Financial risks and opportunities : Establishing effective national and regional risk financing mechanisms for Brazil - Financial and private sector development policies for fostering sustainable growth in Brazil

This report, developed under the World Bank’s technical assistance program “Financial and Private Sector Development Policies for Fostering Sustainable Growth in Brazil,” examines strategies for strengthening disaster risk financing in response to floods. It provides an overview of federal public expenditure on disaster risk, assesses financial implications of future flood events through probabilistic analysis under two climate scenarios, and explores options for using financial instruments to ensure predictable funding.

Building on reforms introduced after the 2011 Rio de Janeiro floods, the report highlights opportunities to improve budgetary processes and incentivise risk transfer to the private sector at state and municipal levels. With climate change driving increased frequency and severity of extreme weather events, Brazil faces heightened exposure to hydrological risks, substantial fiscal pressures, economic disruption, and human losses. The findings underscore the need for strategic resource allocation and robust risk financing mechanisms to enhance resilience and mitigate future impacts.