economic impact of the 2007 earthquake on the …...economic impact of the 2007 earthquake in peru...

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Disaster Risk Management in Water and Sanitation

Economic Impact of the 2007 Earthquake on the Drinking Water and Sanitation Sector In Four Provinces of PeruWhat did unpreparedness cost the country?

May 2011 / Full Study

2 Disaster Risk Management in Water and Sanitation

The findings, interpretations, and conclusions expressed in this study are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or countries they represent.

Rights and PermissionsThe World Bank encourages dissemination of its work and permits reproduction of parts of this book as long as the source is cited.

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Disaster Risk Management in Water and Sanitation

Economic Impact of the 2007 Earthquake on the Drinking Water and Sanitation Sector In Four Provinces of PeruWhat did unpreparedness cost the country?

May 2011 / Full Study

Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector: Full Study

APOYO Consultoria Working TeamGeoffrey Cannock — Project DirectorJessica Silva Yon, Senior Economist — Project CoordinatorCésar S. Jara Trujillo, Economist, Impact Assessment Specialist Roberto O’Connor La Rosa, Water and Sanitation Specialist — Analysis of Direct EffectsFernando Saavedra Bonifaz, Junior Economist — Analysis of Indirect Effects

Acknowledgments: Raúl Andrade, for review and technical editing of the study; Tania Begazo, for collaboration on analysis of secondary effects; Carlos Aparicio, Economist, Quantitative Tools Specialist; Gladys Anaya, for review of application of the direct effects methodology; and Magaly Ríos, Juan José Guzmán, and Alexandra Herrera, for processing the information compiled from the quantitative and qualitative field work.

Water and Sanitation ProgramGlenn Pearce-Oroz, Regional Director for Latin America and the CaribbeanIris Marmanillo, Country Coordinator for PeruGustavo Perochena, Project CoordinatorÁngela Flores, ConsultantYehude Simon, Communications Officer

PhotographyJulio Kuroiwa and the research team

LayoutCamaleón Comunicaciónwww.camaleon.pro

First edition: May 2011Print run: 500 copies

Lima, Peru

© 2011, World Bank, Water and Sanitation [email protected]


Executive Summary .............................................................................................................................................................. 7

Introduction ........................................................................................................................................................................ 11

I. Objective and the Study Area ............................................................................................................................. 15

II. Methodology ........................................................................................................................................................... 17

2.1. Methodology for Estimating the Direct Effects ........................................................................................ 17 2.2. Methodology for Estimating the Indirect Effects ..................................................................................... 18 2.3. Methodology for Estimating the Impact on Households ....................................................................... 19 2.4. Methodology for Estimating the Impact on Businesses .......................................................................... 20 2.5. Methodology for Estimating the Macroeconomic Impact ..................................................................... 21

III. Estimating the Direct Effects .............................................................................................................................. 23

IV. Estimating the Indirect Effects ........................................................................................................................... 37

V. Estimating the Economic Impact of the Earthquake on the Service Providers in the Sur Chico ..................................................................................................................................................... 39

VI. Estimating the Effects on the Population and Businesses and Other Effects on the Area ................. 43

6.1. Effects on the Population ............................................................................................................................... 43 6.2. Effects on Businesses ....................................................................................................................................... 52 6.3. Macroeconomic Effects .................................................................................................................................. 55

VII. Conclusions ............................................................................................................................................................. 65

VIII. Annexes ..................................................................................................................................................................... 69

Annex 1: Methodology for Conducting the Second Scenario Valuation ................................................... 69 Annex 2: Damage Rate for Drinking Water and Sanitation System Components Other Than Pipes .......................................................................................................................... 72 Annex 3: Estimating the Direct Effects by Type of Valuation ....................................................................... 74 Annex 4: Analysis of EMAPISCO Main Accounts (2001–2009) ............................................................... 75 Annex 5: Channels of Impact on Public Finance ............................................................................................. 83

Abbreviations ...................................................................................................................................................................... 89

List of Graphs ..................................................................................................................................................................... 91

List of Tables ....................................................................................................................................................................... 93

Contents

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector

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On August 15, 2007, an earthquake measuring 7.9 on the Richter scale shook the south-central coast of Peru. The areas most affected were the provinces of Pisco, Chincha, and Ica (in the department of Ica), and Cañete (in the department of Lima).

With a view to adding further thought to the effects produced by this phenomenon, as well as the merit of incorporating a series of preventive measures, the present study undertakes to estimate the economic impact on the affected areas, in particular the drinking water and sanitation sector. More specifically, the analysis focuses on those urban areas in which the following providers of drinking water and sanitation services operate: EMAPICA (Ica), EMAPISCO (Pisco), SEMAPACH (Chincha), and EMAPA Cañete (Cañete).1

In terms of the time frame and aspects covered by the analysis, consideration has been given to both the direct and indirect effects and the macroeconomic effects produced between August 2007 and December 2009.

Direct effects refer to damage done to the infrastructure of the drinking water and sanitation system. Indirect effects, on the other hand, are those that impact the service providers’ operations, usually reflected in loss of income and profits, as well as increased costs for these agencies. Macroeconomic effects are those that relate to aggregate

accounting for the area under study (sector GDP, employment, inflation, etc.). In an effort to arrive at the closest possible estimate of the earthquake’s impact, the study has also included effects on households and businesses.

It is a fact that the country could generate considerable savings2 if the service providers conducted regular maintenance on the infrastructure of their drinking water and sanitation systems and if they also practiced risk management. To determine the amount of savings this would represent, the study has simulated a counterfactual scenario, to be discussed later, in addition to the impact estimates mentioned above.

What were the study’s main conclusions? Here is a summary:

In total, the earthquake caused damage to drinking water •and sanitation systems in the towns of Cañete, Chincha, Pisco, and Ica amounting to S/. 84 million.3 This money could have been used to bring services to 160,888 inhabitants — for example, at least 8,183 drinking water and 7,925 wastewater connections, which represent 7 percent and 9 percent, respectively, of all the connections covered in 2006 by the four service providers studied.

The • direct effects are estimated at S/. 77.3 million. This figure represents the total cost of the damage to the

1 See list of abbreviations at the end of this document.2 In other words, what is understood here as avoiding “the cost of not being prepared.”3 The result of adding together both the direct and the indirect effects.

Executive SummaryEconomic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector


drinking water and sanitation systems. The amount corresponds to 6.4 times the budget spent on these services in 2007 by the provincial municipalities4 in the study area.5 In other words, if the providers had performed appropriate maintenance on their drinking water supply and sanitation systems, the estimated value of the damage would have been 5.9 times less and S/. 64.2 million would have been saved. Moreover, if risk management had been applied to implementing the drinking water and sanitation infrastructure, the service providers in the Sur Chico would have avoided having to spend a total of S/. 74.4 million to restore the systems to their pre-earthquake status. This money would have been saved if ductile material had been used for the pipes instead of concrete, if the soil had been evaluated before they were installed, and if the wells and tunnels had been regularly maintained.

In addition, the • indirect effects came to S/. 6.5 million. This amount is equivalent to 29 percent of the service providers’ total sales for 2007. However, the figure may be less because EMAPISCO and SEMAPACH made some changes in their business strategies to increase operating revenue after the earthquake.6

The effects on macroeconomic variables and on households and businesses were also included as part of the estimated impact on the area as a whole.

The following variables were analyzed in terms of their •macroeconomic effects: (i) GDP for drinking water and sanitation (Ica only); (ii) trade balance; (iii) public finance; (iv) water tariffs and inflation; and (v) employment.

In the case of Ica, the decrease in GDP for drinking •water and sanitation attributable to the earthquake in 2007 and 2008 was approximately S/. 506,000 for each

of these years. This figure represents 1.8 percent and 1.3 percent, respectively, of the Ica estimated GDP for this sector in 2007 and 2008.

The effects on the sector’s trade balance would have •been nil or limited, since water exports and imports of construction materials were also nil.

The impact on public finance has been considered in •three respects: (i) the variation in taxes collected by the central Government due to variation in the production of goods and services; (ii) variation in the public providers’ sales income; and (iii) increased investment in the reconstruction of public works and repair of damages. The first two effects, over all, have been positive. However, both were offset by the amount that had to be invested to rehabilitate the drinking water and sanitation services. Thus, there was a net negative effect of approximately S/. 54 million. This figure represents 26 percent of the total revenue collected by the Peruvian Tax Administration (SUNAT) in Ica during 2007 in the form of general sales tax, income tax, and selective excise tax.

Water tariffs went up, but the increases were the result of •adjustments in the wholesale price index (WPI) and not an effect of the earthquake.

With regard to employment, as a result of the •disaster, 18 percent of heads of household changed their principal activity, mainly shifting to activities related home-making. In addition, for a period of two months (the emergency period) the heads of household in the study area were estimated to have lost earnings amounting to a combined total of between S/. 12 million and S/. 36 million, which would represent between 0.5 percent and 1.5 percent of total annual household income for urban residents in the department of Ica.

4 In other words, it is equivalent to the combined cost of all the actions taken to ensure the supply of drinking water and the implementation and maintenance of sewer and storm drain systems, as well as to improve sanitation conditions for the population, including public cleanup. It also includes the planning, promotion, and development of enterprises providing water and sanitation services (Source: Ministry of Economy).

5 The total expenditure executed by the provincial municipalities of Ica (S/. 4.0 million), Chincha (S/. 3.0 million), Pisco (S/. 3.3 million) and Cañete (S/. 1.9 million) came to S/. 12.18 million.

6 In this case, unlike the other providers, the results were so distorted that it was decided not to consider any calculation after November 2008. Unfortunately, this situation resulted in a loss of information on more than one year of indirect effects.


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As for the earthquake’s impact on household well-•being, the effects of this phenomenon were analyzed starting from the days immediately after the temblor until April 15, 2010, the day on which the survey was conducted. The survey questions addressed four aspects: (1) household drinking water supply and sanitation service; (2) health; (3) gender; and (4) the environment.

In the case of drinking water and sanitation service, •81 percent of households experienced an interruption or changes in their water service for an average of 16 days. Water trucks were their main alternative source of supply (69 percent), which entailed a weekly cost of S/. 15 for each household that resorted to using them. This amount represented 4 percent of weekly income for an average household in the department of Ica. Altogether, the added expense came to a total of S/. 382,000 for the study area.

Only 14 percent of households reported members •becoming sick for reasons related to the earthquake, and these were mainly related to the accumulation of waste (28 percent). Mothers and children were the most vulnerable household members. The households in the study were estimated to have spent between S/. 50 and S/. 60 a week on health-related expenses. Based on the duration of the illnesses, the total for the study area was estimated to range between S/. 17 million and S/. 21 million — roughly equivalent to what the central Government spent on health in the department of Ica for 2007.

As far as gender is concerned, in 36 percent of the •households it was the mothers who were responsible for fetching water. At least half of them devoted one to three hours a day to this activity. In general, the increase in domestic work or activities related to reproduction7 was approximately five hours a day for 30 days. The value of this work was estimated at S/. 22 million for the area studied. Furthermore, in 16 percent of the

households women had to leave their paid jobs to perform activities related to reproduction, representing total lost earnings amounting to S/. 16 million. This represented 1.2 percent of women’s total income in the department of Ica for 2007.

With regard to effects on the environment, 10 percent •of the inhabitants were left without hygienic amenities and were forced to eliminate outdoors. As for solid waste, 40 percent of the households had to change the way they handled trash disposal. It is interesting to note that the use of suitable trash disposal methods8 increased by 4 percent, mainly because of construction work and technical assistance following the earthquake.

The earthquake’s effect on private businesses was also •significant: 25 percent of business owners claimed that damage to and problems with drinking water and sanitation services had a greater impact on their businesses than damage to other services. Regarding the effect on sales, although 80 percent of the businesses stated that the impact was moderate, the duration of the impact was prolonged (52 percent saw their sales affected for more than two months). In addition, at least 60 percent of the businesses sampled had had plans to invest prior to the earthquake and, as a result of the disaster, these plans had been put on hold or postponed, even as of the date the survey was conducted.9

7 Domestic work or activities related to reproduction was understood to mean unremunerated activities related to homemaking.8 For example, leaving trash to be picked up by a collection truck or paying for it to be picked up.9 The survey was conducted between April 9 and 15, 2010. It should not be regarded as statistically representative; it is intended to be merely indicative.


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According to estimates, natural disasters cost US$575.2 billion world-wide between 1996 and 2005.10 It has been observed that developing countries in particular are relatively more affected by these events, because they experience a greater impact on their GDP than the more developed countries.11

Introduction

On August 15, 2007, an earthquake measuring 7.9 on the Richter scale shook the south-central coast of Peru, known as the Sur Chico. The temblor had its greatest impact on the population of Ica and the provinces south of Lima, disrupting the lives of approximately 431,000 people: more

10 Hofman, David. “Time to Master Disaster,” Finance and Development Magazine, volume 44, number 1, March 2007.11 In this connection, in the World Bank discussion paper entitled “Complementing Natural Disasters Management: The Role of Social Protection,” Renos Vaki points out that in

1998, after Hurricane Mitch, the GDP of Honduras fell 6 percentage points below pre-hurricane projections. ECLAC has estimated that the cost of the damage and losses caused by these natural disasters in the last 30 years in some of the vulnerable countries of Latin America and the Caribbean amounts to more than US$50 billion.

Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Introduction

The drinking water supply and sanitation systems in Ica and south of Lima suffered damages estimated at S/. 77.4 million.


than 200,000 were left homeless, 519 were killed, and 1,291 were injured. The magnitude of the shock also caused heavy damage to the population’s basic service infrastructure. The drinking water supply and sanitation systems were especially affected, with total damage estimated at S/. 77.34 million. The school system lost 643 classrooms, which lay in ruins, and at least 635 others suffered some degree of damage. In the health system, 14 facilities were destroyed and at least 112 others were affected. In the transportation grid, two bridges collapsed and four others were damaged.

In view of the magnitude of the damage caused by lack of preparedness for dealing with a natural disaster, one wonders how much less the cost of rehabilitating drinking water and sanitation systems might have been if public investment projects and the enterprises that provide drinking water and sanitation had adopted measures to mitigate the risks of natural dangers. Since this is a key sector and a lifeline for public services, the World Bank Water and Sanitation Program commissioned Apoyo Consultoria S.A.C. to conduct research on the drinking water and sanitation sector to find an answer to the question: What did unpreparedness cost the sector that provides drinking water and sanitation services? Or in economic terms: What would have been the gain to society, or savings in the cost of reconstruction, if risk prevention measures had been included in the management of services in the sector proposed for the analysis? The study offers an evaluation based on what are considered to be two simulated, or counterfactual, scenarios, and the result is an estimate of the impact in terms of “reconstruction savings.”

In answer to this question, the study estimated how much was spent on making this very important sector operational again and restoring it to the levels existing prior to the

earthquake — in other words, the cost of the direct effects. Using this figure, it calculated how much would have been saved in achieving sector recovery if appropriate work had previously been done to maintain infrastructure and if the infrastructure had been constructed using earthquake-resistant materials. It also calculated how much revenue the companies that provided water and sanitation services lost in the wake of the disaster. In other words: What were the indirect effects, specifically, in the areas where the following service providers operate: EMAPICA (Ica), EMAPISCO (Pisco), SEMAPACH (Chincha), and EMAPA Cañete (Cañete)?

In addition, the study estimated the economic effects of the earthquake on households, businesses in the area, and the main macroeconomic variables of the region.

With these goals in mind, the study has been divided into eight sections. The first section presents the objectives and outlines the scope of the study. The second sets forth the methodology used to assess the different types of effects: direct and indirect effects, effects on the population and businesses, and macroeconomic effects. The third section presents the results of calculating the direct effects and the cost to EMAPISCO in particular of not applying risk prevention practices. The fourth presents the results of estimating the indirect effects and also examines the situation prior to the earthquake (ex ante) and after it (ex post) in the case of EMAPISCO. The fifth section reviews findings with regard to the earthquake’s economic impact on the four service providers. The sixth, in turn, shows the results of estimating the effects of the disaster on households and businesses and also macroeconomic variables. The seventh focuses on the conclusions of the study, and finally, the eighth section contains the annexes.


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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Objective and the Study Area

The objective of the present study is to estimate the economic impact on the drinking water and sanitation sector caused by the earthquake that affected the area surrounding Pisco on August 15, 2007.

I. Objective and the Study Area

LimaPeru

Ica

Other

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Cajatambo

Oyón

Huaral

Canta

Huarochirí

Lima

Yauyos

Cañete

Ica

Chincha

Pisco

Palpa

NazcaLegendDepartments

Study area

N

S

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0 km40 80 160

0 km35 70 140

Prepared by APOYO Consultoría

GRAPH 1: LOCATION OF THE STUDY AREA

The analysis focuses on the urban areas of Ica, Pisco, Chincha, and Cañete. Four enterprises provide drinking water and sanitation services in these areas: EMAPICA, EMAPISCO, SEMAPACH, and EMAPA Cañete.

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Methodology

II. Methodology

In estimating the earthquake’s economic impact on the delivery of water and sanitation services, the primary reference model has been a methodology proposed by the Economic Commission for Latin America and the Caribbean (ECLAC).12 According to this model, the effects of a natural disaster (intense natural event, according to the ECLAC terminology) can be classified into three types: direct, indirect, and macroeconomic effects. Direct effects are those that impact the infrastructure of the drinking water and sanitation sector at the time of the event or within a few hours thereafter. Indirect effects, on the other hand, occur after a longer period, which can be as much as three to five years depending on the magnitude of the disaster. They both affect the operations of service providers and are usually manifested in decreased income and increased costs. Macroeconomic effects refer to the impact on aggregate accounting in the study area (sector GDP, employment, inflation, etc.).

In line with this methodology, the study has simulated counterfactual scenarios13 to determine the additional costs that were incurred because of failure to adopt risk prevention practices in the drinking water and sanitation sector. In the first scenario, the cost of the disaster is estimated assuming that the service providers had followed proper infrastructure maintenance practices in providing water and sanitation services. The second scenario considers what the cost would have been if, in addition to the maintenance activities, the infrastructure had been built using earthquake-resistant materials.

The direct and indirect effects can then be combined to arrive at an approximate estimate of the total magnitude of the impact. In addition, estimates of the effects on households and businesses and the macroeconomic effects can be added to the impact on the area as a whole.

2.1. Methodology for Estimating the Direct Effects According to the ECLAC methodology, briefly outlined above, direct effects are damages to property that occur at the time of the intense natural event. They can include total or partial destruction of physical infrastructure, machinery, equipment, or the like. In the present study, attention is focused on damage to the drinking water supply and sanitation systems. To estimate this damage, a calculation is made of how much it would have cost to restore the water and sanitation services to their pre-disaster status.14

12 Comisión Económica para América Latina y El Caribe, “Manual para la Evaluación del Impacto Social, Económico y Ambiental de los Desastres.”Mexico City: CEPAL, 2003.13 Counterfactual scenario is understood here to mean a scenario artificially designed or constructed to simulate what would have happened if the earthquake had not occurred.14 This entire estimate is in line with the ECLAC methodology (op. cit., 2003).

Damage to the drinking water and sanitation systems.



To incorporate in the methodology a means of estimating the benefits that would result from using risk management practices, valuations15 were derived based on the two counterfactual scenarios just mentioned. In other words, to estimate the damage, the first assessment considers the infrastructure of the utilities prior to the disaster but under the assumption that the infrastructure had been properly maintained and was in good operating condition. The second one estimates the damage under the assumption that the components of the drinking water and sanitation systems before the disaster were not only in optimal condition but also had been built with earthquake-resistant materials. The latter scenario reflects a context in which the service providers would have applied corrective risk management.16

To determine the cost of not being prepared with adequate systems, the (lower) cost of the damage that the disaster would have caused based on each of these two valuations was subtracted from the real costs incurred in restoring the service providers to their pre-disaster operating level.

a. Baseline: ECLAC MethodologyAccording to the ECLAC methodology, the following input needs to be taken into account in order to place a value on the earthquake damage:17

For each component there should be a description of its i. main characteristics, the type of damage incurred, and its approximate size or the amount of material affected.

With regard to the damage associated with the ii. component, the following elements enter into the calculation: (a) first, the type of item and/or material; (b) second, the unit cost of its construction or full

replacement; (c) and finally, the estimated unit cost of its repair as a percentage of the previous unit price (R%). Estimates of percentage of damage were either obtained directly from the service providers (technical data from FORSUR and CESEL, a private Peruvian engineering consulting company)18 or based on an assessment by the water and sanitation expert using field data obtained on site.19

b. Valuation for the First Scenario:20 Infrastructure Properly Maintained21

To simulate the counterfactual scenario in which the infrastructure has been properly maintained, APOYO Consultoría designed an application based on the HAZUS-MH MR4 Technical Manual prepared by the U.S. Department of Homeland Security, Emergency Preparedness and Response Directorate (FEMA).22 Graph 2 shows the steps taken to arrive at this valuation.23

c. Valuation for the Second Scenario: Infrastructure with Earthquake-resistant MaterialsThe second scenario also assumes, in addition to proper maintenance, that earthquake-resistant materials were used in constructing the water and sanitation infrastructure and that the infrastructure is in optimal condition. In this scenario, it is further assumed that the service providers have practiced risk management. The valuation procedure is similar to that followed in the previous valuation.

2.2. Methodology for Estimating the Indirect Effects The indirect effects, as implied earlier, are the losses incurred in the flow of production goods and services (ECLAC 2003). They occur during the course of reconstruction, repair, and

15 The term valuation involves the action and effect of placing a value on something, i.e., putting a price on it. In this case, a value is placed on the estimated damage caused by the earthquake.

16 The expression corrective risk management refers to the process of adopting measures to reduce existing vulnerability by intervening in the actual causes of the vulnerable condition. In the present case it is an intervention in the quality and maintenance of the components of the drinking water and sanitation system.

17 The following paragraphs summarize the ECLAC methodology (op. cit., 2003).18 Proposed reconstruction projects were reviewed at the profile level — i.e., the level that identifies the project’s objectives and alternatives for addressing the problem to be solved. This

level also included a preliminary evaluation of the alternatives and their feasibility based on a cost-benefit comparison of the situation “with the project” and “without the project.”19 The estimated unit price should include the cost of labor and materials, demolition or disassembly, and rubble removal. It should also take into account the degree of difficulty of

the work.20 The term valuation involves the action and effect of placing a value on something, i.e., putting a price on it. In this case, a value is placed on the estimated damage caused by

the earthquake.21 Annex 1 provides a detailed explanation of the method for calculating this valuation.22 The HAZUS-MH MR4 Technical Manual was developed by the Federal Emergency Management Agency (FEMA), now the Emergency Preparedness and Response Directorate,

U.S. Department of Homeland Security. FEMA is concerned with estimating damage to infrastructure, the transportation grid, etc., as well as human losses as a result of disasters. 23 See details on the method for calculating this estimate in Annex 1.

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restoration of the service to its normal state. They include: (i) income the service providers failed to receive because of reduced billing as well as water losses resulting from direct damage that has not yet been repaired, and (ii) increased operating costs for the delivery of provisional services during the course of reconstruction.

The final value, or valuation, of the indirect effects is defined as the difference between the values observed due to the earthquake (first variable) and the values from a scenario in which no earthquake occurred (second variable).

To estimate with a degree of certainty what would have happened in the event the earthquake had not occurred, projections for the counterfactual scenario were simulated on the basis of the variable’s actual historical pattern. For this purpose, the principal earnings and loss statements for each of the service providers were examined. The figures were grouped into the following categories: sales, cost of sales, administrative expenses, sales expenses, and other income or expenses. To project the value of these variables, the moving averages method was applied to the period from January 2001 to July 2007.

2.3. Methodology for Estimating the Impact on HouseholdsTo measure the earthquake’s effects on households, a quantitative survey was conducted in which heads of household and housewives were

GRAPH 2: STEPS FOR VALUATION OF DIRECT EFFECTS OF THE EARTHQUAKE (ASSUMING THAT INFRASTRUCTURE WAS ADEQUATELY MAINTAINED)


Inventory of components of the drinking water

and sanitation system prior to the earthquake

Determination of damage rate for each

component

Evaluation of the ground characteristics

in each locality

Valuation of the damage to the

drinking water and sanitation system

Plan for the drinking water and sanitation system, to be furnished by the service provider

Two types of components to be considered: (a) pipe networks, and (b) other components (e.g., water treatment plant, storage tanks, wells, pumping stations)Other considerations: areas with probability of liquefaction, degree of ground deformation, type of material in the components — all of which impact the damage rate

Earthquake parameters Earthquake microzoning study of the locality, to be obtained to review the following:

Zones where liquefaction has occurredi. Zones with soil that is aggressive toward pipe materialsii. Zones with ground faults presentiii.

Damage rate to be multiplied by the unit cost of the componentUnit costs, based on project formulation file

4

3

2

1

GRAPH 3: COST OF INDIRECT EFFECTS ON THE SERVICE PROVIDERS


Values of the “with earthquake scenario” variable

Values of the “without earthquake scenario” variable

Cost of the indirect effect

1 2



interviewed in the urban areas of Ica, Chincha, Pisco, and Cañete. The method used to select the sample was stratified probabilistic sampling with random selection of blocks and systematic selection of houses within each block. The margin of error was ±5.7 percent for each of the urban areas. A confidence level of 95 percent was assumed. The sample size was 301 households, distributed by socioeconomic level as follows: level B/C, 36.9 percent; level D, 42.5 percent; and level E, 20.6 percent.

The main objective of the survey was to obtain information about the earthquake’s effects on the well-being of the households. Emphasis was placed on changes in productive activities, income, and the epidemiological pattern (i.e.,

vulnerability to illnesses), among other effects. To consider all these aspects, four distinct impact models were analyzed: (1) household drinking water and sanitation service; (2) health; (3) gender; and (4) the environment.

2.4. Methodology for Estimating the Impact on Businesses A qualitative method was used to study the earthquake’s effects on businesses, designed to elicit information indicative of the economic losses they suffered following the earthquake.24 Business owners or managers were engaged in a semi-structured qualitative interview divided into four modules that would provide background for determining the following:

24 It should be pointed out that the values derived in this section are not statistically representative.

Structural damage to the water tower reservoirs in Pisco.

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the earthquake’s impact on water and sanitation services;•

the damage caused to water service infrastructure;•

economic effects on sales, investment plans, etc.; •

the existence of a preventive culture regarding natural •disasters.

To select the businesses, the first step was to identify the main industrial and commercial users in the region. This information was obtained in interviews with the business managers for each of the service providers. In addition, the following criteria were considered: (i) whether the business was typical of the Ica production and service sectors; (ii) age of the business (i.e., whether it existed prior to the earthquake); (iii) duration (i.e., whether it ceased to exist after the earthquake); (iv) perception of the local populace and business owners in the region (i.e., businesses they would suggest as suitable points of reference to be interviewed).

In the end, a total of 57 businesses were selected. Quantitatively, the distribution turned out to be focused mainly on manufacturing, hotels and restaurants, and commerce. These sectors employ a high percentage of the region’s workforce.25

2.5. Methodology for Estimating the Macroeconomic ImpactThis section describes the procedure followed to estimate the disaster’s effects on drinking water and sanitation in terms of macroeconomic variables for the department of Ica. To estimate these effects, the following variables were analyzed: (i) gross domestic product (GDP); (ii) trade balance; (iii) public finance; (iv) prices and inflation; and (v) employment.

Gross Domestic Product (GDP)•

This variable makes it possible to see the decline in the volume of water distributed starting from the date of the earthquake and the decrease in expected distribution (on the calendar) during the period when repairs were being made and the system was

being restored to normal production capacity. For purposes of the calculation, these variations are regarded as changes in value added generated by the service provider.

Trade Balance•

In this case, the decline in exports of goods and services (water) is estimated vis-à-vis the increase in imports of construction materials needed for the reconstruction and repair of direct damages.

Public Finance•

This variable provides an estimate of total income and expenditure as it affects the central, regional, and municipal governments, as well as other public agencies. This effect occurs in three ways: (a) decline in taxes collected by the central Government because of lower production of goods and services; (b) decline in the income of the public service providers; and finally, (c) increased expenditure for investment in reconstruction and repair of damages.

Prices and Inflation•

The damage caused by the earthquake could have had an effect on the prices of water and also the construction materials needed by the sector to repair the damaged infrastructure.

Employment•

To analyze the effects on employment, yet another questionnaire was added to the survey prepared by APOYO Consultoría. The intention of the employment module was to learn about changes in employment patterns and their average impact on income.

25 “Informe económico regional y social: Región Ica” (2010), Banco Central de Reserva del Perú. Document prepared for the Encuentro Económico Región Ica 2010 [Ica Regional Economic Encounter 2010]. See: http://www.bcrp.gob.pe/publicaciones/seminarios-y-eventos/encuentro-economico-region-ica-2010.html (consulted on 8 May 2010).

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Estimating the Direct Effects

Since Pisco was the city closest to the epicenter of the earthquake, it was natu-rally the most affected. Consequently, of the four service providers studied, EMAPISCO (the provider for Pisco) was the one that suffered the greatest damage. It is therefore of interest to examine this case in detail. The esti-mated effects for the other three service providers are shown in Section V.

This section starts with a general description of the services provided by the utilities and the nature of the damage incurred to each of the components that comprise the drinking water and sanitation system. It then indicates the valuation of the direct effects as well as the cost of not implementing risk prevention.

3.1. Direct Effects on Pisco

3.1.1. General Aspects of the Water Service Provided by EMAPISCOThe province of Pisco is located south of Lima and is one of the five that form the Ica region (Graph 1). The province, in turn, is composed of eight districts: Huancano, Humay, Independencia, Paracas, San Clemente, Pisco, San Andrés, and Túpac Amaru Inca. It has 125,879 inhabitants, 87.63 percent of whom live in urban areas. The service provider, EMAPISCO, covers Pisco, San Andrés, and Túpac

III. Estimating the Direct Effects

Amaru Inca, or 65.8 percent of the population in the province of Pisco.

In terms of access to drinking water (Graph 4),26 it can be seen that the proportion of homes with access to this service is steadily increasing.

However, although coverage has increased, there is still room for improvement in terms of continuity of service delivery: only 13.17 percent of the Pisco inhabitants covered by EMAPISCO have service every day of the week. Moreover, only 8.78 percent have service 24 hours a day, whereas 23.07 percent have service only one to three hours a day.27

50%

60%

70%

80%

90%

100%

82.9%

89.3% 90.0% 89.4% 90.1%

95.7%99.0%

2002 2003 2004 2005 2006 2007 2008

GRAPH 4: DRINKING WATER COVERAGE: PISCO (2002–2008)

Source: SUNASSPrepared by APOYO Consultoría

26 This indicator makes it possible to identify the proportion of population that does not have access to drinking water service, which should be a priority for the service providers.27 Data from the 2007 Census. Instituto Nacional de Estadística e Informática, Censo de población y vivienda 2007, Lima: 2007.



28 This indicator makes it possible to identify the suppliers with the smallest proportion of active connections.

The figures on active drinking water connections (Graph 5)28 are helpful in calculating EMAPISCO’s commercial losses because the difference between total connections and active connections reveals, at least to some extent, the number of inactive connections associated with clandestine users. This indicator would appear to confirm that the presence of clandestine users increased in 2007 and 2008, which naturally adds to commercial losses and affects the sustainability of the services.

3.1.2. Components of the EMAPISCO Drinking Water and Sanitation System

Drinking Water SystemDescribed in the most general way possible, the EMAPISCO drinking water system (Graph 6) is made up of the following components:

Gallery water filters: • Cabeza de Toro and Ocas

Water pumping stations•

Water tanks•

Water tower reservoirs (R1, R2, and R3)•

Water pipelines•

The main disaster-related damages to the drinking water system can be summarized as follows:

The gallery water filters in the catch-•ment structure developed cracks in the canal works, resulting in seepage.

There were leaks and breaks both •in the pipelines that supply water to the population and at the joints, with a much greater incidence in the older section.

Leaks and cracks in the 1,400 m• 3 water storage tower rendered it totally inoperative.

The disinfection equipment broke •down in the R2 water storage tank and

the Túpac Amaru water treatment plant.

The distribution networks, especially the cast iron •pipelines, were affected when a protective layer of soil was spread in the Pisco urban area.

Fissures developed in the structure of the Túpac Amaru •water treatment plant.

The extent of damage to the systems exceeded the local service provider’s capacity to respond to the situation. Thus it was necessary to enlist the participation of other entities, in particular SEDAPAL, which worked in the area for 35 days. It was a significant achievement that service was restored within the first seven days.

Sewerage SystemsThe EMAPISCO sewerage system (Graph 7) has the following components:

Wastewater collection network•

Wastewater pumping stations•

Wastewater treatment plants•

GRAPH 5: ACTIVE DRINKING WATER CONNECTIONS: PISCO (2002–2008)

Source: SUNASS

2002 2003 2004 2005 2006 2007 200860%

62%

64%

66%

68%

70%

72%

74%

65.4%

67.5%

72.0% 72.1% 72.4%73.2%

71.4%

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Most affected were the concrete sewer pipes in the Pisco urban area and the district of San Andrés.

The wastewater pumping stations also incurred damage, especially to their electrical systems. The Leticia pumping station, the main one on which the city relies, was damaged so badly that its electromechanical component was inoperative for 15 days. In addition, there was damage to the stabilization ponds’ pumping equipment and the slope of backup pond #1. The Boca del Río wastewater treatment plant had minor damage that did not affect its operability.

3.1.3. Estimating the Direct EffectsAs indicated earlier, the methodology considered three scenarios: the baseline and two counterfactual ones. But before the estimated costs of these scenarios are examined,

it is useful to have a brief look at the components of the entity’s drinking water and sanitation infrastructure, as well as the parameters of the earthquake.

Inventory of Components of the Drinking Water and Sanitation SystemsEMAPISCO provided an inventory of its water and sanitation infrastructure prior to August 15, 2007, for use in the present study.29

According to the reports provided, the water system’s cast iron and asbestos cement pipes were in poor condition and had to be totally replaced. The same was true of the concrete pipes in the Pisco and San Andrés sanitation system, and a complete renovation was suggested.

Cabeza de Torogallery water filter

Alternate source

San Clemente

San Miguel

San Andrés

Pisco

Villa Túpac Amaru

Ocas gallerywater filter

PRC- 3

24” - RC

24” - A.C.

R- 3

R- 2

R- 1

Disinfectiontank

12”

6”

Diagram of Pisco Water Supply System

GRAPH 6: DIAGRAM OF EMAPISCO DRINKING WATER SUPPLY SYSTEM

Source: EMAPISCO

RC: Reinforced concretePRC: Pressure reduction chamberR: Water storage tank/towerAC: Asbestos cement

29 Field notes taken by the water and sanitation engineers confirmed that the inventory listed more than 90 percent of the water and sanitation components observed in the field.



The drinking water system has two subsystems: (i) the Túpac Amaru/San Miguel subsystem, and (ii) the Pisco/San Andrés subsystem. Each has the following components: a water distribution network, water pumping stations, a disinfection system, water tower reservoirs, gallery water filters (with facilities for catchment and transportation of the water and inspection chambers), and a drinking water supply line. The sewerage system has the following components: a wastewater collection network, wastewater pumping stations, and wastewater treatment plants (Graph 7).

Earthquake Parameters for the Pisco Urban AreaTo find out the earthquake parameters for the Pisco urban area, the first step was to gather information from Peru’s Geophysical Institute and the U.S. Geological Survey. In addition, the data were reviewed from seismic microzoning studies conducted in the area of Pisco, San Andrés, and Túpac Amaru by the Center for Earthquake Engineering Research and Disaster Mitigation (CISMID) at the National Engineering University.30

The CISMID studies (2007) established five zones, each with different characteristics. The most important factors

30 The studies reviewed were: (1) Sánchez Espinoza, Manuel; Denis Parra Murrugarra; Karla de la Cruz Uribe, “Microzonificación Sísmica de Pisco,” Centro de Investigación y Mitigación de Desastres (CISMID-UNI), 1999; and (2) CISMID, “Ciudades Seguras: Microzonificación Sísmica de Pisco, San Andrés, San Miguel y Túpac Amaru,” working paper, Lima: 2007.

Casalla

Túpac Amaru Inca

PP.JJ. San Miguel

Túpac Amaru water treatment plant

Pisco

San Andrés

Stabilization ponds had breakdowns in their pumping equipment and damage

to slope of backup pond #1.

Pisco and San Andrés sewer network experienced multiple breaks and leaks because of poor state of repair.

Power outages and equipment damage affected the normal operation of pumping stations.

Boca del Río treatment plant

GRAPH 7: DIAGRAM OF EMAPISCO SEWERAGE SYSTEM

Source: EMAPISCOP.S.: Pumping stationPP.JJ.: “Pueblo Joven” shantytown

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taken into account in these studies were depth of the aquifer, resistance of the soil, and its degree of aggressiveness considering the phenomenon of corrosion. Table 1 gives a list of the parameters that were taken into account.

a. Baseline: ECLAC MethodologyWith these parameters in mind, the earthquake emergency projects proposed by EMAPISCO and the Pisco Provincial Municipality and submitted to the Southern Reconstruction Fund (FORSUR)31 were reviewed for the purpose of quantifying the damage caused by the disaster. Also included in this review were the reconstruction projects proposed in the CESEL study that diagnosed the damage caused to the system.32 This study included proposals for implementing

improvements to the systems, which have not been taken into account in the estimate.

Unit costs per linear meter were determined based on the data developed for each of the emergency projects. The costs included materials, labor, cost of replacing the pipes, etc. The figures varied from one zone to another and there were differ-ences in the degree of difficulty of the work.

Table 2 summarizes the calculation of damages to the components of the drinking water and sanitation systems. The earthquake was esti-mated to have incurred damages costing a total of S/. 36.4 million in the city of Pisco. Of this total, 33 percent corresponded to the drinking water system (mainly

damage to pipes in the distribution network) and 67 percent to the sanitation system (pipes in the sanitation network).

b. Valuation for the First Scenario: Infrastructure Is Properly MaintainedAs already indicated in Section II, this first valuation considers the service provider’s infrastructure as it was prior to the earthquake, but under the assumption that it had been being properly maintained and was in optimal operating condition. Thus, for example, it calculates the same amount of drinking water pipe33 as in the previous valuation (baseline), but under the assumption that the pipes were in optimal working condition before the earthquake.34 Once the characteristics of the system’s components (type of material) were defined

31 These emergency proposals were for repairing the initial damage caused by the earthquake and were strictly limited to restoring the system to its pre-earthquake status. 32 CESEL was contracted by EMAPISCO to prepare a diagnosis of the damage to the system. Funding was provided by the German Development Bank (Kreditanstalt fuer

Wiederaufbau — Kf W). 33 Consideration was also given to the material used in the water system pipes: cast iron, asbestos cement, reinforced concrete, cylinder concrete, steel, plastic/PVC, etc. 34 Maintenance refers to activities for the purpose of conserving capital assets in condition for regular use. Examples include preventive and corrective maintenance programs such

as cleaning and repairing drinking water and sanitation pipelines, as well as maintaining house connections, pumping equipment, the two systems’ treatment plants, etc.

TABLE 1: EARTHQUAKE PARAMETERS FOR THE PISCO URBAN AREA

Parameter Value

Intensity — Richter Scale 7.9

Modified Mercalli Intensity Scale (MMI) 8

Peak ground acceleration (PGA) 0.45

PGA value in cm/seg2 441

Peak ground velocity (PGV) in cm/s: Pisco-San Andrés zone 55

Peak ground velocity (PGV) in cm/s: Túpac Amaru zone 40

Permanent ground deformation (PGD) in inches 3

Probability of liquefaction (urban center from cemetery to sea wall) in % 100

Probability of liquefaction in other parts of the Pisco zone in % 50

Probability of liquefaction in the district of San Andrés (near the ocean) in % 100

Probability of liquefaction in other areas of San Andrés in % 50

Probability of liquefaction in Túpac Amaru (lower part) in % 50

Probability of liquefaction in the Túpac Amaru-San Miguel zone in % 25

Probability of liquefaction in the catchment area in % 50

Probability of liquefaction in pipeline area in % 50

Period of return in years (10% of probability in 50 years) 475

Sources: USGS (USA)-IGP (Peru), CISMID (UNI)



and the earthquake parameters were taken into account (e.g., intensity, liquefaction, vulnerability, etc.), the formulas from the HAZUS-MH Technical Manual were applied to estimate the rates of damage to the components.

In calculating the breaks in the pipelines, the following points should be kept in mind:

Based on the earthquake microzoning studies, •consideration should be given to the percentage of areas affected by liquefaction and permanent ground deformation (PGD). For purposes of the present study, an average of 3 inches (7.5 centimeters) has been taken as the indicator of permanent ground deformation.

According to USGS readings, the • peak ground velocity (PGV) in centimeters per second (cm/s) was 55. In zones farther from the epicenter the values ranged from low levels up to 45 cm/s.

The probability of liquefaction •is determined by the earthquake microzoning studies. It reached 100 percent in the Pisco-San Andrés urban area, and it was 50 percent in the catchment and drinking water supply line areas. The values in the San Miguel sector were between 25 and 50 percent.

The structural damage rate takes •into account both the time required to restore the systems to operability and the peak ground acceleration (PGA) produced by the earthquake.

Approximate unit costs to replace •the pipes were calculated using the unit costs of the emergency and repair work done by the local service provider and SEDAPAL.

Determination of Number of Repairs for Leaks and Breaks in Water System Pipes

Tables 3 and 4 show the estimated damage rates under this valuation. The number of repairs for pipe damage is calculated on the basis of two possible causes:

Case 1: damage due to • ground shaking (PGV); and

Case 2: damage due to liquefaction and permanent •ground deformation (PGD).

With the exception of the disinfection system, which was totally destroyed, the damage to the various pipeline components was relatively minor (see Annex 2 for full details of damage to the pipes). This outcome can be explained by the fact that, for the last 15 years, the various structures related to the pipeline have been built with reinforced concrete and earthquake-resistant materials.

TABLE 2: VALUATION OF DAMAGE TO THE DRINKING WATER AND SEWERAGE SYSTEMS: ECLAC METHODOLOGY— BASELINE (MILLIONS OF PERUVIAN SOLES)

No. Component Cost of damage

Drinking water system 12.05

1 SEDAPAL REPAIRS 0.26

2 Capture via gallery water filter 0.10

3 Pipes — drinking water supply line 0.11

4 Pipes — distribution network 10.81

5 Water tower reservoirs 0.70

6 Pumping stations 0.03

7 Equipment 0.04

Sewerage system 24.37

1 SEDAPAL REPAIRS 0.22

2 Pipes — sewer network 23.76


4 Boca del Río treatment plant 0.07

Total cost of damage to the systems 36.42


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TABLE 3: TOTAL DAMAGES TO WATER SYSTEM PIPES WHEN THEY HAVE BEEN PROPERLY MAINTAINED, TAKING INTO ACCOUNT GROUND-SHAKING (PGV) AND DAMAGE DUE TO GROUND LIQUEFACTION (PGD)

Case I (km) Case II (km) Total (km)Total

incidents / kmDegree of damage

1. Component: water pipeline (distribution network)

Pisco area

Total repairs: Pisco 67 107 174

Repairs to cast iron pipe 8 18 26 2.68 Moderate

Breaks 5 16 21 2.16

Leaks 3 2 5 0.51

Repairs to asbestos cement pipe 50 79 129 2.12 Moderate

Breaks 25 63 88 1.45

Leaks 25 16 41 0.67

Repairs to PVC pipe 9 10 19 0.52 Light

Breaks 3 8 11 0.30

Leaks 6 2 8 0.23

San Andrés area

Total repairs: San Andrés 14 22 36

Repairs to asbestos cement pipe 12 19 31 2.23 Moderate

Breaks 6.0 15.2 21.2 1.52

Leaks 6.0 3.8 9.8 0.70


Breaks 0.6 2.4 3 0.34

Leaks 1.4 0.6 2 0.22

Túpac Amaru — San Miguel area

Total repairs: Túpac Amaru — San Miguel 10 12 22

Repairs to asbestos cement pipe 7 9 16 1.20 Light

Breaks 3.5 7.2 10.7 0.80

Leaks 3.5 1.8 5.3 0.40


Breaks 0.6 2.4 3 0.14

Leaks 2.4 0.6 3 0.14

Total repairs to distribution network 232



Case I (km) Case II (km) Total (km)Total

incidents / kmDegree of damage

1. Component: water pipeline (drinking water supply)

New section

Total repairs 8 10 18

Repairs to ductile iron pipe 1 1 2 0.78 Moderate

Breaks 0.2 0.8 1 0.39

Leaks 0.8 0.2 1 0.39

Repairs to reinforced concrete pipe 7 9 16 1.52 Light

Breaks 2.8 7.2 10 0.95

Leaks 4.2 1.8 6 0.57

Old section

Total repairs 12 16 28

Repairs to reinforced concrete pipe 9 12 21 1.61 -

Breaks 3.6 9.6 13.2 1.01

Leaks 5.4 2.4 7.8 0.60

Repairs to asbestos cement pipe 3 4 7 1.54 -

Breaks 1.2 3.2 4.4 0.96

Leaks 1.8 0.8 2.6 0.57

Total repairs to pipelines 46

3. Component: gallery water filters

Repairs to reinforced concrete pipe 2 3 5

Breaks 0.8 2.4 3.2

Leaks 1.2 0.6 1.8

Total repairs to water system pipes 283


(Table 3 continued…)

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TABLE 4: TOTAL DAMAGES TO SANITATION SYSTEM PIPES WHEN THEY HAVE BEEN PROPERLY MAINTAINED, TAKING INTO ACCOUNT GROUND-SHAKING (PGV) AND DAMAGE DUE TO GROUND LIQUEFACTION (PGD)

Case I (km)

Case II (km)

Total (km)

Total incidents / km

Degree of damage

1. Component: sewer pipeline

Pisco area

Total repairs: Pisco 49 76 125

Repairs to concrete pipe 39 65 104 2.22 Light

Breaks 27 59 86 1.83

Leaks 12 7 19 0.39


Breaks 4 9 13 0.32

Leaks 6 2 8 0.21

San Andrés area

Total repairs: San Andrés 12 20 32

Repairs to concrete pipe 11 19 30 2.21 Moderate

Breaks 8 17 25 1.82

Leaks 3 2 5 0.38


Breaks 0 1 1 0.24

Leaks 1 0 1 0.14

Túpac Amaru — San Miguel area

Total repairs: Túpac Amaru — San Miguel 10 13 23

Repairs to concrete pipe 9 12 21 1.21 Light

Breaks 6 11 17 0.99

Leaks 3 1 4 0.23


Breaks 0 1 1 0.24

Leaks 1 0 1 0.14

Total repairs to sewer system pipeline 180




The estimated damage rate for each of the components was multiplied by the unit cost of the component, and the result was the cost incurred by the earthquake.

As shown in Table 5, the estimated cost of the damage in the hypothetical scenario is 10 times less than the estimated baseline (ECLAC methodology). The difference, of course, is explained by the optimal condition of the systems in the present scenario.

c. Valuation for Second Scenario: Infrastructure Built with Earthquake-resistant MaterialsAs indicated earlier, the cost of damage to the drinking water and sanitation systems was also estimated in a simulated scenario under the assumption that, at the time of the disaster (August 15, 2007), the infrastructure had been built with earthquake-resistant materials and the service providers had also performed proper maintenance. For this purpose, it was assumed that the structures met the following criteria:

TABLE 5: VALUATION OF DAMAGE TO COMPONENTS OF THE DRINKING WATER AND SEWERAGE SYSTEMS: FIRST SCENARIO (MILLIONS OF PERUVIAN SOLES)

No. Component Cost of damage Total

Water system






6 Equipment 0.04

Total cost of damage to the water system 1.84

Sanitation system



3 Boca del Río treatment plant 0.08

Total cost of damage to the sanitation system 1.73



Water SystemIn the catchment system, the source is • permanently protected.

The catchment system is free of source contamination. •

In both the old and new sections of the drinking water •supply line the concrete pipes have been replaced with pipes made of ductile iron.

The pipes throughout the distribution network and those •used in all the house connections are made of ductile material (plastic, polyethylene, ductile iron) and the existing sections of asbestos cement and cast iron pipe have been replaced.

The water tower reservoirs have been evaluated •structurally and there are no cracks or fissures that compromise their stability.

All equipment has been fully braced to reduce movement •during an earthquake.

In the pumping station, the power generator is always •ready on standby.

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The system is • permanently operational.

There is an up-to-date technical inventory of the entire •water system.

The time required to restore water service for the entire •coverage area is three days at most.

There is only light damage to system components other •than the pipes.

The earthquake parameters for the current scenario are •the same as those used in the first scenario.

Maintenance SystemThe pipe material throughout the sanitation system is •ductile (plastic, polyethylene) and all sections of concrete pipe have been replaced.

The entire sanitation system is operational.•

There is an up-to-date technical inventory of the entire •sanitation system.

The structure of the pumping stations is in good condition, •the equipment is braced, and there is a generator on standby in the event of an emergency (power outage).

The equipment at the Boca de Río wastewater treatment •plant is also operational and prepared to deal with a power outage.

There is only light damage to system components other •than the pipes.

The time required to repair the damage to the components •is seven days at most.

The earthquake parameters are the same as for the •previous scenario.

The method for calculating the cost is similar to the steps followed in the previous scenario. The results are shown in Table 6.

TABLE 6: VALUATION OF DAMAGE TO COMPONENTS OF THE DRINKING WATER AND SEWERAGE SYSTEMS: SECOND SCENARIO (MILLIONS OF PERUVIAN SOLES)

No. Component Cost of damage Total

Water system






6 Equipment 0.02

Total cost of damage to the water system 0.58

Sanitation system



3 Boca del Río wastewater treatment plant 0.11

4 Túpac Amaru water treatment plant 0.03

Total cost of damage to the sanitation system 0.72





To summarize, Table 7 shows the estimated valuation of damage based on the proposed scenario. Assuming hypothetically that EMAPISCO had maintained its systems properly, the estimated value of the damage would be 10 times less than the estimated investment required to return the system to its pre-earthquake status. Maintaining and repairing the system would have saved S/. 32.9 million.

Moreover, in the second scenario the estimated cost of damage to the drinking water and sanitation systems would have been only one-third the amount calculated for the previous scenario. This is because in the present scenario the pipes are made of ductile material and vulnerability is therefore reduced in the event of an earthquake. In light of these figures, it would appear to be worth giving serious consideration to replacing the pipes made of inappropriate material (concrete) and developing a risk management program.35

In addition to the reasoning outlined above, the following points should be considered as well:

The drinking water and sanitation system managed by •EMAPISCO was already challenged with operating

and maintenance issues before the disaster struck on August 15, 2007. The earthquake-related breakdowns in various parts of the system were more than the local service provider could handle and it was necessary to enlist outside support, especially from SEDAPAL.

Pipes were the component that suffered the largest •share of the damage to the water and sanitation systems. Since they were not made of earthquake-resistant material, but rather of the kind that is most vulnerable in seismic events, and since a number of sections had collapsed previously, the damage was naturally much greater.

One reason for the delay in resolving the multiple incidents •was that the local utility had only minimal resources for operating, maintaining, and monitoring the systems.

The service provider had not implemented its emergency •response plan. At the time the earthquake struck, its capacity to respond to an event of this kind had not been evaluated.

Moreover, the plans for the drinking water and sanitation •systems did not have a provision for seismic microzoning studies of the area. As a result, there was no picture of the danger or the risk to the systems’ components.

TABLE 7: ESTIMATED DAMAGE TO THE EMAPISCO DRINKING WATER AND SANITATION SYSTEMS, BY TYPE OF VALUATION (MILLIONS OF NEW SOLES)

Baseline:ECLAC methodology

Scenario 1:Estimated damageswith maintenance

Scenario 2:Estimated damages with earthquake-resistant material and maintenance

36.4 3.6 1.3


35 See Annex 3 for estimates of the direct effects using each type of valuation for each of the utilities studied. It also shows the total amount that could have been saved if each of the four utilities had used risk management.

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EMAPISCO water storage tower (R1): structural failures developed after the earthquake and it had to be shut down.

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Estimating the Indirect Effects

In the present study, the estimation of indirect effects was based on figures from the EMAPISCO balance sheets for January 2005 through December 2009.36 The moving averages method was used.37 To estimate indirect effects that adversely affected the service provider, it was decided that operating profit was the most relevant criterion, since it is the figure that most closely reflects the company’s productive process. Also, if net profit had been used to measure the indirect effects, it would have been necessary to overestimate the result to offset non-cash accounts such as depreciation.

Based on the results, it was concluded that the indirect effects for almost the entire period under analysis (August 2007–December 2009) came to approximately S/. 1,773,000, or 8.8 times the provider’s average operating income for the 12 months prior to the earthquake. It should be pointed out that this result includes the effect of offsetting the measures applied by the supplier to increase its sales after the disaster, which reduced the indirect effects (losses).

A comparison of each of the actual accounts against the corresponding estimates shows the ones that were most affected and those that suffered the greatest impact in the calculation of the indirect effects.

IV. Estimating the Indirect Effects

In 2007, the indirect effects were greatest under sales and administrative expenses (Table 9). This result reflects the fact that EMAPISCO did not send out bills for the month of October and only billed 50 percent for the two months after that. Again in 2008 the brunt of indirect effects was felt on sales and administrative expenses, and there was a similar picture in 2009. Projected gross profit was considerably lower in the estimated scenario than was actually the case. However, operating expenses negate this result.

TABLE 8: INDIRECT EFFECTS, BY YEAR (MILLIONS OF PERUVIAN SOLES)

Year 2007 2008 2009 Total

Amount 0.46 0.84 0.48 1.77

Source: EMAPISCOPrepared by APOYO Consultoría

36 See Annex 4 for an analysis of EMAPISCO accounting records of sales, cost of sales, sales expenses, and administrative expenses.37 Moving (or rolling) averages is a calculation in which each number in a series is the average of a subset of the original data.

TABLE 9: COMPARISON SHOWING RESULTS FOR OPERATING INCOME: YEARS 2007, 2008, AND 2009 (THOUSANDS OF PERUVIAN SOLES)*

2007 2008 2009

Account Actual Estimated Actual Estimated Actual Estimated

Sales 2,596 3,017 3,408 3,139 3,535 3,352

Cost of sales 3,648 3,793 3,582 3,911 3,769 4,404

Gross profit -1,051 -777 -174 -773 -234 -1,051

Sales expense 496 563 994 493 968 520

Administrative expenses

1,341 1,092 1,787 854 1,767 917

Operating income -2,889 -2,431 -2,955 -2,120 -2,968 -2,488

*Here, as in all the tables and graphs where “thousands” is indicated, each of the figures should be multiplied by 1,000. The numbers have been abbreviated to save space.

Source: EMAPISCOPrepared by APOYO Consultoría

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Estimating the Economic Impact of the Earthquake on the Service Providers in the Sur Chico

This section presents the results of estimating the earthquake’s direct and indirect effects on the entire study area. According to the ECLAC approach, the sum of these effects represents the total magnitude of damage caused by a natural disaster.

As it can be seen in Table 10, the direct effects were the most significant, amounting to S/. 77 million (92 percent of all the damage). The direct effects have been subdivided into damage to the drinking water system and damage to the sanitation system. The former accounted for 39 percent of the total, while the latter represented 61 percent and suffered the greatest impact.

V. Estimating the Economic Impact of the Earthquake on the Service Providers in the Sur Chico

The indirect damage came to S/. 7 million, or 8 percent of the total. It should be remembered that the effects for EMAPISCO, EMAPA/Cañete, and EMAPICA were calculated through December 2009, whereas the estimates for SEMAPACH only went up to October 2008. The earlier cutoff was taken because the structural changes in income from sales did not make it possible to draw a reliable comparison between actual income and estimated potential income.38 Also, these structural changes generated both positive and negative effects. Therefore, to avoid confusing overlaps,39 all of the positive and all the negative numbers were added together to derive a net figure.

TABLE 10: ESTIMATE OF EARTHQUAKE IMPACT, BY PROVINCE (MILLIONS OF PERUVIAN SOLES)

Chincha Pisco Ica Cañete Total effects

Direct effects 18 36 18 5 77 92%

Drinking water systems 5 12 11 2 30 39%

Sanitation system 13 24 8 2 47 61%

Indirect effects 2 1 2 1 7 8%

Positive1 2 1 3 2 8

Negative2 0 0 -1 0 -1

Total effects by province 20 37 20 6 84

1. Increase in provider’s operating income — for example, increased revenue due to improved collection management.2. Decrease in operating income.


38 These structural changes were generated as a result of new business policies introduced after the disaster regarding delinquent accounts, collections, and the installation of micrometers. To give an idea of the effectiveness of these measures, before the earthquake this provider’s average monthly sales were S/. 434,000; between September 2007 and October 2008 they increased to S/. 465,000, and between November 2008 and November 2009 they rose to S/. 688,000.

39 Specifically, the concern was to prevent the positive effects for one provider during a given period to be neutralized by the negative effects for another provider during a different period.



A look at the total effects by province shows that Pisco, with 45 percent of the total damage, was the most affected. The other provinces, in order, were Ica (25 percent), Chincha (23 percent), and Cañete (7 percent).

In total, the disaster incurred damage to the drinking water and sanitation systems valued at S/. 84 million.40 This money could have been used to install more than 8,183 drinking water and 7,925 wastewater connections that would benefit 160,888 inhabitants.41

40 The GDP for Ica in 2007 was S/. 157,751,553.41 A review of other studies that also used the ECLAC approach shows that in Latin America the percentage of indirect effects relative to total effects has varied considerably.

It should be pointed out that in the present case the earthquake’s indirect effects tended to be low because the service providers undertook reconstruction activities and adopted policies or strategies regarding collections and improving their efficiency. It has been calculated that underestimation of damage ranges between 20 percent and 30 percent for the countries of Latin America. (Source: CEPAL, BID. Proyecto de Cooperación Técnica, Programa de Información e Indicadores para la Gestión de Desastres. Daniel Bitrán, “Metodologías específicas: Evaluación Retrospectiva del Impacto Socioeconómico de los Desastres y Consideraciones Metodológicas para llevarla a cabo,” May 2005.)

Work to replace pipes: the total cost of earthquake damage to the drinking water and sanitation systems came to S/. 84 million. This money could have been used to install more than 8,183 drinking water and 7,925 wastewater connections that would benefit 160,888 inhabitants.

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Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Estimating the Effects on the Population and Businesses and Other Effects on the Area

In order to approximate42 the total magnitude of the earthquake’s damage, both the direct and the indirect effects have to be added together. The present section analyzes the impact of the disaster on the well-being of households, the performance of businesses, and other macroeconomic variables.

6.1. Effects on the PopulationA quantitative survey was used to estimate the effects of the earthquake on households (Graph 8). This survey was administered during visits with the heads of household and

VI. Estimating the Effects on the Population and Businesses and Other Effects on the Area

GRAPH 8: HOW MUCH DID THE AUGUST 2007 EARTHQUAKE AFFECT YOU?

A lot 44%

Somewhat 23%

Not at all 2%

Considerably 22%

Very little 10%

Source: Household Survey — Ipsos APOYO Opinión y MercadoPrepared by APOYO Consultoría

housewives in their homes in the urban areas of the cities being studied.43 The survey revealed that 66 percent of the households had been considerably affected by the disaster and only 2 percent had not experienced any damage at all.

The question, then, was: Which aspects of the earthquake had the greatest impact on drinking water and sanitation service in the homes? The present section looks at the answer to this question and focuses on impacts in the following areas: home, health, gender, and the environment.

42 Approximate: to bring near or closer, to estimate — Merriam-Webster Unabridged Dictionary.43 The method used to select the sample was stratified probabilistic sampling with random selection of blocks and systematic selection of houses within each block. A confidence level

of 95 percent was assumed, and the margin of error was ±5.7 percent for each of the towns. A total of 301 representative surveys were obtained.


GRAPH 9: INTERRUPTION OR CHANGE IN HOME WATER SERVICE DUE TO THE EARTHQUAKE


Yes81%

No19%

Was there an interruption or change in service to your home? For how many days?

16 dayson average

3 monthsto 1 year

Notindicated

1 month toless than3 months

2 weeks toless than1 month

1 week toless than2 weeks

Less thana week

17%

38%

14%

0.41%

5.37%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

6.1.1. Drinking Water and Sanitation Service Because of damage to the drinking water systems, 81 percent of the households had to contend with an interruption or changes in their service for an average of 16 days (Graph 9).44 The town affected by this problem the longest was Pisco (31 days), followed by Chincha (21 days), Ica (12 days), and Cañete, which experienced the least inconvenience (7 days).

Because of the system breakdown, households had to resort to alternative sources of water supply. They relied mainly on water trucks (69 percent)45 and bottled water (40 percent).46 The water from the trucks was used for both personal hygiene and dishwashing, and the bottled water, of course, was for consumption (Graph 10).

44 According to information from the 2007 Census, the survey used a weighted average of the number of urban households in each of the towns in question. The average excludes extreme values.

45 SEDAPAL provided 14 water trucks, which supplied a total of 23,764 m3 of drinking water over a period of 38 days. In addition, Caritas and MIMDES distributed 2,500-liter tanks, 15,000-liter bladders, and 200-liter drums. Support was provided to the water trucks, and the other storage tanks were constantly refilled — the 2,500-liter tanks a total of 71 times and the bladders six times, as well as the drums.

46 SEDAPAL produced 95,395 liters of table water between August 2007 and July 2008 and distributed a total of 499,357 liters of bottled water to the towns in the study area. In addition, MIMDES donated 456,484 liters of water.

47 Because of wide dispersion of the data, the median has been taken as the measure of the main trend.

The solution of using water trucks as a water source is of special interest because it entails the development of comprehensive distribution plans. These plans could be supervised, making it possible for the service providers to monitor the frequency of arrivals, the schedules in general, the pattern of beneficiaries, etc.

Additional Expenses for Drinking Water Supply or Sanitation ServiceWhile 66 percent of the households had access to drinking water through donations (via water trucks, bottled water, etc.), it should be kept in mind that 21 percent of the households had to pay for it. The weekly cost for these latter families was approximately S/. 15,47 which represented 4


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percent of weekly income for an average household in the department of Ica.48

Accordingly, it is estimated that the households had to spend, on average, an additional S/. 41. For the entire study area, the total would come to S/. 1,316,000. This figure takes into account both the additional amount (S/. 1.56 per day)49 that the households had to spend50 and also the percentage of households that consumed more than just the donated water (21 percent),51 and finally, the average length of time that the homes went without drinking water service in each city (Graph 11).

48 In Ica, the monthly income of an average family in 2007 was S/. 1,626. 49 The survey respondents stated that they had spent S/. 2.14 a day on water because of the earthquake. A typical family consuming drinking water in the Ica region paid approximately

S/. 0.58 per day in 2007. Therefore, the additional daily cost of water consumption was S/. 1.56 per family.50 The percentages of households that lost their water supply were as follows: Ica (38.02 percent), Chincha (37.60 percent), Pisco (19.42 percent), and Cañete (4.96 percent).51 The value of the additional payment and the percentage of households were applied in similar fashion to each of the other cities, since the survey answers to these questions did not

allow for inferring at the level of the cities as a whole.

GRAPH 10: HOW DID YOU GET WATER WHEN YOUR HOUSE WAS NOT RECEIVING NORMAL SERVICE?


1/ Includes well, street vendor, etc.

69%

40%

18%

11%

2%

12%

0%

10%

20%

30%

40%

50%

60%

70%

Water truck Bottled water Home of neighborsor friends

In-houseconnection topublic network

Publicfountain

Other1

6.1.2. Health Since damage from the earthquake forced people to stay in temporary shelters, they were naturally at greater risk for contracting acute respiratory infections (ARIs) and acute diarrheal disease (ADD). Other health hazards included conjunctivitis, dermatitis, and insect bites.

According to the Ministry of Health (MOH), although initial emergency care after the earthquake was for traumatic injuries and cardiovascular and respiratory problems, five days after the disaster the main health problems were infectious diseases. By August 26, 2007, it was reported that



50 percent of all the conditions receiving treatment in the affected area were ARIs, 13 percent were external traumatic injuries, about 4 percent (1,031 cases) were skin diseases, and slightly more than 3 percent (743 cases) were illnesses related to ADD.52

At the same time, measures were taken to stem the spread of outbreaks and prevent epidemics. Below is a list of the actions taken to control or prevent potential disease:

Restrictions were placed on the number of hours that •water could be distributed because the streets were flooded with water from leaking pipes and were becoming potential foci of infection.

The Ministry of Health (MOH) was constantly on the •watch for possible epidemic outbreaks. A team of experts

from the General Directorate of Epidemiology was sent to Ica and Pisco. As a result, a surveillance network was created consisting of 164 units that were charged with monitoring and reporting on conditions in the affected areas so that an immediate response could be mounted in the event of any outbreak of disease.

In addition, the MOH created the Healthy Family •and Home program, which conducted mass media, information, and education campaigns about good hygiene practices aimed at the population staying in shelters, tents, and other makeshift housing.

Vaccination programs were mounted to immunize the •populace against typhoid, tetanus, hepatitis A and B, and yellow fever.

Yes14.29%

One to two84%

Not indicated0.33%

Three to five 16%

No85.38%

Did any member of your householddevelop a new illness?

How many people are in your household?

GRAPH 11: HOUSEHOLDS WITH A MEMBER WHO BECAME SICK AS A RESULT OF THE EARTHQUAKE

Source: Household Survey — Ipsos APOYOPrepared by APOYO Consultoría

TABLE 11: TOTAL ADDITIONAL EXPENSES DUE TO LACK OF DRINKING WATER

Province Average days without serviceTotal additional payment

(thousands of soles)

Ica 12 395

Chincha 21 401

Pisco 31 383

Cañete 7 137

Total 1,316

52 Ministry of Health. “Sismo: Sala de situación de salud al 26 de agosto de 2007.” See: http:// www.olx.com.pe/index.php?invite=branding-pe.

Elaboración: APOYO Consultoría


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The General Directorate of Health (DIGESA) monitored •water quality on an ongoing basis. In particular, it tested for residual chlorine at supply stations, shelters, cisterns, and other shared water sources.

In addition, DIGESA undertook fumigation and rat control •activities in the areas covered with rubble and around irrigation canals and ditches near homes. It also installed latrines and chemical portable toilets.

Finally, the MOH worked with local authorities in the •affected areas to mobilize sanitation brigades for on-site self-monitoring. As part of this initiative, a sanitary checklist card was developed that is still used by local authorities responsible for environmental cleanup.

Spread of Disease as a Result of the EarthquakeImplementation of the preventive measures above undoubtedly contributed to the fact that only 14 percent of the households had a member who became sick as a consequence of the disaster. Moreover, within this subgroup, most of the households had only one or two members who fell ill.53

The most vulnerable household members were the children (60 percent), followed by the mothers (17 percent), fathers (9 percent), and other members. Respiratory illnesses were

TABLE 12: ESTIMATED HOUSEHOLD EXPENDITURE FOR ILLNESS ATTRIBUTABLE TO EARTHQUAKE-RELATED PROBLEMS WITH DRINKING WATER AND SANITATION, BY LOCALITY *

LocalityTotal urban households

Households with at least one sick member

Households that paid for their illnesses

Total payments for illness (millions of S/.)

Ica 73,598 4,710 3,062 3.3

Chincha 43,161 8,632 5,611 6.1

Pisco 27,611 5,522 3,589 3.9

Cañete 41,801 5,392 3,505 3.8

Total 186,171 24,256 15,767 17.1

*The calculation includes a weekly expense per household of S/. 50. Consideration was also given to another scenario in which the expense was S/. 60 per household, for a total of S/. 20,540,167.

the most common (46 percent). Other health problems included stomach upsets related to the quality of the drinking water (10 percent), other digestive and respiratory problems (15 percent), and other diseases (28 percent). All these conditions were caused mainly by the accumulation of waste and lack of clean water for drinking and personal hygiene.

Weekly Expenditure on account of IllnessOf the 14.3 percent of households with at least one member affected by a disaster-related illness (Graph 11), 65 percent had additional expenses (between S/. 50 and S/. 60 a week), and only 23 percent received medical care and medicines at no cost.54

Considering the estimated expense and the time it took the patients to recover, the total expenditure on health came to between S/. 17 million and S/. 21 million,55 a figure that roughly corresponds to what the central Government spent on the health sector in the department of Ica for 2007.

6.1.3. GenderThe effects of a natural disaster tend to impact men and women differently. Among the main repercussions for women are decapitalization and reduced participation in productive activities56 in both the formal and the informal

53 At the broad population level, the proportion was 5 percent. 54 The remaining 12 percent did not provide information.55 This total includes the percentage of households in each of the cities with at least one sick member, the percentage of households with at least one sick member who incurred

a weekly expense, the additional money paid by the households (between S/. 50 and S/. 60 a week), and the average recovery time for the sick household members.56 In other words, remunerated activities unrelated to domestic activities.



sectors. At the same time, women face the added costs of increased domestic work.

The nature of the domestic work tends to be typical after an earthquake. It includes caring for children and other family members who have been wounded or fallen ill, cleaning and taking care of the home, picking up distributed or donated food, and fetching water. All of these activities are usually performed by women. It is therefore essential to undertake a gender-focused analysis so that measures can be proposed and implemented that will enable women to handle these situations more successfully.

Accordingly, the following effects that especially impact women were analyzed: (a) an increase in domestic work, and (b) the loss of employment and productive income from work performed outside the home. These effects are examined below.

Who engaged in domestic or reproductive work after the earthquake?In most households, the domestic work was done mainly by women, and they experienced a change in their principal activity. Of these women, 70 percent were mothers, 2 percent were sisters, and 2 percent were other relatives or household members. Moreover, 70 percent of them said that this was the case because it was their duty to take care of their family or the wounded; on the other hand, only 48 percent of the men shared this belief.

Caring for the SickTaking care of the sick after an earthquake of this kind is a typical example of domestic work in a time of disaster: it becomes a necessary domestic task. In the study area, 15 percent of the households declared that after the earthquake one family member was devoted exclusively to caring for the sick. The mothers were mainly responsible for assuming this role, followed to a much lesser degree by the fathers, daughters, and sons (Graph 12).

Fetching WaterOf the households interviewed, 63 percent said that after the earthquake at least one member was responsible for fetching water. It was mainly the mothers who performed this task (36 percent), followed by the fathers (31 percent). This work took them an estimated one to three hours (Graph 13).

a. Impact on Women’s Domestic WorkIncrease in Domestic WorkAfter the earthquake, 43 percent of the households in which the women were responsible for homemaking duties stated that domestic work required an average of five additional hours a day. The tasks included fetching water, waiting in line for food, helping out with the work in the shelter, and caring for the sick. This work lasted for about one month after the earthquake (Graph 14).


One of the earthquake’s effects on the population was that women’s domestic chores increased.

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GRAPH 12: PERSON IN THE FAMILY RESPONSIBLE FOR CARING FOR THE SICK AFTER THE EARTHQUAKE


Yes15%

Father9.6%

Mother69.2%

Daughter(s)7.7%

Son(s)3.8%

Adult sibling(s)3.8%

Other(s)5.8%

No85%

Who was responsible for caring for the sick?Was anyone in the family responsible for caring for the sick after the earthquake?

Adult sibling(s), 2% Other(s), 3%

Daughter(s), 8%

Son(s), 20%No

37%Yes63%

After the earthquake, was anyonein the family responsible for fetching water?

Persons responsible for fetching water,by household role

Mother, 36%

Father, 31%

GRAPH 13: FETCHING WATER AFTER THE EARTHQUAKE


Yes43%

No57%

Did care for your homeand family members require more effortand more hours after the earthquake?

Number of additional days spenton domestic work

Approximately five additional hoursa day were spent on domestic

work because of the earthquake.

Notindicated

2 3 4 5 6 7 8 9 10 12 24

1%1%

7%

10%

2%

16%

20%

14%

12%

4%

6%5%

0%

5%

10%

15%

20%

GRAPH 14: HOUSEHOLDS THAT REQUIRED MORE EFFORT AND TIME TO CARE FOR THE HOME (COMPARED WITH ALL HOUSEHOLDS IN WHICH THE WOMAN CARES FOR THE HOME)





GRAPH 15: ESTIMATED VALUE OF INCREASED DOMESTIC OR REPRODUCTION-RELATED WORK PERFORMED BY WOMEN IN THE STUDY AREA

Based on the information above, it is estimated that the additional domestic or reproduction-related work required for rehabilitation and reconstruction after the earthquake would be valued at a total of S/. 22 million.57

b. Change in Productive Work as a Result of Domestic WorkBecause of the earthquake, in 16 percent of the households the women had to leave their jobs to take over the domestic work that needed to be done in the home. Thus, the change in work patterns for this group meant that women missed earning a combined total of S/. 16 million in the study area. This amount assumes working eight hours a day for a wage of S/. 3.03 per hour for the 30 days that they did not work at their job.

Graph 15 summarizes the earthquake’s impact on domestic work. It shows the households where women had to increase this work and also the households where they had

to change from productive to domestic work as a result of the earthquake. The cost of the two changes together would amount to a total of S/. 39 million, or 1.2 percent of total income for women in the department of Ica in 2007.58

6.1.4. EnvironmentImpact on the EnvironmentThe impact of a natural catastrophic event and its repercus-sions on the availability and quality of water can also pro-duce environmental changes that have negative effects on the health and well-being of the population. In addition, break-downs in the wastewater network or the system for collecting and disposing of solid waste can lead to disease.

Wastewater SystemOf the households surveyed, 14 percent reported that their wastewater system had malfunctioned because of the earthquake. The changes lasted between a week and three months.59 Because of this inconvenience, the population had to

57 The extra five hours a day was estimated to apply to 43 percent of the urban households for a period of 30 days. The hourly wage of S/. 3.03 adopted for the urban woman was based on dividing the average monthly income (S/. 533), as estimated by the 2007 National Household Survey (ENAHO), by 22 working days in the month and eight hours a day.

58 For that year, only women over 14 years of age were counted (230,821 women). The average annual income for women in Ica in 2007 was S/. 6,189.59 It is important to be aware that the condition of the wastewater system in Pisco had already been declared an emergency before the earthquake. Of course, the disaster made the

situation much more serious.

Urban households

186,171

Women137,767

Domestic work 144,346 households

S/. 23 million

Households with more domestic

work 49,169

S/. 3.03 per hour5 additional hours

30 days of additional work

S/. 3.03 per hour8 additional hours

30 days of additional work

Shifted to domestic work 22,042 households

Wage-earning

work 22,042 households

S/. 16 million

S/. 39million Men

48,404

Households tended by …

74%

84%43%

16%100%

26%

Work done by women before

the earthquake

Work done by women after the earthquake Valuation Assumptions


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find alternative hygiene facilities. One-third of the inhabitants used latrines or cesspits to take care of their needs. A second group used portable toilets, or even the home of a family member as a provisional solution. To a lesser extent, some of them relieved themselves in the open air.

Local authorities in the area were responsible for arranging alternative hygiene facilities for the population. The Ministry of Health installed chemical portable toilets and built latrines for the temporary shelters. In addition, it stepped up its health promotion activities in the area and made a point of informing the population about the correct use of latrines, hand-washing, proper handling of human waste, etc.60

It should be noted that, although the portable toilets were a satisfactory option to help meet the demand in this situation, their high cost placed a burden on resources.61

In terms of the population’s perceptions of the provisional hygienic facilities, the majority (69 percent) of those affected considered that the arrangements were very poor, poor, or ordinary (Graph 16).

Solid Waste Management Another important aspect of the environmental impact was the change in patterns for managing trash or garbage. After the disaster, 40 percent of the households experienced changes in how their refuse was handled (Table 13).

A comparison with the situation before the earthquake shows that afterwards there was an increase in households using more appropriate methods to dispose of solid waste.62 At the same time, there was also a slight rise in the use of inappropriate methods of refuse disposal: burning it increased by 2 percent, and leaving it in a pit by 0.33 percent.

GRAPH 16: PERCEPTION OF CLEANLINESS OF HYGIENE FACILITIES USED BY HOUSEHOLD MEMBERS


Good 24% Poor 24%

Not indicated 2%

Ordinary 38%

Very poor 7%Very good 5%

60 Ministry of Health. “Sismo: Sala de situación de salud al 26 de agosto de 2007.”61 PAHO estimates that rental of the portable toilets for 30 days cost US$36,000.62 “Appropriate methods” is understood here to mean leaving refuse to be collected by a truck or paying a third party to pick it up.



It is likely that the increase in appropriate refuse collection methods (4 percent) was due at least in part to the effect of the reconstruction work and technical assistance after the earthquake.63

6.2. Effects on BusinessesTo obtain reference data on the economic losses suffered by businesses after the earthquake, a series of semistructured (qualitative) interviews were held with personnel in charge of the businesses. It should be pointed out that the results reported in this section are merely indicative and are not statistically representative.

The interviewees stated that the service problems that had the greatest negative impact on their business operations64 were electric power outages (35 percent) and damage to, or problems with, water and sanitation services (25 percent) (Graph 17).

TABLE 13: REFUSE DISPOSAL METHODS USED BY HOUSEHOLDS BEFORE AND AFTER THE EARTHQUAKE

Method of refuse disposal Before earthquakeImmediately after

earthquakeChange

Appropriate methods 86% 90% 4%

Leaving it to be picked up by a refuse collection truck 84% 88% 4%

Paying to have it picked up 2% 2% 0.3%

Inappropriate methods 14% 10% -4%

Leaving it in the open air 7% 5% -2%

Leaving it in a ditch, stream, or river 2% 1% -1%

Leaving it in a pit 0% 1% 0.3%

Leaving it on a hill 4% 1% -3%

Burning it 1% 3% 2%


Impact of Water and Sanitation Services on Businesses in the Study AreaA series of interviews were conducted to assess the disaster’s impact on businesses. To analyze differences and similarities in the impact of problems with these services, interviews were conducted both with businesses that were users of the respective water and sanitation providers in the affected areas and also with those that had their own services.65

The majority of businesses in the region that had their own services were large-scale industries. Given the shortage of water resources, it is understandable that they would want to have their own independent water supply and sanitation facilities.

The following paragraphs analyze the earthquake’s impact on the businesses in the survey, with special attention to those companies that received water and sanitation services through the local providers.

63 Bearing in mind the poor management of refuse, the apparent improvement in the distribution of solid waste does not mean that the environment was not affected immediately after the earthquake. It should be remembered that the survey focused on the families’ situation as of April 15, 2010, not the arrangements they made for waste disposal during the emergency.

64 The businesses were without these services for up to two weeks.65 Interviews were conducted with a total of 44 businesses that relied on the local service providers in the respective provinces where they operated and 13 businesses that had their

own drinking water and sanitation services.


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a. Quality of Services Provided by the Local UtilitiesOpinions differed regarding the services provided by the local utilities. Some of the users stated that they had noted slight improvements since the earthquake (especially in the Ica urban area). However, other spokespersons for their businesses — for example, in the Cañete and Pisco urban areas — expressed discontent with the service they had received. The main problems included:

Intermittent operation of the service; •

Quality of the treated water in the study area; •

External negative effects experienced by businesses in •the area as a result of street closings for repairs and/or installation of infrastructure.

b. Length of Time without Service after the Earthquake and Time Required to Fully Restore Service

Businesses Affected by Water Supply Approximately 84 percent of the businesses that were users of the local utility said they had been without water service immediately after the earthquake. However, other users of

the same provider stated that they had not gone without water because they had a backup water supply on hand in case of any interruption in service. Their storage arrange-ments ran the gamut from very simple (household water drums) to very elaborate (subterranean wells or cisterns).

Unlike the businesses that received water through one of the local providers, those that had their own systems, with a few exceptions, did not lack for water service immediately after the earthquake. Generally speaking, these latter businesses did not experience significant or costly damage to their systems, mainly because of the characteristics of their arrangements: they had storage wells or subterranean reservoirs, as well as silos, storage tanks, or oxidation ponds located on their property, with ample space for them to operate and a large reserve capacity.

Length of Time without ServiceMore than half the businesses surveyed had gone without drinking water and sanitation services for up to two weeks. In fact, a small number of them said they had been without service until the time of the survey. These businesses had to rely on cisterns, store whatever water they could get, and

GRAPH 17: SERVICES THAT GENERATED THE GREATEST NEGATIVE IMPACT ON THE BUSINESSES SURVEYED

Source: Business SurveyPrepared by APOYO Consultoría

Roads Telecom-munications

Electric power Drinking waterand sanitation

Banking Governmentservices

14%

21%

35%

25%

2% 2%

0%

5%

10%

15%

20%

25%

30%

35%

40%



ration water use extremely carefully. On the other hand, none of the businesses with their own water supply went without water service for more than 15 days.

c. Costs and Debts Incurred on Account of the Earthquake

Additional Costs for Alternative ServicesLeft without their usual source of water, most of the businesses surveyed (73 percent) obtained it from water trucks or other providers (11 percent). However, quite a few of them did not procure water at all (16 percent).

Of those businesses that obtained water by some means, 61 percent said that they incurred no cost for the water they received during the emergency period because the service was provided for free by their local utility. However, those associated with the restaurant business had to incur additional costs, which ranged from S/. 5 to S/. 50 a day.

d. Impact on Total Sales of Businesses that Used Local Service ProvidersOf the businesses that were users of the local utility, 80 percent had the impression that the earthquake had only a minor effect on their sales. Less than 30 percent said that their sales declined, but of these respondents, 11 percent stated that the earthquake’s impact had been high or very high (more than a 60 percent drop in sales).

Their main losses involved infrastructure. Most of the companies interviewed said that the earthquake’s greatest impact on their business operations was damage to their assets and infrastructure.

All the businesses that had their own drinking water and sanitation systems said that the earthquake had relatively little impact on their business sales. The greatest damage was to the company’s assets, both infrastructure and loss of inventory of finished products.

Monthly Sales PerformanceAs a result of the damage caused to the water and sanitation systems and the services provided by the respective local

utilities, 40 percent of the companies that used these providers saw their sales affected for periods ranging from two weeks to two months. Of this group affected for up to two months, the businesses that experienced the longest periods were in Pisco and Chincha.

An even larger group, 52 percent of the companies, saw their sales affected for more than two months because of serious problems with pipes and the supply network. In some places — for example, Cañete — the repairs took up to nine months.

On the other hand, a group of restaurateurs in Cañete, Pisco, and Chincha reported that there had been no negative impact on their sales. On the contrary, their income increased shortly after the earthquake, mainly because of traffic from visitors who came to these places to make donations and work as volunteers to rebuild homes and help the people affected by the disaster who needed their services.

e. Preventive Culture in Businesses that Relied on the Service ProvidersAbout 61 percent of the businesses that relied on services provided by the local utilities stated that they had developed emergency plans for this type of earthquake. The plans called for such measures as evacuation route signage, civil defense courses and seminars, and training for personnel responsible for participating in brigades in times of emergency. However, few of these companies furnished details on which emergency measures were implemented in their installations.

Even so, the spokespersons for the businesses in this sample declared that the safest response in the event of a natural disaster such as an earthquake was to run to open areas away from buildings — in other words, to follow the instinct for survival. Since a sizable percentage of them do not have contingency plans or evacuation route signage, and since in many cases the buildings they operate in are in precarious condition, they do not stop to consider the impact of losses on future business performance.

This culture explains why 70 percent of the businesses in the survey did not have insurance against natural disasters. In some cases, they did even not have insurance against accidents


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or any other type of hazard related to their activities. In answer to the question Why don’t you have this kind of insurance? one of the common responses was Because the risk premium makes it too expensive.

Unlike the businesses that relied on the service providers, those that had their own water supply and sanitation services had disaster insurance before the 2007 earthquake — probably because they are larger companies. The insurance settlements they received for damage to their infrastructure were invested in rebuilding and improving it.

f. Impact on Business Investment PlansBefore the earthquake, at least 60 percent of the businesses in this sample had investment plans. In other words, they planned to expand their infrastructure, move to larger or more adequate quarters, update their merchandise, or even enter into distribution contracts that would be generally favorable for their business.

As a result of the earthquake, about 55 percent of the companies that had investment plans of this kind were forced to abandon or delay their projects. They were either in debt or had to draw down on their capital to cover arrangements related to their infrastructure (including repairs to drinking water and sanitation instal-lations), replace merchandise, or pay emergency overtime to their personnel.

In 43 percent of the cases these investment plans were suspended, and some of them are still on hold, mainly because of lack of liquidity. However, thanks to a gradual recovery in the flow of sales, some of the companies said that they intended to revive the plans they had shelved in 2010. Others, however, still had debts that prevented them from doing so, or else they did not

yet know when their businesses were going to improve (Graph 18).

6.3 Macroeconomic EffectsThis section looks at the earthquake’s effects in terms of macroeconomic variables for the Ica region in the drinking water and sanitation sector. The following variables are analyzed: (i) gross domestic product (GDP), (ii) effects on the trade balance, (iii) public finance, (iv) prices and inflation, and (v) possible effects on employment.

6.3.1. Effects on the GDP of the Drinking Water and Sanitation Sector This sector’s GDP for the department of Ica is the sum of the value added generated by all the drinking water and sanitation service providers in the region. One way to approximate a calculation of the earthquake’s impact on GDP in this case would be to quantify the value added that the drinking water and sanitation providers failed to generate on account of the earthquake.

Until now43%

Over 36529%

Under 90 7%

Between 90 and 3657%

Not indicated14%

GRAPH 18: BUSINESSES THAT RELIED ON SERVICE PROVIDERS: FOR HOW MANY DAYS DID YOU SUSPEND OR DELAY YOUR INVESTMENT PLANS BECAUSE OF THE EARTHQUAKE?




The first step, prior to arriving at the estimate, was to approximate a calculation of the GDP for drinking water and sanitation for the region in question. For this purpose, information was taken from the 2008 National Economic Census conducted by INEI.66 This source shows the census value added67 for the drinking water supply and sanitation sector (0.4 percent) and the electric power sector (4.5 percent) disaggregated for 2007. Based on the production structure for 2007 indicated by the Economic Census, if the drinking water and sanitation sector and the electric power sector are considered together, it can be seen that the first sector accounts for 21 percent of the value added by both of them. Based on this approximation, it is estimated that the drinking water and sanitation sector GDP for Ica for 2001–2008 averaged 0.38 percent of total GDP for the department. This percentage makes it possible to approximate the region’s sector GDP (value added) for the two years after 2007.

The estimated GDP for drinking water and sanitation for the department of Ica in 2001–2009 is shown in Graph 19.

Since information is available on actual gross income (sales) and intermediate consumption (cost of sales and sales expense) for the three service providers in the Ica area of influence, and since estimates are also available for the same indicators under a counterfactual scenario (in which there had not been an earthquake), it is possible to estimate the value added that the three utilities failed to generate in 2007 and 2008.68

Thus, it is estimated that the decline in GDP for the drinking water and sanitation sector in the Ica region for 2007 and 2008 would be approximately US$170,000 each year. This represents 1.8 percent of the estimated GDP for this sector and this department in 2007 and 1.3 percent in 2008 (Graph 20).

6.3.2. Effects on the Trade Balance The study’s analysis led to the conclusion that earthquake-related effects on the trade balance for the drinking water and sanitation sector were nil or very limited, since neither imports nor exports were affected.

Exports of drinking water by any of the service providers in question would be nil, since they do not engage in this activity. Therefore, this heading would not have affected the trade balance. As far as imports are concerned, operations managers interviewed in each of the utilities stated that the construction materials purchased, especially the pipes

GRAPH 19: ESTIMATED GDP FOR DRINKING WATER AND SANITATION: ICA (MILLIONS OF CURRENT US DOLLARS)


2005 2006 2007 2008 20090

2

4

6

8

10

12

14

16

66 The National Economic Census is the most complete information source on the country’s economic structure at any given time. Among its advantages, it is structured to allow for the preparation of national accounts.

67 The census value added includes the value added from the following: drinking water catchment, treatment, and supply; sanitary waste collection, treatment, and elimination; collection of materials; urban cleanup; and other waste management services.

68 No estimates for 2009 were considered because, starting in October 2008, some of the providers changed their collection policies and increased their sales. The resulting effect would distort estimates of the impact.


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for the drinking water and sanitation networks — which represented 93 percent of total expenditure on materials — were made in Peru.69

6.3.3. Effects on Public FinancePublic finance was impacted in three different ways, namely, from: (i) a decline in taxes collected by the central Government because of reduced production by the service providers; (ii) lower income earned by the service providers; and (iii) increased public expenditure on investment to reconstruct works and repair damage.

The estimated effect on tax revenue collected by the central Government took into account the variation in moneys received from the general sales tax (IGV), due to changes in the providers’ sales and investments in the sector, and the variation in income tax. In total, an additional

69 The section on the prices of construction materials offers a more detailed analysis of the national manufacturers.70 Because of the earthquake, improvements introduced in the management systems resulted in increased income for the service providers. Therefore, contrary to expectation,

there was an increase in taxes collected compared with the “no earthquake” scenario.

GRAPH 20: ESTIMATED GDP FOR DRINKING WATER AND SANITATION: ACTUAL AND COUNTERFACTUAL SCENARIOS (MILLIONS OF CURRENT US DOLLARS)

Source: SEMAPACH, EMAPICA, EMAPISCO, INEI, and 2008 Economic Census

2007 2008

Counterfactual scenario (without earthquake) Actual scenario (with earthquake)

9.4

12.7 12.5

9.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


S/. 7,034,000 was collected for the period 2007–2009 — in other words, the amount was additional relative to a scenario in which no earthquake had occurred.70 This increase in revenue collected from the general sales tax was related to the repair and rebuilding of infrastructure. However, revenue from income tax was nil, since all the service providers in the study experienced loss of profits.

With regard to the service providers’ income, a comparison with the “no earthquake” scenario has shown that there was a clear drop in income for 2007 and 2008. However, this situation turned around in 2009 thanks to improvements introduced in the management of their businesses and also to investments they made. Thus, the cumulative net effect for 2007–2009 was positive: the providers made S/. 298,000 more in operating income than they would have made in the counterfactual scenario — i.e., if there had not been an earthquake.


Public expenditure on reconstructing the works and repairing the damage came to S/. 61,100,000. This amount includes only the investments made by FORSUR and contributions by the Ministry of Housing, Construction, and Sanitation.

The three effects on public finance mentioned above have been summarized in Table 14.71 Although when taken together the first two effects were positive, in the end they were offset by the large amounts that had to be spent on rehabilitating the drinking water and sanitation service. Thus, in the end there was a net negative effect of approximately –S/. 54 million. This figure is equivalent to 26 percent of all tax revenue collected by SUNAT in the Ica region for 2007 — i.e., the combined total from the general sales tax, income tax, and the selective excise tax.

6.3.4. Effects on Prices and InflationThe effects generated by the earthquake could have had an influence on the price of: (a) water, and (b) the construction materials needed by the sector to repair the damaged infrastructure.

a. Variation in the Price of WaterIt would appear that the August 15 earthquake was not the cause of variations in the price schedule in the case of the service providers studied. Although it is true that water tariffs were raised in September 2007 and three times again in 2008, these increases, keyed to variations in the wholesale price index (WPI), were consistent with general standards for the sector that apply to most of these service providers throughout the country.72

TABLE 14: EFFECT ON PUBLIC FINANCE: 2007–2009 (THOUSANDS OF PERUVIAN SOLES)*

Public income / expenditure S/. (thousands)

a. Taxes collected by variation in the production of goods and services 7,034

Variation in general sales tax collected on sales by service providers 34

Variation in general sales tax collected on investments by the sector 7,000

Variation in income tax collected 0

b. Variation in income of the service providers 298

2007 -1,051

2008 -420

2009 1,769

c. Investment expenditure on reconstructing the works and repairing damage -61,100

Net effect (a + b - c) 53,768

Prepared by APOYO ConsultoríaSources: FORSUR, SUNASS


71 See Annex 5 for further details.72 According to Article 57 of the Reglamento General de Regulación Tarifaria [General Rules on the Regulation of Tariffs], providers with an approved tariff schedule and formula for

calculating it may readjust their rates for inflation whenever the WPI shows a cumulative variation of 3 percent or greater.


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b. Effects on the Price of Construction Materials As might be expected, the demand for construction materials for the drinking water and sanitation sector, as well as other sectors, increased as a result of the earthquake. It is also possible that the excess demand could have generated a rise in the prices of construction materials in general.

According to INEI, the price of polyvinyl chloride (PVC) pipe for the drinking water and sanitation network increased one year after the earthquake. Between August and October 2008 the price of these pipes showed an accumulated increase of 16 percent. However, starting in November 2008 it started to fall back again, and by February 2009 it was down to what it had been before. The variations could be explained in large part by the expenditure on construction materials starting in 2008 (Graph 21).

It should be pointed out that, in order to be contracted for this construction work, bidders had to go through a thorough selection process and an exhaustive review of technical records and approvals. These processes tend to

be drawn out. Thus, for example, execution of most of the works in Pisco began six months after the disaster, in January 2008,73 and in Ica, starting in August 2008.74 It is likely that these large expenditures were the reason for the belated bump in the price of PVC pipe.

In addition, in calculating the estimate, consideration was given to whether the purchase of materials for reconstructing the water and sanitation systems represented a sufficiently large percentage of national production capacity (sales of the main providers) to influence the variation in prices.

In line with the ECLAC methodology (1991),75 the expenditure on construction materials was derived by subtracting the cost of the direct sales tax from the total amount spent on these works (direct effects) and then applying the total cost structure to the component. According to the interviews, 100 percent of the materials were purchased from national sources; in other words, nothing was imported (Table 15).

73 Execution of this work, which began in January 2008, cost a total of S/. 18 million (FORSUR/Pisco Office).74 The cost of this project, started in August 2008, came to S/. 7.6 million (FORSUR/Ica Office).75 The source for calculating the cost structure per component (labor, supplies, and earnings) was: United Nations Economic Commission for Latin America and the Caribbean,

Planning and Operations Division. Manual for Estimating the Socio-Economic Effects of Natural Disasters. Santiago: ECLAC, 1991, pp. 126–128.

GRAPH 21: PRICE INDEX FOR PVC PIPE (BASE 1994 = 1000)

Source: INEIPrepared by APOYO Consultoría

PVC pipe for the drinking water and sanitation network

PVC pipe in general

0

100

200

300

400

500

600

Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct

2006 2007 2008 2009



Expenditure on construction materials was close to S/. 39 million. Of this amount, more than 90 percent went to replace water pipes (for drinking water supply lines and the distribution network) and pipes for the sanitation network. This expenditure would represent 9 percent of all sales by national producers of these supplies in 2007.76 This is not a small proportion, and it reinforces the thought that the increased expenses generated by the earthquake might well have contributed to the increase in prices for construction materials in general.

6.3.5. EmploymentThis impact refers to both the direct loss of jobs and any adverse effect on the population’s income, not only due to a decline in the number of hours worked but also to lower pay.

Variations in Employment PatternsIt was found that 18 percent of the persons interviewed in the study area had changed their main employment activity as a result of the earthquake. This impact was greatest for women: 21 percent of them were obliged to change their principal activity, compared with 14 percent of the men (Graph 22).

A variation was observed in the type of activities engaged in by the population in the area. After the earthquake there was a 6 percentage-point increase in the proportion of persons

devoted to domestic tasks, coupled with a 4 percentage-point drop in the population working in the tertiary (service) sector. The other sectors, however, did not show significant variations (Graph 23).

It should be pointed out that the shift in the main activity pattern appears to have been permanent for those who made a change. Only one in three persons returned to the activity they had engaged in before the earthquake. The main reason for the change in activity was the need to devote more time and attention to the family. Other reasons included the need to care for the injured and the time required for this purpose.

Impact on IncomeIn addition to affecting the types of activity performed in the area, the earthquake had a significant impact on the population’s income. Of those interviewed, 46 percent77 stated that their income had declined, while 49 percent said it had not changed and only 5 percent said it had increased. According to the responses provided by the interviewees, their income was affected for an average of about two months (Graph 24).

Based on the information provided in the survey, an attempt was made to quantify the earthquake’s impact on the income of the heads of household. Given the variability

TABLE 15: COST STRUCTURE OF THE DRINKING WATER AND SANITATION SYSTEM, BY COMPONENT

Structure Wells Pipes Storage tanks Other structures

Labor 30% 20% 30% 25%

National supplies 35% 30% 50% 40%

Imported supplies 15% 30% 0% 15%

Other expenses and earnings 20% 20% 20% 20%

Total 100% 100% 100% 100%

Source: CEPAL, 1991

76 Aggregate annual sales for 2007 came to S/. 392 million.77 This calculation includes both those who changed their employment activity and those who continued to carry out the same activity as before the earthquake. It does not include

students or housewives; these two groups together represented 37 percent of the sample.


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GRAPH 22: PERCENTAGE OF PERSONS WHO CHANGED THEIR MAIN EMPLOYMENT ACTIVITY1


1/ Survey was administered to person who provided the most economic support to the household and/or the one who handled household expenses (housewife)

Yes18%

No82%

Did not change main activity Changed main activity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

21%

79%

14%

86%

Male Female

% of total population % of population by gender

GRAPH 23: EMPLOYMENT ACTIVITY BEFORE AND AFTER THE EARTHQUAKE


1. Service activities, including tourism, industry, and transportation

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Did not present relevant variations (more than 2%)

Before the earthquake

After the earthquake

House

wife

Terti

ary se

ctor

*

Agricut

ure

/ Fish

ing

Mining

/ Con

stru

ctio

n

Health

/ Edu

catio

n

Stude

nt

Other

/ Not

indi

cate

d

32%

38%

+6%

-4%

24%

27%25%

20%

8% 9%

4% 4% 4%2% 2% 2%



of the data, two scenarios were considered: (i) 30 percent of their monthly income was affected (scenario 1), and (ii) 10 percent of their monthly income was affected (scenario 2). These percentages were applied to both the group whose income declined (46 percent) and those who saw an increase (5 percent). In both cases, the affected period was taken to be two months. The monthly wage was assumed to be S/. 788.78


GRAPH 24: ESTIMATED IMPACT OF THE EARTHQUAKE ON INCOME OF HEADS OF HOUSEHOLD IN THE STUDY AREA

Urban households

186,171

-S/. 36 million

Scenario 1: Impact 30%

-S/. 12 million

Scenario 2: Impact 10%

Increased in 9,309 households

Held steady in 91,224 households

Fell in 85,639 households

-S/. 40million

-S/. 14million

S/. 4million

S/. 2million

Income of head of household ...

46%

49%

5%

According to calculations shown in Graph 24, the earthquake had a negative impact on household income. According to scenario 1, it is estimated that the heads of household in the area studied failed to receive a total of S/. 36 million. In scenario 2, their income was reduced by S/. 12 million. These figures represent 1.5 percent and 0.5 percent, respectively, of total annual income for all the households residing in the urban area in the department of Ica.

78 Source: ENAHO 2007.


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Overall, the earthquake caused damage to the drinking 1. water and sanitation systems in the urban areas of Cañete, Chincha, Pisco, and Ica amounting to S/. 84 million.79 This money could have been used to install at least 8,183 drinking water and 7,925 wastewater connections that would benefit 160,888 inhabitants.

Of this total, the damages or direct effects — i.e., those 2. related to the recovery and to returning the drinking water and sanitation systems to pre-disaster status — came to S/. 77.3 million. This amount corresponds to 6.5 times the budget spent for drinking water and sanitation in 2007 by the provincial municipalities in the study area.

The results show that if the service providers had 3. performed ongoing maintenance of the drinking water and sanitation systems, the estimated value of the damage would have been 5.9 times less; in other words, approximately S/. 64.2 million would have been saved. Moreover, if the infrastructure for these services had been built with pipes made of ductile material, if the quality of the soil had been evaluated before they were installed, and if the wells and tunnels had been regularly maintained, etc., a total of S/. 74.4 million would have been saved in lower fiscal costs for repairing the drinking water and sanitation systems of service providers in the Sur Chico.

In addition, the indirect effects came to S/. 6.5 million. 4. This amount is equal to 29 percent of the service providers’ total sales for 2007. However, the result may

VII. Conclusions

have been underestimated because of policy changes introduced by EMAPISCO and SEMAPACH80 to increase operating revenue following the earthquake.

In terms of the macroeconomic effects, pursuant to 5. the methodology, the impact of the earthquake was calculated in relation to the following variables: (i) GDP for drinking water and sanitation in Ica; (ii) public finance; (iii) water tariffs and inflation; and (iv) possible effects on employment.

In the Ica region, the decrease in GDP attributable •to the earthquake in 2007 and 20008 for the area of drinking water and sanitation services was approximately S/. 506,000 for each year. This amount represents an estimated 1.8 percent and 1.3 percent of the GDP for Ica in 2007 and 2008, respectively.

The impact on public finance was negative, calculated •in terms of three indicators: (i) variation in tax revenue collected by the central Government due to variation in production of goods and services; (ii) variation in the sales income of the service providers; and (iii) higher costs of investment to reconstruct works and repair damage. The first two indicators were positive. However, they were offset by the amount invested to rehabilitate the drinking water and sanitation service. Thus, there was a net negative effect of approximately S/. 54 million. This amount is equivalent to 26 percent of total revenue collected in Ica by the Peruvian Tax Administration (SUNAT) in 2007 from the general sales tax, income tax, and the selective excise tax.

79 Figure derived by adding both the direct and indirect effects.80 In this case, unlike the other providers, the results were so distorted that it was decided not to consider any calculation after November 2008. Unfortunately, this situation resulted

in a loss of information on more than one year of indirect effects.

Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Conclusions


Water tariffs went up, but the increases were the •result of adjustments in the wholesale price index (WPI) and not an effect of the earthquake.

As far as employment was concerned, 18 percent of •heads of household changed their principal activity: the shift was mainly towards homemaking activities. In addition, it is estimated that lost earnings of the heads of household in the region ranged between S/. 12 million and S/. 36 million (0.2 percent of the GDP for Ica in 2007).

The effect of the earthquake on the well-being of 6. households was analyzed from the period immediately after the earthquake until the beginning of the study. Through a survey that collected quantitative data from a representative sample of households in the area of influence, the following four aspects were evaluated: (1) water and sanitation service at home; (2) health; (3) gender; and (4) the environment.

In 81 percent of households, water service was interrupted 7. or otherwise affected for an average of 16 days. As a result, water trucks were their main alternative source of supply (69 percent), which entailed a weekly cost of S/. 15 for each household that had to use this alternative source. This amount represented 4 percent of weekly income for an average household in the department of Ica. In total, this expense corresponded to S/. 382,000 for the study area.

Because of the earthquake, 14.3 percent of household 8. members fell sick for reasons attributable to the disaster, and theses were mainly related to the accumulation of waste (28 percent). Children and mothers were the most vulnerable. Spending on health in these households averaged between S/.50 and S/.60 a week. Depending on the duration of the prevalence of diseases, the amount spent in the study area ranged between S/. 17.1 million and S/.20.5 million.

The earthquake had a different effect on men and 9. women, with a more negative impact on the latter. This was because of the amount of time that women had to

devote to domestic tasks81 and also because they had to give up paid work in order to perform these chores. The main earthquake-related domestic functions were looking after sick family members and fetching water. For example, in 36 percent of the households, it was the mothers who were responsible for collecting water, and at least half of them devoted between one and three hours a day to this activity. In general, the increase in domestic work was approximately five hours a day for 30 days. This type of work was valued at S/.22.4 million for the area studied. In addition, in 16 percent of households, women had to quit their regular jobs to perform this type of work, for total losses of S/.16 million.

Regarding the effect on the environment, 10 percent of 10. the people were forced to relieve themselves outdoors instead of in appropriate places (hygienic amenities). In terms of solid waste management, it was found that 40 percent of households had to make changes in their refuse disposal arrangements. However, use of appropriate methods82 of refuse disposal increased by 4 percent because of post-earthquake reconstruction work and technical assistance.

The business strategies used by the service providers 11. to offset the impact of the earthquake on their revenue were effective. In some cases, sales volume actually increased. The improvement was due to the companies’ efforts to generate income not previously earned, using the following mechanisms: detection of clandestine connections; a recount of users; upgrades to damaged infrastructure; adoption of an aggressive policy regarding delinquent accounts and collections; and installation of micrometers. In several instances, revenue was recovered quite rapidly and reached pre-disaster levels.

With regard to sanitation infrastructure and operating 12. indicators from the service providers themselves, the systematization of information for better disaster risk management still seems rudimentary and disorganized. These shortcomings made the present analysis more

81 As pointed out in the study, this term refers to unremunerated activities and those related to home-making.82 As indicated earlier, appropriate methods were considered to be leaving trash out for a collection truck or paying to have it picked up.


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difficult. For example, much of the service providers’ data are not in digital format and are kept in places where they could be damaged or lost. This was the case with EMAPISCO: data prior to 2001 were lost precisely because of the earthquake and the collapse of its offices.

Based on the study’s findings, it can be said that disaster 13. risk management is not commonly practiced by the sector’s service providers. Prior to the earthquake, no use was being made of information about natural hazards, soil quality, or the vulnerability of the drinking water and sanitation systems so that measures could be proposed to reduce the exposure of their components. The service providers are not aware of their risks and therefore do not undertake or plan for actions to reduce or mitigate them. They do not have, or have not used, emergency plans, and they did not have the capacity to respond at the time the earthquake.


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Annex 1: Methodology for Conducting the Second Scenario Valuation

Below is a detailed presentation of the steps to be applied in the valuation.

Conduct an inventory of the pipes and other components i. corresponding to each system, including all subsystems.

Identify the sectors supplied by each subsystem. This ii. step should be done with the help of a plan of the water system provided by the utility.

Determine the parameters of the earthquake that iii. occurred on August 15, 2007, which will be different for each locality analyzed. The parameters to be considered are based on the data recorded for the locality to be evaluated and should include the following:

Maximum intensity of the earthquake on the Richter a. scale and its equivalent on the Modified Mercalli Intensity Scale for each locality;

Peak ground acceleration in cm/segb. 2;

Peak ground velocity in cm/s;c.

Permanent ground deformation in cm or inches.d.

Obtain the seismic microzoning study for the locality to iv. evaluate he following:

Zones where liquefaction has occurred;a.

Zones with soil that is b. aggressive toward pipe materials;

Areas with ground faults present.c.

To determine the damage rate, consider two types v. of components of the drinking water and sanitation systems: (a) pipes in the networks, and (b) other

VIII. Annexes

components (e.g., water treatment plants, storage tanks, pumping stations, etc.).

In the case of pipes, organize the information required vi. for projecting the number of cracks or breaks according to the following criteria:

Ground liquefaction and ground deformation: a. indicate on the water system plan those areas where there is a probability of soil liquefaction and also the values for ground deformation;

Earthquake intensity: indicate on the water system b. plan whether there are different intensity values for the earthquake and other parameters in the locality to be evaluated.

Use the vii. HAZUS-MH-MR4 Technical Manual (Chapter 8) to determine the number of repairs for leaks or breaks in the water system pipes. For each section of the water subsystem, make note of the number of repairs from the existing inventory by type of pipe (criterion 1). The types of pipes, by material used (criterion 2), are listed in Table 1.

To determine the number of repairs for damage to the viii. pipes, the following two situations are considered:

Using peak ground velocity (PGV)a. With the PGV value, the following O’Rourke expression is used:

Repair rate(repairs / km)

= 0.0001 x (PGV) 2.25 with PGV in cm/s

It should be noted that the value calculated in the expression above is valid both for fragile pipes and for those made of concrete, asbestos cement, and cast iron. When pipes

Economic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector | Annexes


83 A length of 6 meters was adopted for purposes of the study.

made of ductile materials are used (for example, plastic, polyethylene, or ductile iron), the value obtained in the expression is multiplied by 0.3.

The estimated number of repairs is then broken down into 80 percent leaks and 20 percent breaks.

Using permanent ground deformation (PGD) b. and probability of liquefaction for the area under consideration

When the zone for which the repair rate has been calculated poses the probability of shaky ground and permanent ground deformation (PGD), the repair rate should be calculated using the Honneger and Eguchi expression (Chapter 8 of the Manual).

TABLE 1: TYPES OF PIPE, BY MATERIAL OF MANUFACTURE

I. WATER SYSTEM PIPES

Nº Pipe material Type of pipe

1 Cast iron Fragile

2 Asbestos cement Fragile

3 Reinforced concrete Fragile

4 Steel concrete cylinder Ductile

5 Plastic — PVC Ductile

6 High-density polyethylene (HDPE) Ductile

7 Ductile iron Ductile

8 Steel Ductile

II. SEWER SYSTEM PIPES

Nº Pipe material Type of pipe

1 Simple concrete Fragile

2 Reinforced concrete Fragile

3 Plastic — PVC Ductile

4Medium-density polyethylene (MDPE)

Ductile


Repair rate(repairs / km)

= [probability of liquefaction (%/100)]x (PGV) 0.56 with PGV in inches

The value calculated in the expression above is valid for fragile pipes. In the case of ductile pipes, the expression should be multiplied by 0.3. The estimated number of repairs is then broken down into 80 percent leaks and 20 percent breaks.

The expected number of repairs to pipes is obtained by ix. multiplying the repair rate (repairs/km) by the length of pipe in the distribution network, taking into account the diameter and material in question.83

When only the PGV value is considered, the number a. of repairs will be defined according to the following formula while still taking into account the rate found using the O’Rourke expression.

Number of repairs = O’Rourke repair rate (repairs / km) x length of pipe (by diameter and material)

in the distribution network

The number of leaks and breaks in the network is determined on the basis of the following equivalences:

Number of leaks in the network = 0.80 x number of repairsNumber of breaks in the network = 0.20 x number of repairs

When the PGD value is considered, the procedure b. is similar, although the percentage of repairs should be changed.

Number of repairs = Honneger & Eguchi repair rate (repairs / km) x length of pipe (by diameter and material)

in the distribution network

Number of leaks in the network = 0.20 x number of repairsNumber of breaks in the network = 0.80 x number of repairs

When both estimates are used (viii [a] and [b] above), x. the average figure for repair of leaks or breaks is calculated as follows:


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84 The values indicated in Table 2 are defaults. The field evaluator may assign other values within the established range.

Average breakage rate (repairs / km) = [(number of breaks based on PGV) + (number of breaks based on PGD) /

total length of the distribution network]

Average leakage rate (repairs / km) = [(number of leaks based on PGV) + (number of leaks based on PGD) /

total length of the distribution network]

Finally, to determine the cost of repairs, the percentage xi. of damage suffered by the component is multiplied by the unit cost of the material. This percentage is assigned according to the judgment of the evaluator84 based on a field interview with the utility’s personnel. The costs should include the materials and labor necessary to return the system to its pre-earthquake operational

level. The unit costs were calculated from the figures on file that were used in drafting the emergency project proposals. In the case of projects that did not have this information, the SUNASS reference price for typical projects was used.

For the other components of the drinking water and xii. sanitation systems, the percentages given in Table 15–25, Chapter 15, of the HAZUS Manual were used to determine the best rate for the estimated damage. Then the damage rate assigned by the evaluator was multiplied by the unit cost of the component, and the result was the cost of the damage caused by the earthquake.

TABLE 2: DAMAGE RATE FOR THE DRINKING WATER SYSTEM

Component State of damageBest estimate

of damage rateRange of damage rate

PipesLeak 0.10 0.05 to 0.20

Break 0.75 0.5 to 1.00

Water treatment plant

Light 0.08 0.01 to 0.15

Moderate 0.4 0.15 to 0.4

Significant 0.77 0.4 to 0.8

Heavy/Total 1 0.8 to 1.0

Storage tanks

Light 0.2 0.01 to 0.15




Wells and pumping stations

Light 0.05 0.01 to 0.15







TABLE 1: STRUCTURES: WASTEWATER PUMPING STATIONS

No. Name of site Description of damage Restoration timeDegree of damage

Damage rate

1Leticia Pumping Station

There was a power outage for 5 days. Failures in the hydraulic equipment (check valves) left the station inoperative for 15 days. There were also failures in the enclosure surrounding the station (30 linear meters) and its exterior paving. The instrument panels in the instrument room came off because they were not properly braced.

15 days to bring the station back on line

Moderate 0.15

2Miguel Grau Pumping Station

Because of flooding produced by the surge from the ocean, the station had to be cleaned before being placed back in service. The power outage lasted about three to five days.


Light 0.05

3San Martín Pumping Station

Because of flooding produced by the surge from the ocean, the station had to be cleaned before being placed back in service. The power outage lasted about three to five days.


Light 0.05

4San Andrés Pumping Station

Flooding from the ocean did not affect the chamber because of its location. There was a power outage for three to five days. The emergency equipment did not operate. The instrument panels in the instrument room came off because they were not properly braced.

3 to 5 days to bring the station back on line

Light 0.05

5San Martín de Porres Pumping Station

There was a power outage for three to five days. There was no emergency equipment. The equipment did not suffer any damage.

3 to 5 days to bring the station back on line

Light 0.01

Annex 2: Damage Rate for Drinking Water and Sanitation System Components Other Than Pipes

TABLE 2: STRUCTURES: WASTEWATER TREATMENT PLANTS


Damage rate

1Boca del Río Wastewater Pumping Station

The plant was affected by the power outage plus failure of the emergency power system. The earthquake and subsequent ground deformation caused a fissure to develop on one slope of backup pond #1, but this did not affect the treatment plant’s operations.

Restoring electric power took 3 to 5 days

Light 0.05

2Túpac Amaru Water Treatment Plant

There was no damage from the earthquake, but the plant needs regular maintenance to guarantee efficient treatment.

It remained operational

None 0.0


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TABLE 5: DISINFECTION SYSTEM

No. Name of site Description of damage Restoration timeType of damage

Damage rate

1

Túpac Amaru pumping cistern and water treatment plant

Damage to the pumping station affected the exterior (pavement) and the machine room, chlorination room, and operator’s area. The damage consisted mainly of cracks in the walls and breaks in the pavement due to ground deformation. Electric power was restored three days after the earthquake.

At least 90 days would be needed to fully restore the structure

Moderate 0.25


TABLE 4: STRUCTURES: WATER PUMPING STATION


Damage rate

1

Túpac Amaru pumping cistern and water treatment plant

Damage to the pumping station affected the exterior (pavement) and the machine room, chlorination room, and operator’s area. The damage consisted mainly of cracks in the walls and breaks in the pavement due to ground deformation. Electric power was restored three days after the earthquake.

At least 90 days would be needed to fully restore the structure

Moderate 0.25

TABLE 3: STRUCTURES: WATER TOWER RESERVOIRS


Damage rate

1 Storage tank 1The water tower suffered structural failures from the earthquake and was no longer operational.

At least 90 days would be needed to reinstate it

Total 1.00

2 Storage tank 2There were no failures in the structure or hydraulic installations.


None 0.00

3 Storage tank 3There were no failures in the structure or hydraulic installations.


None 0.00



Annex 3: Estimating the Direct Effects by Type of Valuation

If the four service providers had taken preventive measures (use of earthquake-resistant material and maintenance), a total of S/. 74.4 million would have been saved.


Cost that would have been incurred with ...

Savings:S/. 64.28 million

Total savings:S/. 74.4 million

Savings:S/. 10.2 million

City Damage

Pisco 36.5

Chincha 17.7

Ica 18.4

Cañete 4.8

Total 77.34

City Damage

Pisco 3.6

Chincha 1.9

Ica 6.9

Cañete 0.7

Total 13.06

5.9 times less than the cost of the emergency projects


8,183 drinking water and 7,925 sewer connections, benefiting 160,888 inhabitants

1. Baseline scenario:Cost incurred by emergency projects

2. Scenario 1:Infrastructure properly maintained

GRAPH 1: HOW MUCH COULD HAVE BEEN SAVED IF THE SERVICE PROVIDERS HAD IMPLEMENTED RISK MANAGEMENT? (MILLIONS OF PERUVIAN SOLES)

City Damage

Pisco 1.3

Chincha 0.5

Ica 0.8

Cañete 0.3

Total 2.86


3. Scenario 2:Infrastructure made with earthquake-resistant materials and properly maintained


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Annex 4: Analysis of EMAPISCO Main Accounts (2001–2009)

To understand how the earthquake of August 15, 2007, affected EMAPISCO, the service provider for the city of Pisco, the company’s accounting records from January 2001 through November 2009 were obtained and analyzed.

a) Income from SalesIncome from sales by EMAPISCO S.A. is derived from three main sources: water tariffs, connections, and income from collateral services. As might be expected, billing for the sale of water is the main source of income (90 percent of sales for the period 2005–2009).

After the effects of inflation on sales and the shock of the earthquake were isolated, it could be seen that total sales adjusted for inflation have been relatively flat with little growth. After the disaster, sales in the month of October were almost 95 percent lower than for the same month

GRAPH 1: ACTUAL AND ESTIMATED SALES ADJUSTED FOR INFLATION: 2005–2009 (THOUSANDS OF PERUVIAN SOLES AS OF JANUARY 2005)*

Source: EMAPISCO financial accountsPrepared by APOYO Consultoría

0

50

100

150

200

250

300

350

Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct

2005 2006 2007 2008 2009

Actual Estimated


in 2006 (Graph 1). This decline reflected the provider’s decision not to send out bills for purely humanitarian reasons. The figures began to recover in November and December, when the provider billed 50 percent of its usual total, and by January 2008 the levels were back to what was considered normal. After the short-term effects of the earthquake, the record shows that sales soon exceeded historic highs of S/. 250,000. This rise was due in part to the introduction of changes that affected collection: detection of clandestine connections, a recount of the user population, and improvement of the damaged infrastructure.

A simulation assuming that there had been no earthquake shows that the drop in the third quarter of 2007 is recovered. Moreover, actual sales income after the disaster averaged better than expected. This improvement occurred because the period benefited from additional effects on sales as a result of increased income thanks to initiatives to detect clandestine connections and the recount of users. Most of these changes were introduced shortly after the earthquake.



GRAPH 2: VOLUME OF WATER PRODUCED, BILLED, AND NOT BILLED (MILLIONS OF CUBIC METERS)


To better understand sales performance before and after the earthquake, the main components and the related indicators were analyzed — in other words, the volume produced and billed, the average price, accounts in arrears, etc.

Volume Produced and BilledAt the end of 2007, the percentage of unbilled water had increased to 90 percent as a consequence of the company’s decision not to send out bills (or only bill 50 percent). Thereafter, the ratio remained stable at levels lower than the last quarter of 2007 but slightly higher than the seven quarters prior to the disaster. This situation was the result of an increase in the volume produced, since billing remained at levels very similar to what it had been before the earthquake. It may therefore be concluded that system inefficiency increased, most likely because of the broken pipes and connections that were out of order. Thus, a larger quantity of water had to be produced for the same level of billing.

Produced Billed Water not billed (%) Q: Quarter

1Q 2Q 3Q 4Q 1Q 4Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

2005 2006 2007 2008

0

1

2

3

0.4

0.6

0.8

1.0

%Millions of m3

Average Price It can be concluded that the earthquake did not contribute to any change in the average water tariff, since the price levels remained the same as before the disaster. The average price for a cubic meter of water at the beginning of 2008 remained at levels similar to those in 2006.

Delinquent Accounts and LiquidityLiquidity tends to be a delicate subject for service providers in the drinking water and sanitation sector because of the short length of their cash cycle. Faced with this limitation, the company needs to have sufficient liquidity to take care of its obligations.

The current liquidity index has been highly volatile, although current assets have usually been sufficient to offset short-term liabilities. This ratio increased after the earthquake when cash assets rose by more than ten percentage points because of an accumulation of bank


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GRAPH 3: AVERAGE PRICE OF WATER (PERUVIAN SOLES PER CUBIC METER)


Volume (millions/m3) Amount (millions of S/.) Price

1Q

0.0

0.4

0.8

1.2

2Q 3Q 4Q 1Q 4Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

0.4

0.6

0.8

1.0

1.2

1.4

Q: Quarter

2005 2006 2007 2008

Millions of cubic meters Soles per m3


GRAPH 4: CURRENT LIQUIDITY INDEX1,2


2002 2003 2006 2007 20082005

3.72

0.55

4.83

7.62

1.77

17.79

0

3

6

9

12

15

18

1/ No information available for 2004, hence the gap above between 2003 and 2005.2/The current liquidity index is the percentage that measures the company’s capacity to meet its short-term debts. Liquidity index = Current assets/Current liabilities.


GRAPH 5: COMMERCIAL ACCOUNTS PAYABLE


2004 2005 2006 2007 2008

Allowance for uncollectibles Accounts payable

70% 64% 67%56%

64%

30%36% 33%

44%36%


account funds subject to a restriction on transfers related to the reconstruction of Pisco.

The results from analyzing the current liquidity index may have been distorted by the presence of funds that did not correspond to the company’s regular activities — for example, the fund subject to the restriction in 2007. In light of this concern, the commercial accounts payable directly related to the company’s operations were reviewed. This account is composed of net commercial accounts payable plus an allowance for doubtful collectibility. It can be seen that the allowance for uncollectible accounts as a proportion of commercial accounts payable remained above 50 percent throughout the series, which means that, over the years, the company has been accumulating debt that it does not believe it will be able to collect.

This finding could help to explain the problems the company has been having to meet its operating expenses: it has liquidity challenges because it has been unable to collect on a sizable portion of its sales. There is no strong evidence for saying that the earthquake is responsible for the behavior of these variables.

b) Cost of Sales The cost of sales has four components: technical systems, sanitation, production of drinking water, and related services. The first component represents 65 percent of the total cost of sales; the second, 20 percent.

According to the information reported by EMAPISCO in its financial statements, after the earthquake the cost of sales declined slightly between September and November 2007. However, the figure then went up noticeably in December of that year, to be followed by a sharp drop in the first quarter of 2008 (Graph 6). The graph shows that in the last month of each year EMAPISCO has significant adjustments in its reported cost of sales.

When the components of the cost of sales are compared against the total cost of sales, a strong increase can be seen in the months after the earthquake. This upturn was the result of the fact that the company continued its operations. The account most affected in the months following the disaster was technical systems, which was directly related to the collapse of the company’s networks and connecting pipelines.

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0

300

600

900

1,200

Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct

Actual Estimated

2005 2006 2007 2008 2009

GRAPH 6: ACTUAL AND ESTIMATED COST OF SALES ADJUSTED FOR INFLATION: 2005–2009 (THOUSANDS OF PERUVIAN SOLES AS OF JANUARY 2005)


85 The overall commercial system and local collection offices.86 Advisory bodies and public relations office.87 Administrative and financial accounting systems.88 Governing bodies, oversight, and management.


As for the projection, it can be seen that if there had not been an earthquake the behavior of this variable would have remained stable or better than it was in almost all the other months. Even so, the peaks attained by this variable in December were not as high as at other times in the series. Lower costs in December should translate into a larger annual gross margin for the estimated scenario.

Operating Expenses Operating expenses include sales expenses (expenses incurred by the company to sell its product) and administrative expenses (payments to workers and third parties involved in its operations). Sales expenses, in turn, include those related to the commercial system85 and administrative expenses for advisory bodies,86 support systems,87 and upper management.88

In terms of sales expenses, the historical trend had been relatively flat. After the earthquake, there was a slight increase in this expenditure with a small change in the trend. The main effect of the earthquake was felt at the end of 2008 (Graph 7). Of the total amount under this heading,

88 percent (S/. 371,915) went to write off the allowance for doubtful collectibility, given the large number of uncollectible accounts generated by the disaster.

With regard to administrative expenses, the pattern has been volatile throughout the series but has shown a gradually rising trend. After the earthquake, a peak was observed compared with the months before. This rise could be explained by increased expenditure on the support system starting in December 2007, specifically administrative support (Graph 8).

As for the estimate of administrative expenses, as in the previous cases, the trend was quite stable with some less pronounced peaks. The rise observed in actual performance was due mainly to the application of a new policy that led to increased operating revenue. Undoubtedly this increase should be regarded as a structural change as far as analysis of the series is concerned, since it could not have been predicted from the historical series and was planned and applied after the earthquake.


GRAPH 7: ACTUAL AND ESTIMATED SALES EXPENSES ADJUSTED FOR INFLATION: 2005–2009 (THOUSANDS OF PERUVIAN SOLES AS OF JANUARY 2005)

Source: EMAPISCO financial accounts

Operating Costs by Volume Produced and BilledA comparison of operating cost per volume produced versus cost per volume billed shows that the two trends have correlated over time and that the greatest divergences occurred during the period most affected by the earthquake

0

100

200

300

400

500

Actual Estimated

Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct

2005 2006 2007 2008 2009

— namely, the fourth quarter of 2007. During this period, the cost per cubic meter billed exceeded the cost per cubic meter produced by over S/. 5 (Graph 9). This is because the company did not bill its customers in October and only charged 50 percent in November and December. Even

GRAPH 8: ACTUAL AND ESTIMATED ADMINISTRATIVE EXPENSES ADJUSTED FOR INFLATION: 2005–2009 (THOUSANDS OF PERUVIAN SOLES AS OF JANUARY 2005)*

Source: EMAPISCO financial accounts

Actual Estimated

Jan

0

50

100

150

200

250

300

350

400

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct

2005 2006 2007 2008 2009



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GRAPH 9: OPERATING COST PER VOLUME PRODUCED AND BILLED (PERUVIAN SOLES/M3)*


2005 2006 2007 2008

0.30

0.45

0.60

0.75

0.90

0.8

2.0

3.2

4.4

5.6Produced Billed

1Q 2Q 3Q 4Q 1Q 4Q2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

Q: Quarter

Soles / m3

billedSoles /m3

produced

though it did not bill its customers, the cost of producing the water was not reduced, since the production process was not stopped. This effect may not be very important because it was the result of a decision made on the company’s own initiative. However, what is important to note is that this indicator rose again at the end of 2008 thanks to an abrupt increase in both the cost of sales and sales expenses.

With regard to the cost of the volume produced, the pattern for this indicator did not show any major changes, but it was also affected by the increase in operating costs at the end of 2008. In addition, the average price charged by the company was higher than the operating cost per volume produced throughout the entire period covered by the study, though it was always lower than the cost per volume billed.

Operating Profit The relatively stable trend in the pattern of operating costs was the result of the fact that operating profit was negative

throughout the entire period covered by the analysis. However, as it was pointed out in the section on the indicators used, this result includes non-cash expenses that merely represent accounting charges for the company.

In any case, except for the peaks already mentioned, there was very little difference between the projection of EMAPISCO profit and what the company actually received.

Other Income and ExpensesThis account corresponds to all income and expenses outside operating income (or loss). Its main components are: miscellaneous income, exceptional income, financial income, financial charges, and exceptional charges. In December 2007, after the earthquake, the account experienced a sharp drop because that was the month when losses corresponding to assets damaged by the disaster were recorded. As a result, the corresponding depreciation was offset in the amount of S/. 10,845,548.




GRAPH 10: ACTUAL AND ESTIMATED OPERATING PROFIT ADJUSTED FOR INFLATION: 2005–2009 (THOUSANDS OF PERUVIAN SOLES AS OF JANUARY 2005)


-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct Ja

nApr

Jul

Oct Jan

AprJu

lOct

Actual Estimated

2005 2006 2007 2008 2009


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Annex 5: Channels of Impact on Public Finance

a) Taxes Collected vis-à-vis Variation in the Production of Goods and Services by the ProvidersThe taxes collected from the service providers are (i) general sales tax, and (ii) income tax.

On account of the disaster, variations in the providers’ sales generated variations in the collection of gross revenue from the general sales tax (19 percent on sales). At the same time, FORSUR investments in the drinking water and sanitation services generated payments of this sales tax through the purchases it was making. The net effect on this tax may be summarized in general sales tax not paid because of lower generation of value added in this sector.89

General Sales Tax Generated by the ProvidersIn terms of the general sales tax (IGV), the net effect of the earthquake on the providers’ sales income for 2007–2009 was positive. This effect was due in part to improvements in the management systems implemented as a result of the disaster, which resulted in a gross increase in the collection of general sales tax amounting to S/. 56,700. However, as it is well known, the providers can deduct the sales tax they pay on their purchases from the taxes they

TABLE 1: VARIATION IN INCOME FROM GENERAL SALES TAX (IGV): ACTUAL VS. ESTIMATED (THOUSANDS OF PERUVIAN SOLES)*

2007 2008 2009Total

Actual Estimated Actual Estimated Actual Estimated

EMAPICA 9,737 9,986 10,310 11,095 11,776 12,065 -1,323

EMAPISCO 2,596 3,017 3,408 3,139 3,535 3,352 32

SEMAPACH 5,405 5,597 6,232 5,874 7,509 5,611 2,064

EMAPA Cañete 4,757 4,948 5,073 5,336 5,549 5,571 -475

Estimated-Actual -1,051 -420 1,769 298

19% IGV -199.7 -79.7 336.1 56.7

*Here, as in all the tables and graphs where “thousands” is indicated, each of the figures should be multiplied by 1,000.The numbers have been abbreviated to save space.

Source: Service Providers

89 Cascading application of the general sales tax means that it is equivalent to a value added tax. However, in this case, because the taxed income is received by the provider whereas the investment expenses are made by FORSUR and other agencies, the net effect should be calculated in two separate steps.

collect. This amount was estimated at S/. 5,768,000 in the actual scenario and S/. 5,745,000 in the “no earthquake” scenario. In the latter case, the providers would have paid S/. 34,000 more in net general sales tax.

In a comparison of the providers’ actual income against their estimated income in the absence of the earthquake, it can be seen that the former was considerably lower in 2007 and even more so in 2008. In 2009, however, the difference in income between the two scenarios (with and without the earthquake) was positive. In other words, as a result of the disaster, the providers’ income increased. This outcome can be explained by the investments that were made in the sector and also by the new management tools that were implemented (e.g., recount of users, shutdown of clandestine connections), which improved collection efficiency, especially in the case of SEMAPACH.

In the final analysis, although the government collected less revenue from sales tax on water tariffs in 2007 and 2008, this situation was totally reversed in 2009. Thus, in the end the government’s share not only was not reduced but actually increased by S/. 56,700 if compared with a scenario in which the earthquake did not occur.



The variation seen in the foregoing picture regarding the sales tax revenue collected by the government was estimated on the basis of the providers’ gross sales. However, this is not the sales tax that these companies actually pay. They are allowed to deduct the taxes on their purchases from the sales tax that they collect because they are also consumers of supplies and subject to payment of the same tax. The amount of tax deducted on this basis was calculated using the providers’ intermediate consumption as a reference. The estimate was derived from data in the 2007 Economic Census on the drinking water and sanitation sector in the department of Ica plus the four providers’ gross value of production in both the real and counterfactual scenarios.

As expected, given that the providers’ actual income exceeded their estimated income, the sales tax deduction was lower in the counterfactual scenario than in the real one. In other words, because of their increased purchases, the providers have deducted more sales tax in reality than in the counterfactual scenario. This translates into less revenue for the government.

To determine the net effect, the revenue from sales tax generated by the deductions for purchases by the providers needs to be deducted from the higher amount collected by

TABLE 2: INCOME FROM GENERAL SALES TAX (IGV) REVENUE: INTERMEDIATE CONSUMPTION BY THE SERVICE PROVIDERS1 (THOUSANDS OF PERUVIAN SOLES)*

2007 2008 2009Total

Actual Estimated Actual Estimated Actual Estimated

EMAPICA 3,895 3,994 4,124 4,438 4,710 4,826 -529

EMAPISCO 1,039 1,207 1,363 1,255 1,414 1,341 13

SEMAPACH 2,162 2,239 2,493 2,350 3,003 2,244 826

EMAPA Cañete 1,903 1,979 2,029 2,135 2,220 2,229 -190

Estimated-Actual -420 -168 708 119

19% IGV -79.9 -31.9 134.5 22.7

1/ Based on the structure given in the Economic Census 2007, intermediate purchases are estimated at 40 percent of total sales.*Here, as in all the tables and graphs where “thousands” is indicated, each of the figures should be multiplied by 1,000. The numbers have been abbreviated to save space.

Source: Service Providers

the government. According to this calculation, the total sales tax revenue actually collected by the government comes to S/. 34,00090 more than in the non-earthquake scenario.

Sales Tax Generated by Purchases for ReconstructionInvestments by FORSUR and other agencies in the reconstruction of drinking water and sanitation infrastructure generated purchases subject to the general sales tax on behalf of various contractors. The contractors, in turn, also purchased supplies on which they paid sales tax. Thus, the net revenue from this tax on account of the contractors’ operations is equivalent to the deduction of the sales taxes from the purchases made for use by these contractors plus the sales tax on the supplies purchased by the contractors themselves. According to the calculations, the additional sales tax collected because of purchases required for reconstruction was S/. 14.7 million. This value may be slightly higher than the accumulated impact of the entire chain, inasmuch as the sales tax deducted by the contractors’ suppliers is not considered here.

The analysis only included emergency projects, completed projects, and those under way that were intended to return the drinking water and sanitation systems to pre-earthquake status. These projects were carried out by FORSUR and other

90 Considering that total income from sales tax was S/. 56,700, while the providers’ deductions amounted to S/. 22,700.


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agencies in the drinking water and sanitation sector. It was the expenses corresponding to these works that effectively generated sales tax revenue for the government.91

The sales tax generated by the contractors’ purchases (S/. 7.7 million) needs to be deducted from the total gross general sales tax generated. For this purpose, the expense structure defined by ECLAC was applied.92 According to this resource, purchases (imported and national supplies) represent an average of 52.5 percent of the cost of a drinking water or sanitation project.

TABLE 3: FORSUR INVESTMENTS IN THE DRINKING WATER AND SANITATION SECTOR (MILLIONS OF PERUVIAN SOLES)

Locality S/(millions) IGV

Chincha 17.7 3.4

Pisco 36.5 6.9

Ica 18.4 3.5

Cañete 4.8 0.9

Emergency projects 77.3 14.7


TABLE 4: PURCHASE OF MATERIALS FOR FORSUR-FUNDED PROJECTS IN THE DRINKING WATER AND SANITATION SECTOR (MILLIONS OF PERUVIAN SOLES)

Locality S/(millions) IGV

Chincha 9.3 1.8

Pisco 19.1 3.6

Ica 9.6 1.8

Cañete 2.5 0.5

Emergency projects 40.6 7.7

Source: FORSURPrepared by APOYO Consultoría

Therefore, the total sales tax revenue collected by the government (net effect) from investments made by FORSUR and other agencies in the reconstruction of water and sanitation infrastructure was S/. 7 million.93

Income Tax Generated by the Service ProvidersThe third and last effect derived from tax revenue considers the variation in payment of income tax by the providers. After the disaster, all four providers suffered losses and therefore generated no income tax revenue. Moreover, as it can be seen in Graph 1, the results of the providers’ operations in the counterfactual scenario would have also been without profit. Therefore, even in the absence of an earthquake, the government would not have collected revenue.

However, it is important to note that the amounts in question are estimates based on operating profit (not financial expenses and income) plus other miscellaneous expenses and income. Therefore, it is worth looking at whether there was any pattern of this kind for extraordinary expenses and income in previous years that might contribute to a positive operating profit that could in fact be subject to taxation and therefore a source of revenue.

Table 5 shows that in the years before the earthquake (2004, 2005, and 2006), the level of other net income is low or negative and not sufficient to make up for operating losses. Therefore, during those years the service providers did not generate profits or other resources subject to income tax. Even when net income from other expenses was positive, in no case was it as high as 50 percent of operating profit.

Therefore, even without an earthquake, government revenue in the form of income tax from the service providers would have been nil. Historically, these companies have not generated positive income. Even considering non-operating expenses and income that might generate positive results,

91 The figures indicated do not include projects for improving the system.92 The methodology establishes the cost structure (labor, supplies, earnings) in relation to the system component in question. See: Economic Commission for Latin America and the

Caribbean, Programme Planning and Operations Division, Manual for Estimating the Socio-Economic Effects of Natural Disasters, United Nations Economic Commission for Latin America and the Caribbean, Santiago, 1991, pp. 126–128.

93 The result of subtracting S/. 7.7 million in sales tax paid by the contractors from sales tax generated by purchases for reconstruction (S/. 14.7 million).



TABLE 5: TOTAL FORSUR INVESTMENTS IN THE DRINKING WATER AND SANITATION SECTOR (MILLIONS OF PERUVIAN SOLES)

EMAPICA SEMAPCH EMAPA Cañete

2004 Operating profit -1,698,566 -1,971,308 -647,405

Other income (including financial) (A) 744,202 34,589 240,710

Other expenses (including financial) (B) -445,475 -195,999 -49,591

Net (A) – (B) 298,727 -161,410 191,119

% Operating loss 18% 30%




Net (A) – (B) 144,814 -424,940 217,987

% Operating profit 8% 43%




Net (A) – (B) -123,828 -682,458 118,208

% Operating profit 15%

Prepared by APOYO ConsultoríaSource: SUNASS

EMAPICA

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

EMAPISCO

SEMAPACH

2007 2008 2009

EMAPA Cañete

GRAPH 1: ESTIMATED OPERATING PROFIT OF THE FOUR SERVICE PROVIDERS IN THE COUNTERFACTUAL SCENARIO (MILLIONS OF PERUVIAN SOLES)

Source: FORSURPrepared by APOYO Consultoría


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TABLE 7: FORSUR INVESTMENTS IN THE DRINKING WATER AND SANITATION SECTOR FOR EMERGENCY PROJECTS (MILLIONS OF PERUVIAN SOLES)

Locality S/(millions)

Chincha 14.0

Pisco 28.8

Ica 14.5

Cañete 3.8

Emergency projects 61.1

Prepared by APOYO ConsultoríaSource: FORSUR

c) Increased Expenses for Investment in Reconstruction and Repair of DamageThe third aspect to be considered is the government’s investment through various agencies to rectify the damage caused by the disaster. In this case, as indicated earlier, investments in reconstruction were made through FORSUR. However, funding for the projects overseen by this agency came not only from their own resources but also from sectoral financing and the assistance of outside organizations. The present analysis is only concerned with the resources provided by the public sector (79 percent of the total funding, on average) — in other words, the funds of FORSUR itself and the drinking water and sanitation sector, or specifically those corresponding to the Ministry of Housing, Construction, and Sanitation. As shown in Table 7, the public resources that were committed came to a total of S/.61 million.

there would still have been a net loss if the pattern of previous years had continued to prevail.

b) Variation in Resources Generated by the Service ProvidersThe second aspect considers the effect on public finance of variation in the profit and loss of the affected providers. This effect includes changes in both the income and the costs of the service providers. As indicated above, the companies saw losses during the period before the earthquake and also in the years after it. It would therefore be expected that the providers would also generate losses in the counterfactual (“no earthquake”) scenario. To confirm this, the variation in the losses experienced by the providers will have to be calculated. To simplify, it will be assumed that the earthquake’s impact on the providers’ operating costs was marginal, since the expenses for reconstruction were assumed by FORSUR and other agencies. The analysis can therefore focus on the performance of operating income.

In fact, as it has been noted earlier, a comparison with the counterfactual scenario (i.e., what would normally have happened), shows a clear drop in income in 2007 and, to a lesser extent, in 2008. However, in 2009 this process was reversed because of improvements that were made in management and investments. Therefore, as Table 6 shows, the accumulated effect for 2007–2009 was positive: the providers’ operating income improved over the counterfactual scenario by S/. 298,000.

TABLE 6: VARIATION IN OPERATING INCOME: 2007–2009 (THOUSANDS OF PERUVIAN SOLES)*

Income from sales

2007 -1,051

2008 -420

2009 +1,769

Total +298




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ADD Acute diarrheal diseaseARI Acute respiratory infectionCISMID Center for Earthquake Engineering Research and Disaster Mitigation, National Engineering University (Centro de Investigaciones Sísmicas y Mitigación de Desastres de la Universidad Nacional de Ingeniería)ECLAC Economic Commission for Latin America and the CaribbeanDIGESA General Directorate of HealthEMAPA Municipal Drinking Water and Sanitation Company — Cañete (Empresa Municipal de Agua Potable y Saneamiento — Cañete)EMAPICA Ica Municipal Drinking Water and Sanitation Company (Empresa Municipal de Agua Potable y Saneamiento de Ica)EMAPISCO Municipal Drinking Water and Sanitation Company (Empresa Municipal de Agua Potable y Saneamiento de Pisco)ENAHO National Household Survey (Encuesta Nacional de Hogares)FEMA U.S. Federal Emergency Management Agency FORSUR Fund for Reconstruction of the South (Fondo de Reconstrucción del Sur)GDP Gross domestic productHDPE High-density polyethyleneIDB Inter-American Development BankIMF International Monetary FundINEI National Institute of Statistics and Information (Instituto Nacional de Estadística e Informática)Kf W Kreditanstalt fuer Wiederaufbau (German Development Bank)MDPE Medium-density polyethyleneMIMDES Ministry of Women and Social Development (Ministerio de la Mujer y Desarrollo Social)MOH Ministry of HealthPAHO Pan American Health OrganizationPCM Presidency of the Council of Ministers (Presidencia del Consejo de Ministros)PGA Peak ground accelerationPGD Permanent ground deformationPGV Peak ground velocity PVC Polyvinyl chlorideSEDAPAL Lima Drinking Water and Sanitation Service (Servicio de Agua Potable y Saneamiento de Lima)SEMAPACH Chincha Municipal Drinking Water and Sanitation Company (Empresa Municipal de Agua Potable y Saneamiento de Chincha)SUNASS National Sanitation Services Superintendency (Superintendencia Nacional de Servicios de Saneamiento)SUNAT National Superintendency for Tax Administration (Superintendencia Nacional de Administración Tributaria)USGS U.S. Geological Survey WPI Wholesale price indexWSP Water and Sanitation Program

AbbreviationsEconomic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector

1. Location of the Study Area .................................................................................................................................................................. 15 2. Steps for Valuation of Direct Effects of the Earthquake (assuming that infrastructure was adequately maintained) .......................................................................................................... 19 3. Cost of Indirect Effects on the Service Providers ........................................................................................................................... 19 4. Drinking Water Coverage: Pisco (2002–2008) .............................................................................................................................. 23 5. Active Drinking Water Connections: Pisco (2002–2008)........................................................................................................... 24 6. Diagram of EMAPISCO Drinking Water Supply System ........................................................................................................... 25 7. Diagram of EMAPISCO Sewerage System ..................................................................................................................................... 26 8. How much did the August 2007 earthquake affect you? .............................................................................................................. 43 9. Interruption or Change in Home Water Service Due to the Earthquake ................................................................................. 44 10. How did you get water when your house was not receiving normal service? ........................................................................... 45 11. Households with a Member Who Became Sick as a Result of the Earthquake ....................................................................... 46 12. Person in the Family Responsible for Caring for the Sick after the Earthquake ...................................................................... 49 13. Fetching Water after the Earthquake ................................................................................................................................................. 49 14. Households that Required More Effort and Time to Care for the Home (compared with all households in which the woman cares for the home) ................................................................................ 49 15. Estimated Value of Increased Domestic or Reproduction-related Work Performed by Women in the Study Area ........ 50 16. Perception of Cleanliness of Hygiene Facilities Used by Household Members ....................................................................... 51 17. Services that Generated the Greatest Negative Impact on the Businesses Surveyed ............................................................... 53 18. Businesses that Relied on Service Providers: For how many days did you suspend or delay your investment plans because of the earthquake? .......................................................................................................... 55 19. Estimated GDP for Drinking Water and Sanitation: Ica (millions of current US Dollars) .................................................. 56 20. Graph 20: Estimated GDP for Drinking Water and Sanitation: Actual and Counterfactual Scenarios (millions of current US Dollars) ........................................................................................................................................................ 57 21. Price Index for PVC Pipe (Base 1994 = 1000) .............................................................................................................................. 59 22. Percentage of Persons Who Changed Their Main Employment Activity ................................................................................. 61 23. Employment Activity before and after the Earthquake ................................................................................................................. 61 24. Estimated Impact of the Earthquake on Income of Heads of Household in the Study Area ............................................... 62

Annex 3:1. How much could have been saved if the service providers had implemented risk management? (millions of Peruvian soles) ................................................................................................................................................................. 74

Annex 4:1. Actual and Estimated Sales Adjusted for Inflation: 2005–2009 (thousands of Peruvian soles as of January 2005) ........ 752. Volume of Water Produced, Billed, and Not Billed (millions of Cubic Meters) ..................................................................... 763. Average Price of Water (Peruvian soles per cubic meter) .............................................................................................................. 774. Current Liquidity Index....................................................................................................................................................................... 775. Commercial Accounts Payable ........................................................................................................................................................... 786. Actual and Estimated Cost of Sales Adjusted for Inflation: 2005–2009 (thousands of Peruvian soles as of January 2005) ........................................................................................................................... 79

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List of GraphsEconomic Impact of the 2007 Earthquake in Peru on the Drinking Water and Sanitation Sector

7. Actual and Estimated Sales Expenses Adjusted for Inflation: 2005–2009 (thousands of Peruvian soles as of January 2005) ........................................................................................................................... 808. Actual and Estimated Administrative Expenses Adjusted for Inflation: 2005–2009 (thousands of Peruvian soles as of January 2005) .......................................................................................................................... 809. Operating Cost per Volume Produced and Billed (Peruvian soles/M3) .................................................................................... 8110. Actual and Estimated Operating Profit Adjusted for Inflation: 2005–2009 (thousands of Peruvian soles as of January 2005) ........................................................................................................................... 82

Annex 5:1. Estimated Operating Profit of the Four Service Providers in the Counterfactual Scenario (millions of Peruvian soles) ................................................................................................................................................................. 86



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List of Tables1. Earthquake Parameters for the Pisco Urban Area .......................................................................................................................... 272. Valuation of Damage to the Drinking Water and Sewerage Systems: ECLAC Methodology — Baseline (millions of Peruvian soles)................................................................................................. 283. Total Damages to Water System Pipes When They Have Been Properly Maintained, Taking into Account Ground-Shaking (PGV) and Damage Due to Ground Liquefaction (PGD) .................................. 294. Total Damages to Sanitation System Pipes When They Have Been Properly Maintained, Taking into Account Ground-Shaking (PGV) and Damage Due to Ground Liquefaction (PGD) .................................. 315. Valuation of Damage to Components of the Drinking Water and Sewerage Systems: First Scenario (millions of Peruvian soles) ....................................................................................................................................... 326. Valuation of Damage to Components of the Drinking Water and Sewerage Systems: Second Scenario (millions of Peruvian soles) .................................................................................................................................. 337. Estimated Damage to the EMAPISCO Drinking Water and Sanitation Systems, by Type of Valuation (millions of new soles) ................................................................................................................................... 348. Indirect Effects, by Year (millions of Peruvian soles) ..................................................................................................................... 379. Comparison Showing Results for Operating Income: Years 2007, 2008, and 2009 (thousands of Peruvian soles) ........ 3710. Estimate of Earthquake Impact, by Province (millions of Peruvian soles) ................................................................................ 3911. Total Additional Expenses Due to Lack of Drinking Water ........................................................................................................ 4612. Estimated Household Expenditure for Illness Attributable to Earthquake-related Problems with Drinking Water and Sanitation, by Locality .................................................................................................................................... 4713. Refuse Disposal Methods Used by Households before and after the Earthquake ................................................................... 5214. Effect on Public Finance: 2007–2009 (thousands of Peruvian soles) ........................................................................................ 5815. Cost Structure of the Drinking Water and Sanitation System, by Component....................................................................... 60

Annex 11. Types of Pipe, by Material of Manufacture ...................................................................................................................................... 702. Damage Rate for the Drinking Water System ................................................................................................................................. 71

Annex 21. Structures: Wastewater Pumping Stations ....................................................................................................................................... 722. Structures: Wastewater Treatment Plants......................................................................................................................................... 723. Structures: Water Tower Reservoirs .................................................................................................................................................. 734. Structures: Water Pumping Station ................................................................................................................................................... 735. Disinfection System .............................................................................................................................................................................. 73

Annex 51. Variation in Income from General Sales Tax (IGV): Actual vs. Estimated (thousands of Peruvian soles) ........................ 832. Income From General Sales Tax (IGV) Revenue: Intermediate Consumption by the Service Providers1 (thousands of Peruvian soles) .............................................................................................................................................................. 843. FORSUR Investments in the Drinking Water and Sanitation Sector (millions of Peruvian soles) .................................... 854. Purchase of Materials for FORSUR-funded Projects in the Drinking Water and Sanitation Sector (millions of Peruvian soles) ................................................................................................................................................................. 855. Total FORSUR Investments in the Drinking Water and Sanitation Sector (millions of Peruvian soles) ......................... 866. Variation in Operating Income: 2007–2009 (thousands of Peruvian soles) ............................................................................ 877. FORSUR Investments in the Drinking Water and Sanitation Sector for Emergency Projects (millions of Peruvian soles) ................................................................................................................................................................. 87


THE WORLD BANK

WATER AND SANITATION PROGRAM: TECHNICAL PAPER

The Water and Sanitation Program (WSP) is a multi-donor partnership administered by the World Bank to help the poor gain access to water supply and sanitation services that are accessible, safe, and sustainable.

THE WORLD BANKwater and sanitation program

water and sanitation program

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