El Niño Splits Latin America Into Winners and Losers

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ANALYSIS · LATIN AMERICA · CLIMATE AND MARKETS

El Niño has returned with unusual force, and by one widely used measure it has already set a record. For Latin America this is less a weather story than an economic one.

The warming of the tropical Pacific moves rain away from some countries and dumps it on others. That splits the region into clear losers and quiet winners, with consequences for food prices, power bills, currencies and trade.

How a Warm Pacific Moves Rain Around the Americas

In a normal year, trade winds push warm surface water west across the Pacific towards Asia. Cold, nutrient-rich water then rises along the coasts of Peru and Ecuador and feeds one of the world’s richest fisheries.

When the winds weaken, the warm water drifts back east and the rain belt follows it. Weather patterns across the Americas shift with it.

Coastal Peru and Ecuador get warm seas and heavy rain. Colombia, Venezuela, Central America and the northern Amazon tend to dry out.

Further south the effect reverses. Argentina, Uruguay, Paraguay and southern Brazil usually get extra rain, and central Chile often has a wetter winter.

El Niño also strengthens high winds over the Caribbean that tear storms apart. By 21 September the Atlantic had not produced a single hurricane, a first since 1914.

Why This Event Stands Out

Scientists track El Niño through sea temperatures in a patch of the central Pacific known as Niño 3.4. In the week centred on 23 September, that patch ran 3.1°C above normal.

That beat the weekly record of 3.0°C from November 2015 in data from NOAA, the US weather and oceans agency. Off Peru and Ecuador the anomaly that week was larger still, at about 4.7°C.

There is a catch: NOAA’s official index strips out the general warming of the tropical oceans. On that measure this El Niño is not yet a record.

That may change soon. NOAA puts the chance of a very strong event this winter above 90 percent.

It also gives 75 percent odds that by December this will be the strongest El Niño since at least 1950.

The World Meteorological Organization says the odds of the event lasting through February are close to 100 percent. UN Secretary-General António Guterres put it bluntly: “El Niño is being supersized before our eyes.”

Berkeley Earth, a climate research group, expects the central Pacific to peak just over 4°C above normal between November and January. A Science study of Galápagos corals, published in August, found El Niño swings about 37 percent larger than before industrialisation.

The heat reaches the atmosphere with a delay of several months. Britain’s Met Office says 2027 is very likely to become the warmest year on record.

A Bill of at Least 2 Percent of Regional GDP

CEPAL, the UN’s economic commission for the region, published its estimate on 21 September. An extreme El Niño could cut regional output by at least 2 percent over three years, it said.

Half of that loss would come in the first year. The commission also warned that poverty could rise by up to 4.8 million people by the end of the decade.

UNICEF counts 25.8 million children in Latin America and the Caribbean exposed to the droughts and floods.

Two weak points explain the size of the hit. In several countries dams supply more than 70 percent of electricity, and much of the region’s food comes from rain-fed farms.

History shows how long the damage can last. A 2023 study in Science put global income losses from the 1997-98 El Niño at US$5.7 trillion over the following years.

Help is arriving, but on a modest scale. On 2 October CAF, the Latin American development bank, offered a credit line of up to US$1 billion to affected countries.

Peru and Ecuador: Flooded Coasts and an Empty Sea

Peru sits closest to the warm water, and its central bank has already cut its forecasts. It now expects growth of 3.2 percent in 2026 and 3.0 percent in 2027, with El Niño behind most of the downgrade.

The bank sees fishing output falling 30.7 percent this year. The first anchovy season landed only 24.6 percent of a quota that was already the smallest in a decade.

That matters far beyond Peru, which supplies about a fifth of the world’s fishmeal. Prices for the fish feed hit a record of about US$2,500 a tonne in May.

Dearer feed squeezes salmon farmers in Chile and shrimp farmers in Ecuador. A weak second anchovy season would keep that pressure on into 2027.

ENFEN, Peru’s El Niño forecasting committee, expects an “extraordinary” coastal event through January, its highest category. It sees heavy rain on the northern coast, a farm-export hub, from October, becoming more frequent in November.

The government declared a 60-day emergency in districts of 23 regions on 1 September. The consultancy Preciso estimates farm-export losses of about US$1.5 billion over 2026 and 2027, with the 2027 mango crop roughly halved.

Prices are already moving. Lima’s annual inflation reached 4.55 percent in September, above the 1 to 3 percent target, and tomato prices jumped 29 percent.

Ecuador faces floods and drought at once. By 30 September heavy rain had killed 35 people since January, officials said, and on 2 October it flooded parts of Guayaquil.

Yet the Amazon and southern basins that feed most of its hydropower are drying out. By late September the Coca river, which drives the country’s largest power plant, had dropped below the flow the plant needs.

That raises the risk of power cuts in November and December, two years after blackouts of up to 14 hours a day. Because Ecuador uses the US dollar, it cannot cushion the blow through its currency.

The coast also hosts its export engines. About 87 percent of shrimp farms sit in flood-prone areas, and rice prices have jumped 39 percent.

Colombia and Central America: Running Short of Water

Colombia relies on rain for roughly 70 percent of its electricity. Inflows to its reservoirs were 66 percent of the historical average in late September, according to XM, the grid operator.

XM warns of a shortfall in guaranteed supply equal to 8.3 percent of demand. In a bad case, reservoirs could drop to 15.7 percent by mid-2027, against a 2024 low of about 27 percent.

On 18 September wholesale power peaked at COP 1,513 per kilowatt-hour (about US$0.46 at 3,273 pesos to the US dollar). Imported gas, needed for backup plants, already covered 23 percent of gas supply in the first quarter.

On 30 September the central bank raised its key rate to 12.25 percent, naming El Niño as a risk to food prices. Bogotá’s water, rationed in 2024, looks safer this time, with its main reservoir 95 percent full.

In Central America the damage is human rather than financial. In parts of the Dry Corridor, a farm belt from Guatemala to Nicaragua, drought wiped out most of the first maize crop.

Guatemala counts about 227,000 hectares hit by drought, the most in a decade, and about 3.1 million people facing crisis-level hunger. In July, white maize in Honduras cost 24 percent more than a year earlier.

The World Food Programme says about 4.2 million people in the region could face food insecurity. In the communities they surveyed, aid groups recorded more than 6,000 migration movements between May and July.

The Panama Canal: Tighter, Not Yet Broken

The canal runs on rainwater stored in lakes that refill each wet season. Rain in its watershed has been 34 percent below average this hydrological year, the Panama Canal Authority said in August.

Panama declared a national emergency on 25 August, and daily transit slots fell from 36 to 32. One gas shipper, SK Gas of South Korea, paid a record US$5.3 million at auction to jump the queue.

September rains brought relief. On 28 September the authority raised the limit to 33 transits a day and allowed deeper drafts of 49 feet.

That is well above the 22 daily transits of the 2023-24 drought. But the canal’s new budget assumes 29.5 large-ship transits a day and drafts near 44 feet in the driest months.

The authority still budgets revenue of about US$5.56 billion for the fiscal year that began on 1 October. A new reservoir on the Río Indio, meant to secure the canal’s water, will not be ready before 2031.

Brazil: One Country, Two Climates

Brazil shows both faces of El Niño at once. Government forecasters expect a hotter, drier North and Northeast, and more rain and flood risk in the South.

The Rio Negro at Manaus fell 5.21 metres in September, to 18.88 metres. In early September the Geological Survey of Brazil forecast a low of between 12.31 and 16.50 metres by the end of October.

The bottom of that range would approach the record low of 12.11 metres, set in October 2024. Low rivers slow the barges that supply the Manaus free-trade zone and carry grain to northern ports.

In the South, by contrast, October inflows to hydropower dams are forecast at almost twice their usual level. That revives memories of the 2024 floods in Rio Grande do Sul, which killed more than 180 people.

For now, power bills are easing. The regulator dropped its electricity surcharge for October after five months, because more rain in the South and Southeast steadied reservoir levels.

CONAB, the national supply agency, sees record crops of 148 million tonnes of corn and 181.6 million tonnes of soybeans. It expects slightly lower soy yields, partly because of the weather risk.

Rain has slowed the cane harvest and mills are favouring ethanol, so Centre-South sugar output is down 14.4 percent this season. Arabica coffee trees flowered about a month early, which raises the risk of an uneven 2027 crop.

In a June central bank survey, economists saw El Niño adding 0.3 points to inflation this year and 0.4 points in 2027. The government has set aside R$1.335 billion (US$256 million, at 5.22 reais to the US dollar) for food stocks, health and fire-fighting.

Brazilians vote for president on Sunday 4 October. Whoever wins inherits a drought in the North and flood risk in the South.

The Southern Cone Collects a Rain Dividend

For Argentina, El Niño is mostly good news. Its weather service expects above-normal rain from October to December across the Litoral and much of the farm belt.

The Rosario Board of Trade projects record farm-sector exports of US$42.2 billion for the 2026-27 season, even assuming normal yields. It expects about US$40 billion of hard currency to flow in during 2027.

Better yields could add more. IERAL, an Argentine think-tank, says extra rain could add about 11 million tonnes of corn and soy, worth up to US$4 billion.

In the strong El Niño of 2015-16, Argentine soy yields averaged 3.02 tonnes a hectare against a seven-year norm of 2.71. Those dollars matter for the central bank, which held US$48.65 billion in gross reserves on 2 October.

The risk is too much water. The Salado basin, home to about a quarter of Argentina’s grain, flooded in 2025 at a cost of about US$2 billion.

Uruguay’s forecasters see a 60 percent chance of above-normal spring rain in the north, good for pastures, corn and hydropower. Paraguay is a mixed case, with the Paraná river running high.

The Paraguay River is another matter. At Asunción it stood at just 0.46 metres on 3 October, about two metres below normal, which keeps barge traffic constrained.

Chile is a quiet winner. A mostly wet winter left its reservoirs 22.6 percent fuller than a year earlier, with snowpack about 75 percent above normal.

What It Means for Markets

The clearest price signal is rice, driven mainly by India’s weak monsoon. Chicago rough rice futures closed at US$16.36 per hundredweight on 2 October, 47 percent above a year earlier.

That helps rice exporters in Brazil, Uruguay and Argentina but hurts importers.

Raw sugar rose about 10 percent in September as weather hurt crops in Thailand and India and rain slowed Brazil’s harvest. In Ecuador, rain has already halted the sugar harvest, forcing imports.

Palm oil, by contrast, has fallen 7.5 percent over the past month. Drought damage to palm trees in Indonesia and Malaysia shows up in harvests only months later.

That later squeeze could favour palm growers in Colombia, Ecuador and Central America in 2027.

Energy is a separate story. Brent crude near US$102 a barrel reflects the crisis around the Strait of Hormuz, not the weather.

Expensive oil still adds to the strain on importers already paying more for food. Asian LNG prices have also more than doubled in a year, which matters for Colombia as its dams run low.

Monetary policy is already reacting. Colombia is raising rates and Peru has little room to cut, while Brazilian economists expect inflation near 5 percent this year.

What Comes Next

The next markers are close. NOAA publishes its next El Niño update on 8 October, and Peru’s ENFEN follows on 15 October.

The event should peak between November and January, with the heaviest rain on Peru’s north coast in the southern summer. The tests for the Panama Canal and Colombia’s dams come later, in the dry months of early 2027.

Argentina’s payoff arrives with the harvest between April and June 2027. NOAA sees a 55 percent chance that the Pacific returns to neutral in that same window.

None of this is fixed. Forecasts shift, and a warm Pacific loads the dice rather than deciding outcomes.

It also does not mean the whole region loses. Argentina, Uruguay and Chile stand to gain, the canal is well above its 2023 lows, and Colombia has not ordered power rationing.

For investors, the weather has become a regional macro variable. In 2027 it sits beside interest rates and elections as a driver of Latin American markets.

More: Latin America news in English, every day from The Rio Times.

What is El Niño in simple terms?

El Niño is a periodic warming of the tropical Pacific that weakens the trade winds and shifts rainfall around the world. It returns every two to seven years and usually lasts about a year.

Which Latin American countries are most exposed?

Peru and Ecuador face coastal floods and losses at sea. Colombia and Central America face drought, with strain on power and food. Argentina, Uruguay and Chile are likely to benefit from extra rain.

Will El Niño affect travel in the region?

Possibly, in specific places. Floods have already hit coastal Ecuador, heavy rain is forecast for Peru’s north coast, and Ecuador may face power cuts. Bogotá’s water supply looks secure this time.

How long will this El Niño last?

The WMO puts the chance of it lasting through February 2027 close to 100 percent. NOAA sees a 55 percent chance of neutral conditions by April to June 2027, though price effects can last longer.

Sources: NOAA Climate Prediction Center, weekly Niño indices, 28 September 2026; NOAA ENSO diagnostic discussion, 10 September 2026; WMO, 3 September 2026; Carbon Brief, 21 September 2026; Scimex (Science coral study), 28 August 2026; CEPAL, 21 September 2026; Science (Callahan and Mankin), 18 May 2023; Gestión (BCRP forecasts), 18 September 2026; RPP (ENFEN), 29 September 2026; Infobae (PRODUCE anchovy season), 11 June 2026; Portal Frutícola (Preciso), 29 September 2026; Radio Pichincha, September 2026; Infobae (XM bulletin), 27 September 2026; Banco de la República, 30 September 2026; Infobae (Guatemala drought), 17 September 2026; Panama Canal Authority, 20 August 2026; La Prensa (Panama), 28 September 2026; Geological Survey of Brazil, 1 September 2026; Forbes Brasil (UNICA), 1 October 2026; Prensa Latina (Ecuador power), 29 September 2026; La República (Ecuador, SNGR toll), 3 October 2026; La República (Peru, ENFEN), 29 September 2026; La Estrella de Panamá (canal budget), 14 September 2026; Splash247 (Panama emergency, SK Gas), 26 August 2026; Bolsa de Comercio de Rosario, 18 September 2026; Elonce (IERAL estimate), 27 September 2026; ABC Color (Paraguay River levels), 3 October 2026; Trading Economics (commodity prices), 2 October 2026.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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