El Salvador: Recovery plan from the damage caused by the earthquakes of Jan 13th & Feb 13th, 2001

INTRODUCTION
COUNTRY BACKGROUND

• TERRITORY AND POPULATION
• POLITICAL DEVELOPMENT AND DEMOCRATIC STRENGTHENING
• DECENTRALIZATION AND CITIZEN PARTICIPATION
• SOCIAL DEVELOPMENT
• ECONOMIC POLICIES

IMPACT OF THE EARTHQUAKES

• THE NATURAL PHENOMENA
• EMERGENCY RESPONSE ACTIONS
• DAMAGE ESTIMATES

ACTION PLAN FOR RECOVERY

VISION

STRATEGIC GUIDELINES

OBJECTIVES

PRIORITIES

PHASES OF WORK

NEEDS AND CONSTRAINTS

ACTION PLANS

PARTICIPATORY MANAGEMENT OF PROJECTS
FINAL REMARKS
ANNEX 1. ACTION PLANS BY SECTORS

• INFRASTRUCTURE
• SOCIAL SECTORS
• ENVIRONMENT
• PRODUCTIVE SECTORS

ANNEX II: PROJECT PROFILES

INTRODUCTION

1. After 12 years of internal conflict, El Salvador achieved a successful transition to peace and democracy and reestablished a sound basis for its economic and social development.

2. Within just 30 days, on the 13th of both January and February, El Salvador suffered two major earthquakes of a magnitude of 7.6 and 6.6 on the Richter Scale, respectively. These earthquakes have directly impacted almost 25% of the total population and have increased rural poverty throughout much of the country. Low-income family homes, micro and small enterprises, the road and infrastructure network and the social fabric have been severely damaged.

3. The two successive earthquakes have caused conditions that threaten El Salvador's ability to achieve progress and fight poverty within a system based on freedom and democracy, because they: i) increase poverty; ii) stop or seriously slow down economic progress; iii) increase health problems; iv) lead to massive migrations to the cities or to other countries that offer better living conditions; and v) deteriorate the environment, with severe future consequences for the country and the region. Under these conditions, the governance of the country could be severely affected, weakening the foundations of democracy, the Rule of Law and a market oriented economy, backbones of a modern, free society.

4. In the aftermath of the earthquakes, the government quickly began emergency programs, with broad participation of the civil society and municipal governments, aimed at delivering immediate relief to the affected population, removing rubble and providing a package of materials to build basic housing for those families that had lost their homes. International assistance was critical for the country’s rapid response to emergency needs. This document summarizes the efforts that El Salvador will make in the reconstruction and recovery stages. While the country is undertaking an intensive effort to reopen the road to progress, international cooperation will be essential to avoid a reversion of El Salvador's significant progress and to firmly reestablish the basis for development.

COUNTRY BACKGROUND

Territory and Population

5. El Salvador is the smallest and most densely populated country of the five republics of Central America, with an area of 21,041 square km. To the south, the country is bordered by 210 km of coastline on the Pacific Ocean, to the northwest by Guatemala and to the northeast and east by Honduras (see map). The population is estimated at 6.3 million people, equally divided between urban and rural areas, plus one and a half million people living outside the country. The growth rate of the population is estimated at 2.1% per year. More than 90% of the population is mestizo (of mixed European and Indigenous descent).

6. The earthquakes have greatly complicated the challenges facing the Salvadoran people but have not changed their basic nature: the development of an integrated society open to the world. The reconstruction and recovery process are framed within policies based on the following components: a) strengthening democracy; b) emphasizing social development and the fight against poverty; c) encouraging citizen participation; and d) promoting economic development based on an open market economy. This report summarizes the main elements of these policies.

Political Development and Democratic Strengthening

7. During the 90’s, El Salvador experienced a very important political evolution. After a 12 year armed conflict, the Peace Accords were signed in 1992 and a model reconciliation process began. At the same time, El Salvador launched an educational reform process, expanded health services, rebuilt its destroyed infrastructure and fulfilled the Peace Accords. In 1995, the United Nations Organization ended their verification and observation process and the General Assembly of the United Nations praised the Government’s administration of the democratization process and its fulfillment of the Peace Accords.

8. As part of its’ political development, El Salvador has promoted several mechanisms to open space for participation and consultation with civil society in the management of public issues, with several programs operating on both the national and local level.

9. One of these mechanisms is the citizen's consultation process promoted by the National Development Commission (CND in Spanish) since its creation in 1997. The Commission has worked with multidisciplinary specialists from across the political spectrum, as well as municipal governments and a wide range of citizen groups representing the 14 departments of the country. The proposal of the "Bases for a National Plan" and the "Territorial Actions of the National Plan" were the result of this consultative mechanism. The latter document was endorsed in November 2000 by the Presidents of the three branches of government, the leaders of all political parties, the board of directors of the Corporation of Municipalities of El Salvador (COMURES in Spanish) and the leaders of the business sector in the country.

10. The Government has promoted other national participation mechanisms as well. One of them is the Consultative Group of the Social Investment for Local Development Fund (FISDL in Spanish), whose members are representatives of institutions of the Executive Branch, business organizations, municipalities, NGOs and other support institutions, all involved in the implementation process of the National Strategy for Local Development. Another participatory mechanism is the EDUCO Program, which transfers the administration of rural schools to parents in the school districts. In addition, the Healthy School's program brings together parents and government for preventive medical services and nutritional aids to children at school.

Decentralization and Citizen Participation

11. Active citizen participation and decentralization are considered fundamental to the achievement of the country’s common goals, as they bring governmental actions closer to those who will benefit the most, improving communication channels and establishing a social audit mechanism that guarantees greater transparency of public administration. Decentralization and citizen participation have helped to achieve important transformations in El Salvador during the past few years and will help to support the development of efficient and effective delivery mechanisms for aid provided by the international community, helping to directly improve the situation of those families affected by the earthquake.

12. One of the most important tools to support the decentralization process is the Social Investment Fund for Local Development (FISDL). The FISDL, besides financing projects at the local level, offers different types of services to local governments, including the formulation, execution and supervision of social infrastructure projects at community and municipal levels. The FISDL also provides financial management and procurement oversight services to local governments and supports the negotiation process with national and international institutions. In this process, FISDL links public investment at the municipal and central level, enabling the programming of sectoral investments of the different Ministries to respond to local demands within the framework of the national development policies and strategies.

13. Notwithstanding the central role of the FISDL in promoting the decentralization process, the GOES has created other programs to promote the decentralization of services and citizen’s participation. Among these are the EDUCO Program, the Integral Basic Health system, (SIBASI in Spanish), the Sustainable Rural Roads Program, the Rural Water Organizations (ORA) and the Technology Innovation Committees (CIT).

14. An additional participation mechanism of the National Development Commission (CND) is the "Grupos Gestores Departamentales" created by community representatives who make proposals on local development.

15. At the local level, there are other forums and mechanisms of social participation by the communities, such as the Departmental Mayors Council, which include all of the mayors of the municipalities that make up a department. Also, the Local Development Councils, which are convened by the mayors and made up by local leaders, seek to promote projects identified by the communities and to ensure that local development plans reflect the requirements and needs of the population. Additionally, community members participate though communal organizations such as the communal development associations (ADESCOS).

Social Development

16. Since 1989, the government has pursued social and economic policies oriented towards increasing investment in human capital and effectively attacking poverty through targeted programs. In this context, El Salvador joined the Extreme Poverty Program of the United Nations in 1990. The first Rehabilitation of the Social Sectors Project was signed in 1990 with the World Bank (WB), under which the aforementioned EDUCO Program and the social Investment Fund (FIS) were created.

17. The social development programs have produced important results. The population living in poverty was reduced by one third during the 1990’s, from 60% in 1991 to 41% in 2000; a reflection of the priority assigned to these policy efforts. However, rural poverty only fell from 66% to 55.5% showing the need to redouble efforts in the same rural areas that have now been impacted by the earthquakes.

18. In the educational sector, several programs improved the quality of education and reduced illiteracy from 30% at the end of the 1980’s to 17% in 2000. The Government of El Salvador (GOES) is committed to decrease the illiteracy rate by half within the next five years to provide better opportunities for individual progress. 19. In the health sector, the children’s mortality rate has been reduced from 54 per thousand in 1989 to 35 per thousand in 1998. At the same time, there have been no polio cases reported in El Salvador since 1990, no chicken pox since 1996 and no neonatal tetanus since 1997. More than 90% of the country’s children have been vaccinated and deadly diseases such as dengue and cholera have been kept under control.

20. As a result of the Government’s housing policies, the housing deficit has diminished continuously since 1991 at an average rate of 6% per year. However, the quantitative deficit in the housing area prior to the earthquakes was 44,377 homes with additional 507,227 homes in need of improvement.

21. The war period generated an important social deficit, which has not yet been fully overcome. El Salvador placed 104th worldwide when ranked by the Human Development Index (1998), approximately 13 positions below the position when ranked by GDP per capita (in US dollars adjusted by Purchasing Power Parity).

Economic Policies

22. During the past twelve years the economy of El Salvador has been characterized by an average growth of 4.6%, low inflation (an average of 2.5% in the past three years) and exchange rate stability. This has been achieved as a result of economic reforms that include the opening of the economy, tax reforms and a growing participation of the private sector in the economy, especially in sectors such as energy, telecommunications, and the pension system. El Salvador’s macroeconomic stability and the transparency of its institutions have allowed it to obtain the best country risk rating in the Central American region and the highest ranked economic freedom index in Latin America.

23. The economic policy strategy is based on: i) the strengthening of a regulatory framework that favors the complementary roles of the public and private sectors, with the private sector leading the economic development process and the government removing obstacles to growth; and ii) policies oriented toward ensuring equality of opportunities for vulnerable groups.

24. In harmony with the aforementioned strategy, El Salvador seeks trade integration with the world. Tariff and non-tariff barriers have been reduced and, wherever possible, have been eliminated-45% of all the import tariffs have been reduced to 0% on raw materials and capital goods, and the maximum import tariff is 15% with very few exceptions. The Caribbean Basin Initiative Enhancement recently approved by the United States Congress has broadened the variety of products that can be exported free of duties and quotas from El Salvador to the United States of America. Also, in order to broaden and open new markets, El Salvador recently formally approved a Free Trade Agreement with Mexico, Chile and Dominican Republic. It has also initiated negotiations for a Free Trade Agreement with Canada and Panama.

25. Petroleum prices and the decline of international prices of El Salvador’s main export products in 2000 produced an important deterioration in the terms of trade for the country, resulting in a loss of resources equivalent to 1% of GDP. For this reason, the Salvadoran economy grew at a 2.1% in 2000 and the trade deficit reached 12.6% of GDP, up from the 11% during 1999. A rise in family remittances helped to compensate the loss suffered in the terms of trade, increasing to US$1,750.7 million (13.5% of the GDP). Overall, the country’s current account deficit near 2.5% of GDP in 2000. Despite the slowdown in growth, the fiscal deficit was maintained at approximately 2.8% of the GDP, with a level of total public debt of 32.3% of GDP, and a year on year inflation rate of 4.3%, slightly higher than in previous years.

26. The Monetary Integration Law was approved in November 2000. Beginning on January 1, 2001, the exchange rate between the Colon and the US Dollar was set at ¢8.75 per US$1.00, the dollar became legal tender alongside the Salvadoran Colon, and the US Dollar became the unit of account for the financial system. The main benefits are: i) improved financial conditions for loans at lower interest rates and longer terms ; ii) a more competitive financial system, with opportunities for new foreign banks entering in the market and an improvement in the loan portfolio of banks; iii) greater stability in wages and pensions by eliminating exchange risk, and iv) an increase in the commercial flow with other countries and reduced transaction costs.

27. El Salvador, together with the other Central American countries, has agreed on a transformation and modernization strategy within the context of a regional project for the next 20 years. With this vision, the immediate regional integration covers the area between Puebla, Mexico and Panama. Integration is to be achieved through a shared logistic corridor with road and railroad networks and a ferry between El Salvador and Nicaragua. Additionally, this program requires the modernization and integration of customs, the strengthening of transport connections between the countries of the area and a joint Central American effort to preserve the regional biological corridor.

IMPACT OF THE EARTHQUAKES

28. Within the space of 30 days, from the 13 th of January to the 13 th of February, El Salvador suffered two major earthquakes that caused damages of approximately US$1.66 billion. The two disasters left 1,159 people dead and 8,122 wounded. They destroyed 149,528 houses and damaged 185,338. In many cases, these dwellings doubled as the places where people generated their family incomes. It is estimated that approximately 41,400 small and micro enterprises have been affected in this way. The total number of those directly affected reaches 1,532,919 people, roughly 25% of the population. The situation is worsened by the enormous damage caused to the country’s social and economic infrastructure, as well as its environmental conditions, all of which will make recovery even more difficult.

Table No. 1. Damages caused by the earthquakes of the 13th January and 13th February 2001.

Source: Survey by the General Statistics Office of the Ministry of Economy and COEN.

The Natural Phenomena

29. The earthquake of the 13th of January originated from the juncture of the Caribbean and Cocos Plates. Its epicenter was located 100 km offshore southwest of the city of San Miguel at an estimated depth of 39kms. The magnitude of the earthquake was 7.6 on the Richter scale. Its intensity varied between VI and VIII on the modified Mercalli Scale, affecting almost the entire coastal area and mountain range throughout the nation.

30. One month later on the 13th February, El Salvador was struck by a second earthquake with a magnitude of 6.6 on the Richter scale, an intensity of VI in the Mercalli scale and a depth of 13 km. The epicenter of the February 13 th earthquake was located inland near San Pedro Nonualco, 30 kms southeast of the capital. The second earthquake affected mainly the southern part of the central region of the country, expanding the total area affected by the two earthquakes.

31. The damages of the first earthquake were concentrated mainly in 100 municipalities located in the Departments of La Libertad, La Paz, Sonsonate, Usulután and San Vicente. These municipalities represent 38% of the all the municipalities in the country, cover 32.1% of the national territory, house 30% of the population and generate an important part of the gross domestic product. The second earthquake affected the Departments of San Vicente and La Paz for the second time, as well as the Department of Cuscatlán.

32. The majority of the affected population resides in rural areas and small towns, whose inhabitants are medium or low income. Many of the affected families live below the poverty line. Due to the fact that about 25% of it’s population was affected by this earthquake, El Salvador faces an enormous challenge in meeting the priorities created by the emergency in these areas, while at the same time focusing its attention on the departments located in the northern zone, not affected by the earthquakes, but which register the lowest indexes of human development in the country.

33. This situation is worsened by the fact that geological studies indicate that many slopes have been rendered unstable by strong earthquakes and that for the next several years there will be landslides and flooding problems that will require unforeseen expenditures. These vulnerabilities are magnified by the proximity of the rainy season, which starts in May.

Emergency Response Actions

34. A state of national emergency was decreed and an appeal for international assistance announced a few hours after the earthquake. The National Emergency Committee (COEN in Spanish) immediately activated the Emergency Operations Center. COEN concentrated its efforts on the most affected regions, focusing on search and rescue operations, salvage, evacuation, establishment of provisional shelters, provision of medical attention, security measures and rehabilitation of services. The overriding goal was to minimize the loss of lives and quickly respond to emergency needs.

35. The President of the Republic immediately requested support from civil society institutions, represented mainly by social development foundations, business organizations and service clubs. The Armed Forces and the Departmental and Municipal Emergency Committees with the participation of Governors and Mayors were quickly added to the institutions supporting the emergency response activities.

36. Within this framework, distribution of assistance as well as the rescue, salvage, and evacuation operations, were accelerated. The support of the international community was instrumental in responding to the emergency. Efforts were strengthened by having access to aircraft to reach isolated communities. At the same time, approximately 300 temporary shelters throughout the nation were established; humanitarian assistance was received and delivered; medical attention measures were adopted; basic infrastructure was enabled; and a mechanism for the removal of debris and the provision of temporary shelters (through an investment of US$45 million) were established.

Damage Estimates

37. The preliminary estimates of the indirect and direct damages of the earthquake that occurred on the 13th of January reach US$1,255 million, equivalent to 10% of GDP and more than half of the national budget. About 60% of the damages (US$753 million) pertain to direct damages and the rest (US$502 million) to indirect damages. The most affected sectors have been housing (26% of the direct damages), the productive sectors (27% of the total direct damages), particularly the small enterprise and service sectors, and infrastructure (12% of the total direct damages). The majority of the indirect damages correspond to damages to infrastructure (68%) (See Table 2)

38. The damages caused by the first earthquake in the housing sector were devastating. It is estimated that 108,226 houses were destroyed and that 169,632 suffered damages. These damages have been estimated at US$257.2 million. The reconstruction, according to estimates of the Economic Commission for Latin America and the Caribbean (ECLAC) will cost US$716 million if construction techniques that mitigate risks and are anti-seismic are used. The most affected departments are Usulután (74% affected), San Vicente (69%) and La Paz (64%). In other departments such as Sonsonate, La Libertad and Cuscatlán of the percentages housing affected varied between 20 and 30%. With the second earthquake, it is estimated that at least 41,302 additional homes were destroyed and another 15,706 were severely damaged, mostly in the departments of San Vicente, La Paz and Cuscatlán. A definitive evaluation of the damages caused by the February 13 th earthquake is currently being evaluated by ECLAC.

39. The roads have suffered severe damage as a consequence of the earthquake. Repair of damages caused by landslides in various sectors of the Pan American Highway, the main national and regional artery, as well as other main roads, will require large investments. For example, in the sector of Los Chorros of the Pan American Highway, landslides and rockslides, with a volume greater than 100 thousand cubic meters, covered a 5.5 kilometers section of the highway. In the sector of La Curva de La Leona, also on the Pan American Highway, the road was buried under more than one million cubic meters of earth, with serious consequences for international and interurban traffic. At the same time, serious structural damage was caused to several bridges located on the Coastal Highway as well as numerous severe ruptures of the surface of several other roads.

40. In the social infrastructure sectors, total damage adds up to US$472 million, of which US$396 million pertain to direct damages (84%) and US$76 million to indirect damages (16%). Approximately 26% of all public schools, 60% of the hospital capacity and a 27% of the health clinics throughout the country were damaged.

41. Given the short period of time that has lapsed since the second earthquake, the detailed evaluation of damages from this second disaster is still being prepared and will be presented as an annex of the ECLAC document. However, it is preliminarily estimated that the damages will be more than US$400 million, increasing the total damages from the two earthquakes to approximately US$1.66 billion.

Table No. 2: Summary of the Impact of the Earthquake occurred 13 th January 2001
(Millions of US dollars)

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