+ Press Release MEXICO CITY- October 26, 2009. It is hurricane season and the story repeats itself every year. Every time a phenomenon of this nature and intensity touches the ground, the newscasts are filled with testimonies of people -mainly of limited means- who, in a few hours, lose all their possessions, as well as any hope of getting ahead in the future. Who hasn’t seen these vulnerable men and women breaking down when facing the images of their devastated past, present and future? 
Photo: Jimena Hurricane, Los Cabos
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Such was the result of Jimena, a category 5 hurricane on the Saffir-Simpson scale that moved into Mexican territory through Baja California Sur on Wednesday, August 26, 2009 leaving behind one hundred thousand victims in the northern area of the country. The meteorological phenomenon left thousands of families with nothing, while others suffered from power cuts, floods, landslides and torrential rains that blocked roads and affected vulnerable homes. But Jimena is only one of the hurricanes that has hit the country recently. Mexico has suffered devastation caused by other phenomena, such as Rick –initially forecast as intensity 4- and later intensity 3, or Gilbert, which crossed Mexico’s border on September 14, 1988 and left human and economic losses worth millions in the southwest coast, or Paulina, which affected the Pacific Coast. 
Photo: Cancún, After Gilbert Hurricane |
For example, the total amount of damages caused by Gilbert, the most devastating hurricane in recent years in Mexico, was US$2.092 billion, according to the National Center for Disaster Prevention (CENAPRED). The hurricane first entered Mexico through the coast of Quintana Roo and caused serious economic losses in Cancun. It later crossed the Yucatan Peninsula causing severe ecological damage, then went through the Gulf of Mexico and hit the ground again in the state of Tamaulipas with heavy rains in the northeast of the country that caused serious floods and human losses in Monterrey, one of Mexico’s most important cities.
Mexico is located in an area of high risk natural phenomena. Positioned between two oceans with more than 11 thousand kilometers of coast; the country is frequently exposed to frosts, drought, floods, tropical cyclones, hurricanes and seismic phenomena. According to the document, “Water Statistics in Mexico 2008”, elaborated by the National Water Commission (CONAGUA), between 1970 and 2007 there were 162 cyclones in Mexico, of which 42 turned into tropical depressions, 56 into storms, 45 into moderate hurricanes and 19 into intense hurricanes. According to the CONAGUA, Mexico has been most affected by cyclones in the years 1995, 1997, 2002, 2003 and 2005. The CENAPRED reports that every year in Mexico hurricanes threaten at least 17 entities classified as dangerous, areas in which almost half of the population lives. 
Photo: Mexico City, 1985 Earthquake
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Mexico is also seismic territory. According to the National Seismic System (SSN), the country undergoes 100 telluric movements with magnitudes equal to or higher than 4.5 on the Richter scale per year; about three earthquakes a year, with magnitudes equal to or higher than 6.0 and one earthquake with a magnitude equal to or higher than 7.5 every five years. Even though these figures are only an average of what happens in the country as a whole, they make it possible to estimate the associated seismic risk that exists in the Mexican territory. Before this, when a catastrophe occurred in Mexico, the government employed resources in the Natural Disaster Fund (FONDEN) to face and overcome the material losses suffered by the population and the municipal, state and federal areas. On October 20, 2009 the federal government and the World Bank entered into a $US 290 million coverage agreement though an innovative financial protection scheme. The program presented by the World Bank guarantees a fund for natural catastrophes in Mexico. It is an innovative platform designed in response to the needs of developing countries to help their governments access insurance coverage against natural disasters through capital markets. It is a risk administration instrument for governments that offers coverage against catastrophes. Consequently, the MultiCat program is flexible and it is designed to cover the impact of natural disasters triggered by earthquakes, floods, hurricanes and tropical storms.
"Mexico is one of the most innovative countries using the World Bank’s financial products. We believe the experience obtained through this operation shows Mexico's solid financial system management; experience that can be replicated by other middle income countries facing the same natural catastrophes risks", said Gloria Grandolini, World Bank Country Director for Mexico and Colombia. This type of product, designed specifically for each of our clients, is an example of the Bank’s immediate response to the needs of dynamic clients such a Mexico. Today, in the midst of the global crisis, the World Bank not only seeks to support and to strengthen the Mexican economy in times of crisis, but also to help protect its most vulnerable citizens in the face of various natural disasters. According to the Ministry of Finance and Public Credit (SHCP), the protection offered by this new coverage is governed by a parametric instrument of risk transference that establishes scientifically defined conditions, such as: geographic location, depth, intensity and central pressure that could generate a catastrophic environment derived from an earthquake or a hurricane respectively. The agency considers that if all the established conditions are met during the validity of the coverage, the FONDEN will receive the amount insured regardless of the damage that occurred. The World Bank seeks to replicate this model that combines the array of instruments and technical services it has to offer to its clients. With this kind of coverage, people in different countries would have financial insurance administrated by its government without having to employ their own resources.
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