The impact of the 1997-1998
El Niño on the Andean Community of Nations
J. Roberto Jovel, Consultant, Andean Development Corporation
rjovel@amnetsal.com

Background

The five member countries of the Andean Community of Nations—Bolivia, Colombia, Ecuador, Peru and Venezuela—were badly hurt by the El Niño phenomenon in 1997 and 1998. The effects were different in each of the countries: heavy rainfall caused flooding in the lowlands of Ecuador, Peru and Bolivia, while droughts hit Colombia, Venezuela and the Bolivian highlands. Moreover, changes were reported in the temperature and salinity of ocean waters (see map).

The presidents of the Andean countries asked the Andean Development Corporation (Corporación Andina de Fomento, CAF) to assess the negative impact of the phenomenon and the way it was handled, and to present proposals on how to handle similar events in the future. The following is a summary of the social and economic impact of the 1997-1998 El Niño.

The damage caused by the El Niño phenomenon

People in the region, particularly low-income groups who tend to live in the areas most vulnerable to natural disasters, suffered significant losses involving their already scarce possessions and meager livelihoods. The floods and mudslides in Ecuador, Peru and Bolivia damaged or destroyed 135,000 homes, and the furniture and goods contained in them. Many of these homes will have to be rebuilt in areas less prone to flooding. Close to 5,200 education facilities were damaged or destroyed, as were their equipment and teaching materials. In the health sector, 12 hospitals and 570 health centers suffered the total or partial destruction of their infrastructure and equipment. All five countries saw significant increases in vector-transmitted, dermatological, bronchial and pulmonary diseases, prompting aggressive public health campaigns to control the outbreaks.
The drought made it necessary to interrupt or reduce the water supply, for relatively long periods, in many cities and communities. In the flooded areas, water and sewerage systems were damaged, leading to water rationing. In both cases, water trucks had to be called in regularly. The companies in the sector were hit financially by the loss of metered income and the higher costs to provide a minimum of service.

Electricity generation was affected in drought-stricken areas, forcing the utility companies to use fuel-burning plants. In Peru and Ecuador, the floods damaged two hydroelectric plants, again requiring the use of fuel—at greater expense—to generate electricity and prevent rationing.

The floods and mudslides destroyed or damaged close to 17,500 km of highways and roads, bridges and other related infrastructure, affecting the transport of people and merchandise and increasing operating costs. The lower river levels due to drought also increased the costs of transport on the Orinoco and Magdalena rivers, and the operating costs of several ports in Colombia and Venezuela.

The productive sector was affected in its infrastructure, its stocks, and its production. The floods destroyed or damaged agricultural infrastructure, reduced the number of heads of cattle, and led to declines in productivity both in flooded and drought-stricken areas. Fishing and fish processing were hurt by the changes in the ocean’s temperature and salinity. The industrial and commercial sectors lost infrastructure, equipment, and stocks; their sales fell due to the lesser volume processed and sold as a result of the floods and drought. Mining was also affected by flooding and reduced production. Tourism infrastructure was hit and revenues fell because of problems with the water and power supply during the high season.
The El Niño phenomenon also hurt the environment, already reeling from the impact of human activity. Deforestation and erosion increased the speed and volume of the floods and mudslides. The higher temperatures and strong winds fanned forest fires in drought-stricken areas, destroying a considerable amount of forest cover. Mangroves were damaged by lower water levels in tidelands and changes in water salinity. Coral colonies were also affected, although they fortunately did not die.

Thanks to early warnings of the El Niño phenomenon, governments were able to take some prevention and mitigation measures and strengthen emergency preparedness and response agencies, which helped reduce the impact to some extent.

The economic impact

The total economic impact of the damage caused by the El Niño phenomenon in the Andean region between 1997 and 1998 is estimated at US$7.5 billion. Peru lost US$3.5 billion, Ecuador US$2.9 billion, Colombia US$564 million, Bolivia US$527 million, and Venezuela US$72 million.

Of the total amount, 39% corresponded to losses in production, 29% to damaged property, and 21% to increased service costs. The most affected sectors were the productive sector (US$3.6 billion), infrastructure (US$1.8 million), the social sector (US$736 million), and the service sector (US$621 million).

Ecuador’s bill came to 14.6% of its Gross Domestic Product, Bolivia’s to 7%, and Peru’s to 4.5% of its GDP.

The damage wrought by El Niño reduced economic growth in 1998 by as much as 2.8% in the case of Peru (see Graph 3). Government deficits expanded due to the need to provide emergency relief and to the fewer taxes collected. The balance of trade was negatively affected by the lower exports and the need to raise imports to help with rehabilitation and reconstruction. Finally, the prices of scarce products have gone up, feeding inflation. These macroeconomic indicators may take years to recover.

The numbers reveal that the social and economic impact of the 1997-1998 El Niño on the Andean Community of Nations was so severe that vulnerability reduction must now be a top priority.

CAF, as mandated by the presidents of the region, is supporting the establishment of an Andean regional office for disaster reduction and the creation of a fund to finance regional vulnerability reduction activities. It will also publish a book detailing the impact of the 1997-1998 El Niño phenomenon in the region and the lessons learned, particularly on how to respond more effectively to such natural disasters in the future. Finally, CAF is promoting the strengthening and greater coordination of emergency management organizations in the Andean Community.

For more information, please contact:
Seyril Siegel ssiegel@caf.com
Tanya de Corrales tcorrales@caf.com