Latin America is facing growing risks of supply chain disruption, commodity production losses and infrastructure stress from a super-strength El Niño that is predicted to intensify into 2027, according to new research from global risk data and forecasting company firm Verisk Maplecroft.
The report, released September 30 and titled “Record El Niño poses growing risk to Latin American supply chains, commodity output and infrastructure,” warns that the region could face a repeat, or even an amplification, of the devastating 1997-98 El Niño, which triggered an estimated $5.7 trillion in global economic losses — almost three times the decline in global GDP during the 2008 financial crisis. This year’s El Niño is already the strongest ever recorded in terms of Pacific Ocean temperatures and is not set to peak until December.
Verisk Maplecroft’s Hazard Vulnerability Index (HVI), which assesses factors such as annual economic loss from natural hazards, natural capital, economic fragility, quality of infrastructure, government effectiveness and the sensitivity of populations, shows the impacts will be unevenly distributed across the region.
While drought threatens Panama Canal traffic, agricultural production, and water security across Central America and parts of northern South America, flooding risks are rising in economically critical regions of Peru, Ecuador and Brazil, the report’s authors say. These diverging climate impacts are set to create operational challenges across major export sectors, from Central American coffee and maize to Peruvian anchovy and copper, Chilean salmon and Southern Cone soybeans.
“This El Niño is shaping up as a major test for governments, businesses and investors across Latin America,” says Mariano Machado, Principal Americas Analyst at Verisk Maplecroft. “The resilience of critical logistics, fisheries and agricultural exports, mining operations and energy systems will be severely tested.”
Read More: Super El Niño Could Cost Global Economy $7.2T
According to Forbes, tomato, potato and carrot prices are projected to double as El Niño impacts agricultural conditions in Brazil. Conversely, changing conditions could have some positive impacts. For example, a wet year in South America could boost soy crops. But, overall, the negative impacts are alarming.
Verisk Maplecroft’s report concludes that Central America and the Andean region (Venezuela, Colombia, Ecuador, Peru and Bolivia) emerge as the highest-risk subregions overall.
Nicaragua, Honduras, and Guatemala are not only the weakest performers in Central America, but across the entire region, while Venezuela, Bolivia and Argentina are the three most vulnerable nations in South America. Colombia, Brazil, Chile and Uruguay are comparatively better placed to absorb El Niño-related disruption.
