Report warns super El Niño threatens Latin American trade

Latin America faces mounting risks of supply chain disruption, lost commodity output and damaged infrastructure as a "super-strength" El Niño grows stronger into 2027. That is the warning in a report released Sept. 30 by risk data firm Verisk Maplecroft. The company says the region could see a repeat, or a worse version, of the 1997-98 El Niño. That event caused an estimated $5.7 trillion in global economic losses, almost three times the drop in global GDP during the 2008 financial crisis.bnamericas+2

The report arrives as the warming event breaks records. As of Sept. 21, the daily temperature anomaly in the Pacific's Niño 3.4 region reached 3.11C, passing the previous record of 3.08C, Carbon Brief reported. The BBC reported that scientists now call it the strongest El Niño on record. Verisk Maplecroft says it is not expected to peak until December.carbonbrief+2

Drought in the north, floods in the Andes

The report says drought threatens Panama Canal traffic, farm output and water supplies across Central America and parts of northern South America. Meanwhile, flood risk is rising in economically important parts of Peru, Ecuador and Brazil. About 5% of global maritime trade passes through the canal. Limits on ship crossings would raise shipping costs and lengthen voyages.bnamericas

Exports at risk range from Central American coffee and maize to Peruvian anchovy and copper, Chilean salmon and soybeans from South America's Southern Cone. Brazil's south and southeast, home to states that grow about 60% of the country's soybeans and 70% of its corn, face heavier rain. At the same time, drought in the Amazon could disrupt river shipping and hydropower.bnamericas

"This El Niño is shaping up as a major test for governments, businesses and investors across Latin America," said Mariano Machado, Verisk Maplecroft's principal Americas analyst.supplychainbrain+1

Weak governance raises vulnerability

The firm's Hazard Vulnerability Index ranks Central America and the Andean region as the highest-risk areas. Nicaragua, Honduras and Guatemala score as the weakest performers in all of Latin America. In South America, Venezuela, Bolivia and Argentina are the most exposed. Colombia, Brazil, Chile and Uruguay are better placed to absorb the shocks.supplychainbrain

The report points to Peru, where much of the repair work from the 2017 El Niño remains unfinished. It also says any disruption to mining there could push copper prices even higher after they reached a record earlier this year. Colombia, by contrast, has passed emergency budget measures to protect hydroelectric generation.bnamericas

A forecast of more to come

U.S. forecasters said in September there was a greater than 90% chance of a very strong event this fall and winter. They put the odds of a historic event in October through December at 75%.cpc.ncep.noaa

"With stronger and more volatile El Niño events and more frequent and severe climate-related events increasingly likely in the coming decades, identifying exposure … is going to be vital," said Will Nichols, the firm's head of climate and resilience.bnamericas