A closer look at droughts in Latin America and the Caribbean

For over 60 days, the inhabitants of Montevideo and surrounding areas faced an exceptional crisis following strains in drinking water supplies. In 2023, Uruguayans went through the worst drought since 1947. The unprecedented and severe drought affected over 80 percent of the country, leading to a 60 percent reduction in agricultural yields, widespread water shortages as water reserves reached historic lows, and overall heightened concerns about water and food security.

In Panama, the Panama Canal, a critical global trade artery, confronted a severe threat as an intense drought led to a drastic decline in water levels, disrupting navigation and revenues to the country’s economy, and highlighting the vulnerability of this crucial transportation lifeline to changing climate patterns.

These are only two examples that have captured public attention. While Latin America and the Caribbean (LAC) is blessed with abundant water resources, it grapples with complex challenges in water availability, quality, and distribution. Still, 150 million people in Latin America live in water-scarce areas where droughts are also very common.

In the Dry Corridor of Central America, drought conditions often magnify the structural water and food insecurity challenges, leaving vulnerable people with little choice but to migrate. In Colombia, Bolivia, Argentina, Mexico, Brazil, and other countries in the region, frequent and even multi-year droughts threaten freshwater sources for drinking and irrigation, affecting millions of people, including water systems for hydropower generation and navigation.

Droughts often emerge as a slow onset and multifaceted threat, affecting people, different sectors, and the economy, including the stability of natural ecosystems. As such, droughts can manifest in various forms and can carry distinct implications for different actors over time.  

• Meteorological droughts can affect water availability, impacting urban water supplies, industrial production, agriculture, and hydropower generation;
• Hydrological droughts, following reduced levels in rivers and lakes or water storage systems, have heightened consequences for regions reliant on these sources;
• Agricultural droughts can contribute to crop failures, impacting food security and agricultural sectors;
• and while natural systems exposed to drought conditions may lead to ecological imbalances, urban areas experiencing socioeconomic droughts can sustain reduced access to clean water, industrial interruptions, and livelihood setbacks, triggering resource competition and migration.

Over the past 15 years, droughts have become more frequent, prolonged, and extreme in LAC. Drought risks are expected to magnify in drier areas like northeastern Brazil and parts of Central America, the Caribbean, and Mexico--as changing climate and increased population pressures, continue to drive increasing water demands and reductions in water supplies. At the same time, traditionally water-rich areas such as the Amazon are becoming increasingly vulnerable to droughts, as seen recently from the devasting drought of 2023 that left millions of people with failed crops, drinking water shortages, power cuts, and wildfires that threaten the already delicate ecosystem of the Amazon Forest.

Alleviating the impacts of droughts, however, requires a transition from drought crisis responses to proactive drought risk management. Despite some countries, such as Brazil, Mexico, and Uruguay, have implemented regulations, policies, and other measures such as early warning systems and insurance mechanisms to deal with droughts, the region as a whole needs more cross-sector coordination and planning, including investments that can help mitigate impacts and build better drought resilience.

To help accelerate action, the Bank is working collaboratively to mobilize multi-sector expertise to develop analytics and promote a dialogue with countries in the region to bolster drought resilience. This includes improving the understanding of drought impacts on different sectors and economic growth, drought risk identification and prioritization, and the conceptualization of financial and policy tools to inform a menu of interventions to better manage drought risks as part of deep dives in selected hot spots.

These efforts will guide policies and strategy recommendations in LAC, paving the way for more concerted actions for drought resilience. This work further envisions a series of seminars to facilitate the dissemination of knowledge and awareness around droughts. As we are building this initiative by bringing other relevant actors within and beyond the Bank--drought is a challenge that calls for concerted action that needs and requires all of us to take part and work together.