Latin America is facing growing risks of supply chain disruption, commodity production losses and infrastructure stress as a super-strength El Niño intensifies into 2027, according to new research from Verisk Maplecroft.
Data warns the region could face a repeat, or even an amplification, of the 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.
Verisk Maplecroft’s Hazard Vulnerability Index (HVI) 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. 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.”
Verisk Maplecroft
Key takeaways:
· Nicaragua, Honduras, and Guatemala are the weakest performers in Central America and 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.
· In the Andean region, institutional strength, and in particular governance, investment in resilient infrastructure and support for affected communities is one of the main factors lowering its resilience to El Niño driven shocks.
· Central America is expected to experience some of the most severe consequences of El Niño through 2027. The most high-profile impact will be reduced water levels in the Panama Canal, which potentially has very significant consequences for global supply chains. Around 5% of global maritime trade passes through the waterway. Increased restrictions on vessel transits would raise shipping costs, lengthen journey times, and further intensify pressure on logistics worldwide.
· The Panama Canal’s exposure reflects a wider regional threat in the drought-prone Dry Corridor spanning Pacific coastal regions of Guatemala, El Salvador, Honduras and Nicaragua. These countries display some of the weakest resilience in the region, particularly in relation to vulnerable populations and infrastructure quality. Shrinking rainfall will intensify water shortages that could harm livestock and corn, maize, coffee and bean harvests.
· The Southern Cone typically benefits from stronger institutions, more resilient infrastructure and better access to emergency resources than much of the rest of Latin America. But the region’s importance to global food, energy and commodity markets means localised disruption could still have consequences far beyond national borders.
· Brazil is also set to experience greater rainfall in the south and southeast threatening agricultural areas in Mato Grosso, Mato Grosso do Sul, Goiás, Minas Gerais, and Bahia, which account for around 60% of all the country’s soybeans and 70% of all corn production. At the same time, drought in northern and Amazonian regions could constrain river logistics and hydropower generation.
