Colombia | El Niño is approaching: the sectors most likely to be affected

Summary

The El Niño phenomenon in Colombia, with a probability close to 90% by September 2026, would bring drought conditions and higher temperatures. This climate shock would affect food supply and increase electricity generation costs, leading to temporary inflationary pressures in the economy.

Key points

• Key points:
• The probability of at least a moderate event is close to 80%, while the probability of at least a strong event reaches 50%, and that of a very strong event reaches 25%. The most exposed regions would be the Caribbean, Andean, and Pacific regions.
• If it materializes, the agricultural sector would face lower yields, along with reduced availability of water and pasture. This would affect crops such as fique, cassava, palm, and barley, as well as milk production, reducing food supply and generating inflationary pressures.
• Given that around 66% of electricity is generated from hydropower sources, drought conditions would require greater use of thermal generation, which is more costly and dependent on gas, thereby increasing wholesale electricity prices.
• Higher electricity prices would affect energy-intensive industries—such as cement, steel, and chemicals—raising production costs and partially passing through to final prices. Additionally, increased gas demand for thermal generation could reduce its availability for industrial and transport sectors, creating additional inflationary pressures.
• Historically, El Niño has generated temporary inflationary pressures, particularly in food prices, with the magnitude depending on the intensity of the event.

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