Costa Rica Catastrophe Deferred Draw Down Option (CAT DDO)

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This program document concerns the Catastrophe Deferred Draw Down Option (CAT DDO) Project as budget financing for the Government of Costa Rica (GoCR) for three years.' The CAT DDO was developed by the Bank to respond to middle income countries' request for loans that better address their immediate funding needs in the aftermath of natural disasters. The overall development objective of the project is to enhance the government's capacity to implement its disaster risk management program for natural disasters. The CAT DDO will provide a source of immediate liquidity in case of a natural disaster. The CAT DDO will complement other instruments in the country and provide a source of bridge financing while other sources are being mobilized following a natural disaster. This operation will support two key policy areas of the Costa Rica Disaster Risk Management Program: (a) strengthening of the institutional and legal framework, and (b) mainstreaming disaster risk in the national development and investment programs. Several risks were identified during project preparation, and those that deserve attention are as follows: (a) Deterioration of Costa Rica's macroeconomic situation due to internal and external factors (rated moderate). Costa Rica currently benefits from a robust macroeconomic framework. (b) Coordination is a systemic risk in any emergency management project (rated low). In Costa Rica, the National Emergency Commission (CNE) has strong capacity for leading an emergency response and institutional efforts. (c) Political risk (rated low). The country is politically stable and has low turnover of senior officials. (d) The procedures implemented prove unable to disburse funds rapidly (rated as low). Given the inherent purpose and structure of the instrument, the Bank team will work closely with the GoCR and relevant Bank departments to ensure prompt disbursement.