Risk Center

Drought in Central America

Due to an unprecedented dry season in Central America, parts of Mexico and Texas are experiencing severe water shortages that have affected agricultural production across these areas. The drought could create manufacturing disruptions in Mexico City.  

Water shortages have also been reported in other Central and South American countries, with Colombia and Ecuador particularly affected. With these areas experiencing extreme shortages of water, impacts including drought, power outages, and production stoppages will continue until the start of the rainy season in late May to early June. 

Lower than normal rainfall reduces water supplies 

In recent months, a majority of Mexico, Central America, and northern parts of South America have seen significant deficits in rainfall. From the start of 2024 until late April, most locations have received 50-75% of their normal rainfall, with some areas in Mexico seeing as low as 5-10% of their normal rainfall. January to April is the dry season with more limited rain across this region, however, rainfall this year has been even more suppressed than normal.   

The lower-than-normal rainfall totals have decreased groundwater supplies and water supplies in reservoirs needed for manufacturing and irrigation uses across the region.  

Impacts on agricultural products in Texas and Mexico 

The ongoing water shortages have led to impacts on agricultural production in Texas and parts of Mexico. The drought conditions have been particularly impactful on citrus and sugar products grown in Texas. The state is the third-largest citrus producing state in the United States with the majority of citrus grown in a 27,000-acre area in the Lower Rio Grande Valley on the southeastern tip of the state. This area relies on water supplies from the Rio Grande River for irrigation in growing water-intensive crops citrus and sugar.  

Under the 1944 Water Treaty between the United States and Mexico, Mexico is required to send the U.S. 1.75 million acre-feet of water from the Rio Grande over a five-year cycle. However, data from the International Boundary and Water Commission (IBWC), which oversees the treaty, indicates that through year four of the current five-year cycle, water deliveries from Mexico to the U.S. only amount to roughly 30% of the volume stipulated by the treaty.  

Congress members from Texas have met with the United States’ Secretary of State to ask for help enforcing the stipulation of the treaty. On May 3, several Texas politicians announced a new piece of legislation to give officials more authority to enforce compliance with the terms of the treaty. It is unclear if the legislation will receive enough support to be enacted.  

The lack of rainfall in Texas over the past year along with the gap in water deliveries from Mexico have led agricultural groups within the state to voice concern that the current water shortages will negatively impact harvest for this season. In February 2024, Rio Grande Valley Sugar Growers Inc. was forced to halt production at its sugar mill in Santa Rosa, Texas due to a lack of water. The plant was the last remaining sugar mill in Texas. The site processed approximately 1.5 million tons of sugar annually and was a one of the top ten sugar producers in the United States. This closure has complicated sugar processing for sugar farmers in the area.  

The government of Mexico has blamed the gap in deliveries of water on the drought conditions that its own country is facing and notes that the treaty allows for some adjustments to the delivery due to extreme weather. As drought conditions worsen, government officials in Mexico are increasingly under pressure to conserve water from the Rio Grande River and other sources to protect growers in Mexico. As Mexico contends with drought conditions and water shortages, it has relied on water supplies from the Rio Grande River to bolster its water reserves.  

In April, the sugar harvest in the Mexican state of Veracruz was significantly hampered by drought, with a roughly 300,000 ton reduction in sugar harvested in the current cycle. Veracruz is Mexico’s largest sugar producing state with more than triple the amount of harvestable area than the next closest state. Sugar production in Veracruz makes up approximately 38% of sugar production in Mexico.   

Water shortage in Mexico City could lead to production disruptions 

Mexico City is among the areas hardest hit by the current drought conditions.  The area in and around Mexico City has been one of the driest areas in the country. The period of January 1 to April 25, 2024, has been registered as the driest period since 2000, with the city only receiving approximately 35% of its normal rainfall.   

The severe dry season in Mexico City is posing a threat to manufacturing operations. Water rationing or shortages could force companies to suspend production, especially in the water-intensive manufacturing sectors of chemicals or technology. Business associations in the Iztapalapa borough of Mexico City have been warning for the past year that shortages could cause production stoppages in industrial areas, while government officials have been steadily tightening water supplies since October 2023 to manage the supply shortages.  

Mexico City is an important manufacturing center for many industries, including makers of textiles, chemicals, pharmaceuticals, electronics, and steel products.  

Colombia and Ecuador ration water, reduce workdays  

In South America, Colombia and Ecuador began rationing water at the beginning of April. Authorities in Bogota, Colombia divided the city into nine areas that are cut off from the water supply on a 24-hour rolling basis. While the impact so far has been mostly residential, businesses are also threatened by shortages in water supplies.  

In early April, the government of Ecuador declared a state of emergency due to power shortages. The country is heavily reliant on hydroelectric power and the current drought has impacted energy supplies. In April, government officials asked employees across all sectors to stay home and not go to work to reduce consumption. Officials in the country have temporarily suspended the scheduled power cuts from May 12. Since April 17, power outages due to supply shortages had occurred daily across the country and lasted between 6-13 hours. 


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