Promoting the Development of Resilient Cities in Colombia

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Between 2004 and 2018, Colombia experienced 15 years of sustained economic growth and substantial gains in poverty reduction withsubnational governments playing a strategic role. Since 2018, poverty and inequality in Colombia have increased–now exacerbated bythe COVID-19 pandemic–and rapid urbanization has been characterized by informality in land and housing tenure, as well as ineconomic activity. Furthermore, while poverty rates are still higher in rural areas, cities are home to more people living inmoderate and extreme poverty and are also characterized by higher inequality. As a result, investments that allow for moreequitable access to economic and social opportunities for urban residents will be essential for growth that leads to overallreductions in poverty levels and inequality.Colombia also ranks fourth in Latin America and the Caribbean in terms of disasterrisk. Floods, earthquakes, and landslides are the most prevalent hazards, followed by volcanic activity, tsunamis, and hurricanes.It is estimated that 84 percent of Colombia's population and 86 percent of its assets are exposed to two or more natural hazardsand it is well documented that disasters have disproportionate impacts on the most vulnerable. According to a 2017 World Bankstudy, poor households tend to experience a greater impact from flood events due to their exposure level in the context oflocation, asset vulnerability, and financial capacity to cope with natural disasters. A significant share of Colombia’s urbanpopulation, especially the poorest, lives in poorly planned areas, informal settlements, and densely populated coastal areas. If noaction is taken, risks associated with climate change could significantly increase the exposure of millions of urban dwellers andeconomic assets to greater risk from flooding, droughts, and landslidesAs Colombia is a highly decentralized country, subnationalentities play a key role in the provision of infrastructure and social services to the population. Large and intermediate citiesand municipalities finance these infrastructure and social programs with their own resources; funds transferred from the nationalgovernment aim to make social expenditures (mostly health and education) more efficient. Between 2019 and 2020, municipal revenuesdeclined 9.3 percent, mainly driven by the reduction in tax revenues from the two main sources of income at the municipal level.The proposed Project aims to provide financial access at subnational level to promote the development of resilient urbaninfrastructure in critical sectors and subsectors, by supporting the Financiera de Desarrollo Territorial SA (Findeter, inSpanish), the implementing entity, to expand access to financial resources through on-lending credits to Participating FinancialIntermediaries (PFI) for on-lending to subnational governments, public utilities and mixed public-private service providers.Sectors critical to development—energy, transport, water and sanitation, and urban development— are particularly vulnerable todisaster risk and climate change. At the same time, those sectors are among those that can make a significant contribution tosustainable development and resilience in cities. The Project, an initiative on its own and not related to a larger program, willcomprise two components: (i) a credit line to finance resilient infrastructure subprojects to mitigate the impact of disasters andclimate change, and (ii) a project management component. The design of the project will follow a framework approach providingflexibility to identify eligible sectors, subsectors, subprojects, and the ultimate beneficiaries of the operation. The proposedoperation will contribute to the Colombia Country Partnership Framework (CPF)’s goals to enhance social inclusion and mobility byimproving service delivery and supporting fiscal sustainability and productivity. The Colombia CPF for the period FY16-21recognizes Colombia’s key investment gap in terms of physical infrastructure, especially in the transport sector, as a keyconstraint to economic growth and territorial development, as well as inadequate Disaster Risk Management (DRM) and adaptation toclimate change in the face of disasters of increasing frequency and intensity.