South America, known for its vast network of rivers that collectively contribute around 30% of global runoff to the oceans, has faced severe drought conditions since mid-2023. These conditions have been driven by reduced rainfall and above-average temperatures (Figure 1).
Brazil’s National Center for Monitoring and Early Warning of Natural Disasters (CEMADEN) declared it the country’s worst drought since monitoring began in the 1950s. The prolonged dry period also affected neighboring countries, including Argentina, Bolivia, Chile, Colombia, Ecuador and Paraguay. Rivers across the region dropped substantially, including the Rio Negro — one of the main tributaries of the Amazon River — which fell to its lowest level in more than a century (Figure 2).
El Niño was partly to blame. This natural climate pattern, which develops every two to seven years, usually reduces rainfall across the Amazon basin and northeastern South America. The most recent El Niño began in mid-2023[1] and ended in spring 2024. This event contributed to the onset of the drought; however, the severity of the dry spell was much larger than usual. According to CEMADEN, the magnitude of the 2023 – 2024 drought was double that of the one in 2015 – 2016, the last time a strong El Niño occurred. [2]
So, what explains the severity this time around? Scientists believe it is due to climate change.[3] In the past, agricultural droughts of this scale occurred less than once in a millennium. But under the present climate, the return period is much more frequent at one in 50 years. As a result, researchers estimate that climate change has increased the likelihood by around a factor of 30, which poses significant challenges for a range of industries.
The severe and widespread nature of the South American drought caused diverse impacts across multiple sectors, often in interconnected and compounding ways. Here are five major consequences:
According to the Intergovernmental Panel on Climate Change, severe droughts, such as those in 2015 – 2016 and 2023 – 2024, will become more frequent in the future.[9] For local and global risk managers, the challenge is identifying and managing the multifaceted risks that stem from these events. An effective approach involves combining climate projections with traditional risk models (e.g., actuarial models) to explore a variety of future business scenarios. Consideration of multi-sectoral dependencies in these scenarios can add significant value — for example, exploring how drought concurrently affects both agriculture yields and crop transportation costs. This approach helps companies screen their entire portfolio of assets, operations and supply chains to identify exposures now and in the future. A deep dive of the most at-risk exposures can then guide decisions about how best to avoid, reduce and transfer risk.
