In the early hours of February 27, 2010, Chile was struck by the world’s sixth-strongest tremor, centered three kilometers off its coast. The 8.8 magnitude earthquake triggered a series of tsunamis that pummeled towns up and down the country’s south-central seaboard. Roads, bridges, highways, ports and other infrastructure were compromised, while nearly forty hospitals suffered significant damage. More than 500 were killed and some 220,000 homes were damaged. All told, the earthquake and resulting tsunamis cost the Chilean economy about USD$30 billion.
The government responds
Following the earthquake, the government identified three major tasks.
First, it needed to address the immediate needs of the population—tending to the wounded, finding those who were missing, and ensuring adequate drinking water, electricity and food. Next, it had to tackle the approaching ‘winter emergency’. Since winter in Chile begins in June, the government had to assist a million children as they returned to school, while helping the homeless prepare for the looming cold season. Finally, the government had to prepare a longer-term reconstruction plan and devise a way to finance the country’s rebuilding efforts.
For Rodrigo Perez Mackenna, who today serves as Minister of Housing and Urban Development, the event heralded a dramatic shift in his career. A civil engineer and MBA, he had enjoyed a long and successful career in finance. Within days of the earthquake, he received a phone call from then President-elect, Sebastian Piñera, asking him to become governor of the O’Higgins Region, which in addition to Maule and Bío Bío, was one of the areas that suffered the worst damage. Piñera himself was scheduled to take office less than two weeks later.
“The President-elect wanted to make sure that the governors of the regions affected by the earthquake could start working before the changeover in government, because it was clear that there wasn’t a moment to spare,” he recalls. “I had never been very active in politics, but I knew Chile was facing a significant challenge and I thought my private sector experience could be helpful. It was an opportunity for me to give something back to my country.”
All hands on deck
While the central government played a strong coordination role—particularly in regards to public works, health and education—every level of government was involved in the recovery effort.
“Local governments were best equipped to meet the immediate needs of people in their communities, such as distributing food and medicine,” says the Minister. “Coordination with towns, cities and regions is vitally important in a crisis, and we wanted to leverage the distribution capabilities of local governments. Once we moved to the reconstruction phase, the federal government was most active.”
The private sector was also a vital player. The Piñera administration recognized that government could not carry out such a major undertaking alone, and so it laid a strong foundation of leadership and public financing while leveraging the private sector’s capacity to deliver.
In the case of housing—which was expected to consume USD$3 billion of the total USD$8 billion reconstruction budget—a subsidy scheme was established to build homes for under-resourced families and emerging sectors. The government provided funding while construction companies were responsible for the building.
Building a better country
Rodrigo Perez points to a number of principles championed by the central government that he believes have been vital to Chile’s housing recovery.
First, government focused on the people affected by the losses rather than the loss of the physical assets themselves. The rebuilding policy also took care to address the needs of renters and their families, as many simply had nowhere to go.
The government also gave families the option of rebuilding on the same land, rather than forcing them to move to new areas. “It would have been an easy fix to rebuild a residential development on the outskirts of a village,” he explains. “But that would mean uprooting those families from their social networks and their families, which would only compound their losses.”
In areas along the coastline which are susceptible to future tsunamis, the notion of risk was incorporated into the design. Mitigation projects, such as retaining walls, escape routes and parks were designed. Tsunami and earthquake resistant housing was built, and the concept of risk was integrated with urban design. “In general, safety took precedence over solely economic criteria when we were making decisions affecting the coastline,” the Minister explains.
In June, the Housing and Urban Development ministry reported that 164,000 families—74 percent of those impacted by the earthquake—had moved into their new homes, with construction underway for another 23 percent. The government has set a target date of March 2014 to complete reconstruction.
The events of February 2010 have been an opportunity for the government to improve its overall approach to housing—by passing a regulatory framework that emphasizes quality over quantity. “We could have done things faster by watering down the regulatory framework and relaxing requirements,” says Rodrigo Perez. “But instead we wanted to learn from the earthquake and use the opportunity to not just maintain standards, but strengthen them.”
A lesson learned
The Minister is justifiably proud of the progress that Chile has made in just over three years. But he is careful to counsel others on the dangers of painting too rosy a picture when they face similar circumstances.
“One of the many things I’ve learned in this experience is that you have to be careful to manage expectations,” he says. “You have to convey the message that everything won’t be fixed in just one or two years—because you look at other countries where it’s taken eight or ten years. Building full or partial housing for 200,000 people in less than four years is a tremendous achievement.”
By James Stewart, KPMG in the UK