- Title
- Fonden: Mexico's Natural Disaster Fund, A review
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- Abstract
- "Natural disasters constitute a significant fiscal risk in the form of a contingent liability in disaster-prone countries. If disasters are not anticipated and finan- cially planned for, there can be considerable delays in post-disaster response, potentially significantly exacerbating the adverse human and economic con- sequences of an event. Governments may also be compelled to draw heavily on budgets intended for development purposes, hindering long-term growth and development.
Governments are becoming increasingly aware that they can no longer ignore the fiscal risk posed by disasters. Many governments face trends of rising disaster losses as capital stocks increase. And while exposure of populations and assets rises, insufficient attention is paid to resilience against hazards. In- creases in the incidence and magnitude of climato- logical hazards are anticipated as a consequence of climate change, fuelling the trend of rising losses. Much greater emphasis on proactive disaster risk management, including disaster risk financing and insurance, is essential in stemming this tide.
Mexico stands at the forefront of initiatives to devel- op comprehensive disaster risk management struc- tures and programs, including disaster risk financing and insurance strategies to manage the fiscal risk posed by disasters. Mexico is exposed to a large variety of geological and hydro-meteorological phe- nomena. It is ranked as one of the most seismically active country in the world, experiencing more than 90 earthquakes with a magnitude of 4.0 or above on the Richter scale on average annually. Around two-fifths of Mexico’s territory and over a quarter of its population are exposed to storms, hurricanes, and floods.
As part of its disaster risk management efforts, the Federal Government of Mexico established the Fund for Natural Disasters FONDEN to support disaster
relief and reconstruction. FONDEN was originally established as a budgetary tool through which fed- eral funds were annually allocated for expenditure on post-disaster response. Since then, FONDEN has evolved significantly; changes to its operating rules and procedures have improved FONDEN’s overall ef- ficiency and effectiveness, and the introduction of several additional windows have further strength- ened disaster risk management. In 2005, the Gov- ernment of Mexico empowered FONDEN to develop a catastrophe risk financing strategy to leverage its resources, relying on a layered combination of risk retention and risk transfer instruments. In 2006, FONDEN issued the world’s first government catas- trophe bond, which was renewed in 2009. FONDEN now provides one of the most sophisticated disaster financing vehicles in the world – and the FONDEN system continues to evolve to meet Mexico’s finan- cial requirements related to natural disasters."
- Publication Date
- May 1, 2012, 10:43 a.m.
- Category
- Geoscientific Information
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information pertaining to earth sciences. Examples: geophysical features and processes, geology, minerals, sciences dealing with the composition, structure and origin of the earth s rocks, risks of earthquakes, volcanic activity, landslides, gravity information, soils, permafrost, hydrogeology, erosion
- Regions
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Mexico
- Responsible
- andy
- More info
- -
- Language
- English
- Supplemental Information
- river_flood, drought, tsunami, landslide, volcanic_ash, earthquake
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