Under the water: flood impacts and economic dynamics in northern Peru

This paper assesses the effects of devastating flooding on household welfare in northern Peru. Remote sensing data are used to construct a novel damage index as a proxy for the local economic impact caused by the 2017 coastal El Niño floods. Using 5-year panel data from the Peruvian National Household Survey (ENAHO), we observe that affected households experience a decrease in income and expenditure compared to those in unaffected areas during the period 2015–2019. Additionally, poverty increases as a result of this natural hazard, especially among households in urban areas. Although there is a recovery in income and expenditure in the aftermath of the floods, households mitigate their consumption through donations of food and clothing. We suggest that, in a context where the occurrence of flooding affects the most vulnerable groups, the development of formal risk-coping strategies such as insurance is crucial for boosting their ability to reduce, mitigate, or adapt to future disaster risk.