using
the 1998 and 2001 EMNV finds that the small reduction in poverty over this time masks
significant movements in and out of poverty; some households were able to break out of
poverty while others, not previously poor, fell into it. Overall rural poverty fell by 6
percent,

from 60 percent to 54 percent, but this is just the net of 16 percent of households
moving up out of poverty and another
10
percent falling into poverty. Additionally, 9
percent jumped from extreme rural to moderate rural poverty, while
7
percent moved in
the reverse direction. The trend is more rural than urban; only 20 percent of urban
households shifted categories (Davis and Stampini 2002). This evidence indicates a great
deal of variability in the economic performance of households during this time period.
Identifj4ng which households were direct beneficiaries of disaster aid is an important
component of understanding why households experienced such different economic
results in the wake of the hurricane.
Aid in Central America after Mitch
Anecdotal evidence about the quality of the disaster relief effort in Central
America after the hurricane is helpful in constructing a context for my empirical analysis
of aid distribution in Nicaragua. In the days and months immediately following the
hurricane governments across the world pledged approximately $9 billion to reconstruct
Central America. Most of the money was destined for Nicaragua and Honduras, the two
hardest hit countries (Thompson and
Fathi 2005). The United States was one of the
largest donors; by February 1999 the
government had already supplied $300 million
mostly in direct in-kind emergency relief (White House 1999). Bilateral emergency
assistance for Nicaragua from OECD countries was $34.8 million 1998, rising to $105.7
million in 1999 and falling to
$17.1
million in 2000
(OECD
2004). The World Food

Program distributed 2,329 metric tons of food in November 1998 in Nicaragua and
continued to meet the needs of 400,000 people during December. They pledged to
continue these obligations for six months and countless other organizations made similar
promises. The unprecedented magnitude of the relief effort makes an analysis of its
effectiveness important.
As the emergency phase ended, and the cameras began to leave, international
assistance began to run out. Much of the promised $9 billion was meant for the lengthy
reconstruction process-the rebuilding of roads, homes, and schools. But most of the
money has yet to materialize, even six years later. Less than a third of the promised aid
was ever raised, and much of what did come was offered to the already debt strapped
countries of Central America in the form of cheap loans. Though there are some signs of
development, many roads and bridges in inland Nicaragua and Honduras are still in ruins,
agriculture remains devastated, and planned housing projects have not been completed
(Hiscock 2005). Those houses that have been constructed are often unrealistically far
from jobs, and, in many cases, the government has yet to provide basic services
(Thompson and
Fathi 2005). Though this study will focus on the dynamics of emergency
relief in the six months following the hurricane it is important to understand the even
greater challenges that the victims of the hurricane faced. The best way to set the stage
for a healthy reconstruction process after a catastrophe like Mitch is to implement a well
organized, fair system for the distribution of emergency relief. And with the reality that
promised reconstruction aid may never come, emergency aid is even more important.
In the days immediately following the hurricane more than 320 NGOs, various
church groups, and the Nicaraguan government were attempting to work together to
provide relief (The Non-Governmental Emergency Relief and Reconstruction Coalition
1998). Both the country and these organizations were unprepared; the major problems
that were encountered were the result of a continual lack of coordination and timing
among the various actors (Red Cross 2000). The International Red Cross, one of the
largest distributors of aid, admitted that its efforts were hampered by its failure to
coordinate relief contributions and the late arrival of much of its staff and basic supplies

(Hiscoclc 2005). The aid was mostly supply driven, meaning that instead of indicating to
the international community the real needs of their populations, Honduras and Nicaragua
adopted a policy of accepting all forms of aid, regardless of its cultural appropriateness or
necessity.% demand driven aid process in which the countries made specific requests
based upon the realities of their situations could have been more efficient. As is often the
case following a major disaster, data was severely lacking and no criteria existed for
determining who was affected, how badly they were affected, and who was eligible for
relief. The public did not receive good information on who qualified for aid and how to
obtain it (World Bank 2004). In such a confusing situation it is likely that some of the
neediest people were also the most unable to access the emergency resources that they
needed.
The successes that did come from the relief process mainly came from work done
at the community
level.6 The Red Cross's model of "community centered" rehabilitation
and relief is similar to that employed by many of the different aid organizations operating
Examples of culturally inappropriate aid include canned food without can openers and American baby
formula indigestible by unaccustomed infants.
6
Most of these examples come from Honduras.
in Central America (Red Cross 1999). The municipal level was described as the "key" to
the recovery process. Local assistance was much more effective when municipal leaders
(mayors) were committed and active or when there were established
NGOs in the
community prior to Mitch (World Bank 2004). This suggests that the most helpful relief
work was done by those that understood the needs of the different communities that they
were working in. It also indicates that aid may be geographically variable, even within
regions, as those communities that are more effectively organized are better able to
distribute aid to those in need. Even the
U.S.
military adopted a community based

approach in Honduras. Supplies were sent to "hub" towns and then distributed to
"spoke" villages on the basis of assessed need
(US
Department of Defense 1999). This
particular method of aid distribution could lead to certain gravely affected households not
benefiting from aid simply because they were located in a less affected village. Remote
areas are also subject to discrimination. Because of the importance of this community
based approach, geographic considerations are an important dimension of my analysis of
the allocation of disaster relief.
1.2:
Natural Disasters in Deve1opin.g Countries
The impact of a natural disaster on a household can represent a major economic
shock through the reduction of income and destruction of assets. Coping mechanisms
include cutting expenditures, increasing the time devoted to work, borrowing against
future earnings, drawing on remaining assets or insurance, help from friends and family,
and disaster aid (Carter and Castillo 2004). However, all of these strategies are
contingent on their availability and in a post disaster emergency situation food may be
scarce, prices high and work unavailable. The cost of institutional safeguards like
insurance coverage and functioning credit markets is often prohibitive for affected
households in the developing world. Drawing on an asset base only serves to reduce the
wealth of a household and make it more susceptible to the next environmental shock. In
light of these problematic coping mechanisms the role of disaster aid becomes important;
it is the main financial instrument utilized by developing countries for rehabilitation and
recovery. The success or failure of households in recovery dictates whether they can
recover to their pre-disaster level or whether they become trapped in their post-disaster
condition at a low asset base. For many households receipt of disaster assistance is the
only mechanism that can realistically return them to their pre-disaster level of
well-
being.7
Disaster assistance comes in three stages: emergency, rehabilitation, and post

rehabilitation. In the first phase the focus is on survival-providing temporary shelter,
medical treatment, food, clothing, and other necessities of life. The rehabilitation phase
is about restoring normality to the country. Housing is rebuilt and communities achieve
self sufficiency. The goal of post rehabilitation is development and the reduction of
vulnerability to the next disaster (Kent
1987).
My analysis focuses on the emergency
stage, vitally important not only because it ensures survival but because it sets a
household up for rehabilitation. The emergency phase is often chaotic; with so many
people suffering it is hard to analyze needs. Consequently, emergency relief efforts
generally suffer from an inability to
determine effectively who needs aid and what kind
'
Carter and Castillo
(2004)
find that in Honduran communities with high levels of trust and altruism the
effects of Mitch were less drastic, while those in "social isolation" were less likely to recover.
of aid they need, as indeed seems to have been the case during the post Mitch emergency
phase.
Vulnerability
Though a natural hazard is socio-economically blind, the chance that a particular
hazard will result in a natural disaster (defined by a certain number of deaths
or
amount
of damage) is very much dependent on the economic situation of the country or region
where it occurs. Developing countries are unquestionably more vulnerable to natural
disasters largely because their fragile infrastructures are less able to withstand the winds
and rain of a colossal storm like Mitch.
In
1998 in Latin America, for example, less than

37
percent of the total housing stock provided adequate protection against potential
natural disasters
(Charvkriat 2000). Less stringent environmental regulations that are the
norm in the developing world often also contribute to the magnitude of the damage. The
effects of Hurricane Mitch are thought to have been more intense because of widespread
deforestation in Central America. The destroyed forests could have reduced flooding and
absorbed some of the excess rainfall that made Mitch so powerful (Farber
1999)."
Reconstruction costs from disasters in the developing world are also
proportionally much higher than those in the developed world, forcing countries to
stretch their resources and
colnpromise
on
important aspects of reconstruction. The
physical damage caused by Mitch was estimated at $1.3 billion, an incredible 61 percent
of Nicaragua's
GDP
(IMF 1999). In contrast, when Hurricane Andrew, the costliest
hurricane in history, hit Florida in 1992 it left behind $26.5 billion in damage, a mere 0.4
percent of American
GDP
(Charvkriat 2000). The incomprehensible death and
8
The
article
Central America:
a
disaster the was waiting to happen
can

be
found at
http://www
.zmag.org/zmag/articles/jan99faber.htm
destruction left in the wake of the East Asian tsunami is a sober reminder of how
vulnerable poor countries are to the power of severe weather and geologic events.
Between 1988 and 1997 natural disasters across the world claimed 50,000 lives
per year and caused yearly damage estimated at $60 billion. 94 percent of the world's
recorded natural disasters during the 1990s and more than 97 percent of the total deaths
caused by these disasters were in developing countries (World Bank
2001d). While
average death rates due to natural disasters fell by 75 percent in developed countries
through the
1960s, 70s, and 80s, that statistic rose by 400 percent for the developing
world. Though economic costs from natural disasters were rising across the globe, the
growth rates in poor countries were at least twice (and often much more) that of rates for
developed nations
(Berlte and Beatley 1997). In Latin America and the Caribbean over
the past 30 years there has been an average of 32.4 disasters annually resulting in 7500
deaths a year, with average annual costs ranging between $700 million and $3.3 billion
(Charvkriat 2000).
Among the Central American countries Nicaragua has been the hardest hit. Its
rate of cumulative losses to
GDP
is 338.4 percent, the highest in all of Latin America and
the Caribbean except for the tiny island nation of Montserrat
(Charvkriat 2000). This
illustrates how Nicaragua is vulnerable to natural disasters not only because of its status
as a poor country, but also because of its small size. When Nicaragua is hit by a severe
weather event the entire country is likely to be affected to some degree; there are no

resources from unaffected regions to draw on for recovery. And the situation only
promises to deteriorate. The incidence of natural disasters across the globe has increased
over the past ten years (World Bank
2001d) and some evidence indicates that the number
of severe weather events is likely to rise (Charvkriat 20001, again highlighting the
importance of understanding how effectively the international community is able to
respond to these events.
Developing countries are vulnerable to disasters at a macro level because of the
acute vulnerability of their large poor populations. Poor households suffer more because
of insufficient financial resources, poorly built housing in risk prone areas, inadequate
transport options for evacuation, insecure employment, and the lack of insurance. The
inability of poor households to achieve full recovery also increases their vulnerability to
future disasters (Morrow 1999). Reducing this vulnerability is essentially about reducing
risk. But the realities of risk reduction are costly-purchasing insurance or relocating a
household, measures that are often too expensive for the poor. Additionally, the low
frequency nature of the natural disaster risk makes it unlikely that even those households
with some resources will choose insurance over a more visible need like investment in
agriculture or school fees (Charvkriat 2000).
The inability of the poor to recover has the potential to lead to a situation of
increasing poverty in the aftermath of a large natural disaster. In Honduras after Mitch
poverty rates increased by an average of four percent in affected areas. Floods and
droughts in Chile have been shown to increase inequality both across communities and
across households within communities (Charvkriat 2000).
If disaster aid is meant not
only to provide for the basic needs of an affected population but also, as most scholars
argue, to act as a vital component of the development process, then aid agencies should
make a concentrated effort to target poor households in the distribution of benefits. Yet
some evidence exists that this is not always the case. A study of reconstruction after a
1970 earthquake in Peru found that landowners were the first to benefit from new
housing

(Charvkriat 2000). Similarly, a study focusing on Hurricane Mitch in Honduras
(to be extensively reviewed below) found little evidence of pro poor targeting policies
(Morris et
a1 2002). Wealthier households are often seen as needier after a natural
disaster because they lose absolutely more, an inevitability of their larger asset stock
(Wisner et
a1 2004). But the poor lose far more as a percentage of their total property,
leaving them with very few options for recovery, and making it essential to design
policies that give poor households the extra help they need. As the 200012001 World
Development Report concludes:
These responses [of poor households to natural disasters] perpetuate
chronic poverty, possibly preventing future economic growth because of
the irreversible losses in human and physical capital
.And that is why,
when they occur, among the top priorities should be to protect poor people
(World Bank
2001d, 161).
Poverty is not the only household characteristic that increases disaster
vulnerability. Age, gender, number of dependents, and access to social and political
networks can all affect a household's ability to recover from disasters and merit study in
my analysis of aid distribution (Morrow 1999). Of these gender is particularly important.
Women, more vulnerable themselves, are also the source of the vulnerability of their
children. Female headed households are already economically and politically
disadvantaged, and without special attention have limited recovery potential.
In
Honduras female headed households composed 41 percent of the families in shelters in
the capital of Tegucialpa in the first few
weelts after Mitch, but as the population in the
shelters fell, that proportion rose to almost 60 percent, strongly suggesting that
households headed by women had not been as successful in the recovery process (IADB

1999). Consequently, to achieve the protection of both women and children, relief
programs should be designed to favor women.
The role of the government is also crucial when considering who may be more
likely to get disaster aid. Bureaucracy and
corruption have the potential to both delay aid
and target it away from those who need it most. High levels of governmental corruption
were present not only in Nicaragua but also in Honduras. In both countries NGO and
bilateral aid programs were thought to be more transparent (World
Bank
2004). Studies
of disaster aid in the United States during the 1990s have found that almost half of the
disaster money distributed by the Federal Emergency Management Agency (FEMA) was
politically rather than need motivated (Garret and
Sobel 2002). Additionally, disaster
payments from the Department of Agriculture were higher in states represented by public
officials who played a role in the allocation of those payments (Garret, Marsh and
Marshall 2004). The importance of the national government in a relief effort cannot be
overstated, and it is therefore critical to understand to what extent these governments tend
to serve the best interests of their citizens.
Other empirical work
on
the targeting of disaster relief
Despite the importance of disaster relief to the natural disaster recovery process
most of the literature on natural disasters in the developing world focuses on various
aspects of risk and recovery. The lack of good data has limited the investigation of the
dynamics of disaster aid. Saul Morris et
a1 (2002) provide the most comprehensive
empirical study of aid allocation in their analysis of the effects of Mitch on the rural poor
in Honduras. Their survey of 2,398 rural households was designed to capture the effects
of the hurricane on the poorest parts of the population. Because of the geographical

distribution of poverty in Honduras their selected villages and towns largely miss the
areas of the country where the most visible hurricane damage was present. The authors
found that these poor households experienced direct loss of income through both
agricultural destruction and the disruption of business activities. Though wage labor
composes
36
percent of labor income in rural Honduras, just
7.7
percent of households
suffered losses in wage income due to the hurricane, indicating that those more reliant on
agriculture were more vulnerable to the effects of Mitch. Despite the fact that the
absolute amount of wealth lost by the non-poor was much higher than that lost by the
poor, the poor actually suffered more because they had so few assets to begin with. The
authors estimate that households in the lowest wealth quintile lost
18
percent of their pre
Mitch assets, compared to only
3
percent for households in the highest quintile. They
also find that short term (emergency) relief was inadequate for the amount of losses
suffered.
The
survey also collected information on the amount of disaster aid received, and
in a second paper Morris and Quentin Wodon
(2003)
test both the targeting and
allocation of disaster relief using the probability of receiving aid and the amount of aid
received as their dependent variables. They employ assets as their indicator of well-
being, using both pre Mitch asset levels and asset losses due to the hurricane as
explanatory variables in their regressions. Their analysis of aid allocation suggests that

the amount of emergency relief did not fluctuate according to need. Instead, aid was
generally allocated as a lump sum that did not vary according to how much a household
lost. This is unsurprising given that emergency relief most often comes in the form of
food, clothes, medicine, and other necessities that are hard to vary across households.