Funding resilience, not disasters: Progress and challenges in Central America and the Dominican Republic

The region of Central America and the Dominican Republic faces a dilemma: its natural, social, and economic wealth coexists with high vulnerability to disasters and extreme weather events. Earthquakes, hurricanes, volcanic eruptions, and storms have left deep scars on these countries, affecting millions of lives and costing millions in economic losses. But beyond the visible tragedies, thousands of smaller-scale emergencies impact the most vulnerable communities on a daily basis. 

Faced with this scenario, a historic opportunity has emerged: changing the approach to disaster risk management. Instead of reacting, it is time to anticipate and invest in resilience. Evidence shows that preventing future damage is not only more effective and cost-effective, but also fairer, as it protects the most vulnerable groups.  

On this International Day for Disaster Risk Reduction, we will learn how significant steps have been taken to advance this agenda in Central America and the Dominican Republic, with the help of regional entities of the Central American Integration System (SICA), such as the Coordination Center for Disaster Prevention in Central America and the Dominican Republic (CEPREDENAC) and the Council of Ministers of Finance of Central America, Panama, and the Dominican Republic (COSEFIN); as well as international organizations such as the United Nations Office for Disaster Risk Reduction (UNDRR), the World Bank, the Inter-American Development Bank (IDB), and CAF - Development Bank of Latin America and the Caribbean (CAF).  

Advances in the Region 

In his poem “Unión Centroamericana” (Central American Union), the poet Rubén Darío wrote: “Union so that the storms may cease, so that the time of truths may come.” Although storms and disasters have continued to be part of the multi-threat scenario that characterizes Central America, the processes promoted by SICA have contributed to reducing vulnerability in the region.  

With the support of CEPREDENAC and other regional integration bodies, member states have strengthened their public policy frameworks and their national, subnational, and sectoral risk management systems. COSEFIN finance ministries have progressively incorporated the economic impacts of disasters into financial planning, relying on financial protection instruments that complement emergency funds.  

Nevertheless, the erratic behavior of climate variables and the accumulation of vulnerability factors are creating increasingly systemic and frequent risk scenarios. In infrastructure alone, the expected annual losses in Central America and the Dominican Republic, estimated through probabilistic risk analysis, amount to US$4 billion, which is equivalent to 25% of the region's annual GDP growth and puts the livelihoods of the most vulnerable populations at significant risk.  

A paradigm shift 

It is no longer enough to react: we must anticipate. Moving from disaster management to investing in risk reduction is more effective, more efficient, and fairer. This is the message of the International Day for Disaster Risk Reduction: “Fund resilience, not disasters.” With less than 2.5% of national budgets and less than 1% of international cooperation allocated to this matter, the challenge is to place resilience at the center of development financing policies in Latin America and the Caribbean (LAC). In this regard, Central America has the opportunity to lead by example.

To advance disaster risk reduction through investments in resilient infrastructure, it is essential to act on three fronts:

• Protecting new infrastructure from the design stage. Some countries, such as Costa Rica, Guatemala, and the Dominican Republic, have already incorporated risk criteria into their national public investment systems. Development banks, such as the World Bank, IDB, and CAF, also demand higher standards to ensure that projects are sustainable and resilient. The big challenge is to include and evaluate the costs and benefits of resilience within investment criteria. The key lies in demonstrating a multiplier effect, for example, by increasing the value of public and private infrastructure, reducing insurance costs, and by generating economic, environmental, and social co-benefits.
• Strengthening the resilience of existing infrastructure. Reducing the vulnerability of existing infrastructure requires sustained investment, which is challenging in contexts of high debt and limited budgets. This is where innovative financial instruments come into play: debt-for-resilience swaps, resilience bonds that attract capital from the growing green and sustainability bond market (which has already mobilized more than US$3.7 trillion), or blended finance schemes that mobilize private resources in key sectors.  
• Financially preparing to rebuild with resilience. Reconstruction that incorporates resilient infrastructure principles is an opportunity to reduce cumulative risk. To achieve this, advance planning, financial instruments that ensure timely availability of resources, clear rules, and technical capacity are needed to rebuild better, faster, and more inclusively. Mechanisms such as contingent loans and parametric insurance are already in use in the region, providing immediate liquidity after an emergency and facilitating more resilient reconstruction. 

Regional coordination and innovative initiatives 

Within the framework of SICA, the Regional Strategy for Financial Management of Disaster Risk Reduction, promoted by CEPREDENAC and COSEFIN, represents an important step forward in this agenda in Central America and the Dominican Republic. Its purpose is clear: to close the gaps that prevent greater and better investment in disaster risk reduction for more resilient development.

The region promotes the sharing of instruments, the mobilization of financing in innovative ways, and the strengthening of governance with the support of international organizations and development banks, through actions such as the development of Financing Frameworks for Disaster Risk Reduction by UNDRR, Contingent Liability Management by the World Bank, the Prepared and Resilient Initiative in the Americas by the IDB, and the Co-investment Platform in Early Warning Systems by CAF.  

In this way, the countries of Central America and the Dominican Republic are working together and contributing to a necessary agenda for LAC, in which each investment represents an opportunity to reduce risk, under the premise that there can be no sustainable development without resilience.