CASE STUDY

The 1985 Earthquake in Mexico City

An earthquake of extraordinary magnitude, 8.1 on the Richter scale, caused extensive damage in a densely populated sector in the center of Mexico City in September 1985.

The earthquake and its aftershocks caused the deaths of more than 10,000 persons; another 30,000 suffered injuries or psychological effects and about 150,000 were left homeless.

Approximately 33,600 dwellings were destroyed and 65,000 more suffered considerable damage. The health sector facilities were especially hard hit, with many hospitals and clinics destroyed. Nearly one fifth of the schools in the city were destroyed or seriously damaged. Also seriously damaged or destroyed were the water, electrical, and telecommunications systems in the central city.

UNDRO/Grieco

The direct losses were estimated at $3.8 billion. These losses included the urban infrastructure, public service facilities and their equipment, housing, health and educational facilities, communications, small industry and businesses. The indirect losses were estimated at $544 million and included the decrease of income and the increase in the costs to small industry and business, communications, tourism and the personal services sector. The total losses caused by the earthquake amounted to $4.4 billion making this natural disaster the most damaging in recent years in the region.

More serious than the absolute losses is the effect which the rehabilitation and reconstruction had on the macro economics of Mexico. The effects are especially significant considering that the total losses represented only 2.7% of the Gross Domestic Product of Mexico. However, the disaster occurred at a time when the government was applying a policy of austerity in public expenditures, the banks had limited assets to meet the increased demand for credit and when more external restrictions were foreseen.

It was estimated that in the five years following the earthquake the negative effect in the balance of payments will have reached $8.6 billion in spite of considerable income from insurance and foreign donations. It is also estimated that the fiscal deficit increased approximately $1.9 billion due to the expenses of rehabilitation and reconstruction.

The demands of the reconstruction required the Mexican authorities to revise their economic policy in order to accommodate greater needs for public funding, credits and imports. The priorities for public expenditures were reoriented to reconstruction projects leaving many of the pre-disaster problems of the city unattended.

Q. Identify at least two large scale development projects that you are familiar with that have been affected by disasters:

A.________________________________________ __________________________________________ __________________________________________

Q. Based on your experiences identify some of the ways that these programs have been interrupted by disasters.

A.________________________________________ __________________________________________ __________________________________________

If you are unable to identify development projects, select two from the list below and answer the questions:

1. Irrigation, rural infrastructure and agricultural services for yield increases

2. Forest resource management projects

3. Restructuring of National Agricultural Credit Bank

4. Integrated Rural Development Projects (IRDP) - extension services, on-farm adaptive research and technology testing, irrigation and rural water supply, farming and fishing inputs, road rehabilitation and maintenance, training for agricultural co-ops, technical assistance and training

5. Improvements in farm-access roads, training, and diversification of agricultural production

6. Education planning, training capacity for specific sectors, vocational training support

7. Strengthening of national electric power program - finance restructuring and institution development

8. Restructuring of enterprises with export orientation

9. Technical and marketing support for small and medium size industry

10. Malaria control projects

11. Strengthen urban food distribution systems and supplementary feeding programs

12. Credit and technical assistance for small enterprises

13. Institution building assistance to national railway authorities and ministries of transport

14. Transport sector adjustment and investment credit