What is El Niño and La Niña? 

El Niño is a natural climate phenomenon within the El Niño Southern Oscillation (ENSO) that significantly impacts global weather. The El Niño weather patterns can cause changes in normal ocean sea surface temperatures, which can cause changes to the global weather system. It occurs when sea surface temperatures in the tropical eastern Pacific rise by at least 0.5 degrees Celsius above the long-term average. This disrupts normal Pacific Ocean temperature patterns, altering wind directions and atmospheric circulation. As a result, warmer waters spread across the surface, releasing more heat into the atmosphere and leading to wetter and warmer air conditions. El Niño also influences tropical storm patterns, increasing their frequency in the tropical Pacific while decreasing them in the tropical Atlantic, including the southern US. El Niño events typically happen every two to seven years and can persist for about nine to 12 months, sometimes lasting even longer. The changes it brings can affect temperature and rainfall patterns, and can also lead to droughts or severe storms, which vary by location. 


Conversely, La Niña, also known as El Viejo or anti-El Niño, is a cold event characterized by strong trade winds pushing warm water towards Asia. La Niña affects winter temperatures, causing warmer conditions in the South and cooler conditions in the North, and can worsen the hurricane season. During La Niña, waters off the Pacific coast are colder and contain more nutrients than usual.


Probability of El Niño in 2023 

According to the Climate Prediction Center’s mid-May 2023 update, there is a high likelihood of El Niño developing by the summer of 2023, with a 55 percent chance of it being a strong El Niño. Additionally, there is an 84 percent chance of at least a moderate El Niño event taking place. The United States (US) National Oceanic and Atmospheric Administration (NOAA) also confirmed the emergence of weak El Niño conditions on 08 June. 


If a strong El Niño occurs, it is anticipated to result in a significant increase in temperature throughout the year and into 2024, potentially leading to a new global average temperature record. This can have a notable impact on weather patterns in the Americas and around the world. In 2020, despite the presence of La Niña conditions, temperatures reached the same record high as during the previous El Niño event in 2016. Moreover, ocean temperatures are currently above normal levels, suggesting the potential for a more pronounced impact from El Niño. Experts predict that this year, El Niño is likely to continue through the summer, fall, and winter seasons until 2024. 


Relationship between climate change and El Niño 

Rising temperatures associated with climate change amplify the effects El Niño. The exacerbation of climate change impacts by El Niño is a cause for concern, as it intensifies already experienced effects such as hotter heatwaves, more severe droughts, and increased instances of extreme wildfires. During El Niño, there is a significant transfer of heat and moisture from the tropics to higher latitudes. This moisture amplifies the greenhouse effect by trapping more thermal infrared radiation, resulting in further warming. 


As carbon emissions continue to rise, there are concerns that future El Niño events may increasingly push global temperatures above the 1.5 degrees Celsius threshold. Even a temporary breach of the 1.5 degrees Celsius threshold due to rising emissions and the occurrence of this year’s El Niño, as predicted by the World Meteorological Organization, could lead to a humanitarian crisis worldwide. 

Regional climatic impact of El Niño 

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During the summer months, El Niño’s influence on the US and North America is generally weak. However, it becomes more pronounced in the fall and winter. An El Niño typically brings drought to the western Pacific, rainfall to the equatorial coast of South America, and storms and hurricanes to the central Pacific. Generally, the following climatic conditions are observed during El Niño years: 





North Americas 


  • Drier and warmer conditions in western Canada, resulting in warmer winters and altered precipitation levels. 
  • Increased risk of forest fires.

North Americas 

United States 

  • Drier and warmer conditions in northern US and the Pacific Northwest, Rocky Mountains, Hawaii, and Ohio Valley 
  • Heightened precipitation in parts of California, leading to the risk of flash flooding and landslides; and in the southern regions, including the Gulf Coast and Southeast, leading to severe winter storms along the Gulf Coast (from Texas to Florida)  
  • Reduced hurricanes and diminished Pacific winds along the East Coast.  
  • Increased likelihood of above-normal tornado activity in central and south Florida 





  • While Bermuda is in the Atlantic Ocean, the influence of El Niño on atmospheric circulation patterns may indirectly affect weather conditions in the region, potentially leading to an increased likelihood of storms or hurricanes. 


  • Increased rainfall in southern regions, tropical cyclone activity in the Central pacific impacting Mexico’s western coastal areas like Baja California and the Pacific coast. 


Central Americas 


Costa Rica 

  • Reduced rainfall and drought conditions, in addition to above- average temperatures. 

South Americas 


  • The coasts of northern Peru experience warm weather with rainfall and risk of flooding. 


  • Chile has mild winters with higher temperatures and heavy rainfall, particularly in the central and northern regions. This can potentially lead to floods and landslides. 


  • Central Argentina has mild winters with higher temperatures and heavy rainfall in northern and central regions, increasing the risk of flooding. 


  • Drought and reduced rainfall and increased temperatures, particularly in the northern and western parts of the country. 
  • Higher risk of forest fires due to weather pattern. 


  • Lower rainfall in northeast Brazil, leading to drought conditions. Increased rainfall and risk of flooding in southern regions 


Potential risks of El Niño 

Economic Risks 

El Niño can have a lasting negative impact on a country’s output growth, especially in the tropics and the Southern Hemisphere. According to Bloomberg Economics, Argentina could experience an annual decrease in GDP of nearly half a percent point due to El Niño. Peru is also projected to see a GDP reduction of about 0.3 percent. The problem is further exacerbated by high commodity costs, as research by the International Monetary Fund (IMF) shows that El Niño can increase non-energy and oil commodity prices by four percent. Moreover, extreme weather associated with El Niño causes flooding, wildfires, hurricanes and other natural disasters. That could affect prices for foods, and even lead to economic stagnation and inflation. However, central banks may face limitations in their ability to intervene effectively, as addressing El Niño requires focusing on adjusting supply rather than demand. Here are some specific economic risks associated with an El Niño year: 


Commodity Price Volatility 

  • El Niño can cause fluctuations in commodity prices, particularly for agricultural commodities like corn, soybeans, and coffee. This volatility can impact domestic economies like Colombia and Brazil and global trade and economic stability. 
  • In Chile, heavy rains triggered by El Niño could impair access to the copper mines that account for nearly 30 percent of the world’s supply. This could lead to a decreased copper production and delayed copper shipments, potentially driving up the price of items like computer chips, cars and home appliances. 



  • Hydroelectric Power Generation: Changes in precipitation patterns during El Niño can impact water availability for hydroelectric power generation. Reduced rainfall can lead to lower water levels in reservoirs, affecting electricity production and potentially increasing reliance on alternative energy sources or imports. 
  • Energy Demand and Prices: Extreme temperatures associated with El Niño can drive increased energy demand for cooling or heating purposes. This can result in higher energy consumption and, consequently, increased electricity prices. 


Insurance and Financial Sectors 

  • Increased Insurance Claims: El Niño-related extreme weather events, such as hurricanes, floods, or droughts, can result in higher insurance claims for property damage, crop losses, and infrastructure disruptions. Insurance companies may experience increased financial burdens during such periods. 
  • Financial Market Volatility: El Niño’s impacts on commodity prices, particularly for agricultural commodities, can lead to market volatility and affect financial sectors tied to commodity trading and investments. 


Socio-Political Risks 

Migration and Social Impacts 

  • Displacement and Migration: El Niño-related extreme weather events such as floods, droughts, and storms can lead to population displacement and migration as people seek better living conditions or face the consequences of environmental disruptions. 
  • Social Unrest: Severe impacts of El Niño on agriculture, livelihoods, and infrastructure can contribute to social unrest and political instability in affected regions. For instance, protests and riots occurred in parts of Latin America during the 2015-2016 El Niño event due to rising food prices and economic hardship. 


Health and Humanitarian Consequences   

  • Disease Outbreaks: El Niño can create conditions favourable for disease outbreaks, such as the spread of waterborne diseases during flooding events or vector-borne diseases like dengue fever due to changes in precipitation patterns. In June 2023, Peru experienced one of the worst dengue outbreaks, with 130,000 cases, due to rains brought on by El Niño. 
  • Humanitarian Crises: In extreme cases, the combination of El Niño-related disasters and other socioeconomic factors can lead to humanitarian crises, requiring international assistance. For example, the 2017 flooding in Peru during a weaker El Niño event affected hundreds of thousands of people and resulted in significant humanitarian needs. 


Environmental Risks 

Fisheries Impact 

  • El Niño can affect marine ecosystems and fisheries. Peru, for instance, experienced a significant decline in fish catches during the strong El Niño event in 1997-1998, leading to economic losses and social unrest. 

 Wildfires and pollution 

  • During the El Niño events of 1982–83, 1997–98, and 2015–16, prolonged dry periods caused widespread fires and significant changes in tropical forest composition. This year, the same is expected to occur, heightening the risk of wildfires and resulting pollution in the US and Canada. El Niño winters bring warmer temperatures and less precipitation to the north, further exacerbating already concerning droughts and drying out timber, which can signal more destruction from fires. In June 2023, the effects of this on New York City skies, which were recently darkened by smoke and ash from the massive Canadian blaze, were evident–causing increased pollution and the associated risk of respiratory diseases. 


Agricultural Disruptions  

  • El Niño can disrupt agricultural production, leading to decreased crop yields and increased food prices. For example, during the strong El Niño event in 2015-2016, agricultural losses in Latin America were estimated at USD three billion. 

Business Outlook



Operational disruptions 

  • Extreme weather events such as hurricanes or flooding can disrupt business operations, leading to temporary closures, damage to infrastructure, and supply chain disruptions. 
  • Office closures or reduced workforce attendance  due to adverse weather conditions can affect productivity and service delivery. 

Increased costs 

  • Higher energy costs due to increased demand for heating or cooling during extreme temperature conditions. 
  • Increased insurance premiums to cover risks associated with natural disasters and property damage. 

Supply chain disruptions 

  • Delays or disruptions in the transportation of goods and services due to damaged or inaccessible roads, ports, or airports. 
  • Shortages of raw materials or components sourced from affected regions, impacting production schedules and increasing costs. 

Impact on agriculture and food industry 

  • Reduced agricultural output and crop failures can lead to price fluctuations and supply shortages, affecting food manufacturers and retailers. 
  • Increased costs of agricultural commodities and ingredients used in food processing. 

Market volatility and financial implications 

  • Fluctuations in commodity prices, such as energy, agricultural products, and metals, can impact businesses involved in commodity trading or manufacturing. 
  • Increased uncertainty and market volatility can affect investment decisions, stock market performance, and financial results for companies in the financial sector. 

Insurance and risk management 

  • Insurance companies may face higher claims and losses due to increased incidents of natural disasters, affecting their profitability and premiums. 
  • Increased demand for risk management and insurance products to mitigate the impact of climate-related risks. 


Technology and data management 

  • Increased demand for weather forecasting, climate modelling, and risk assessment tools to help businesses understand and manage the impact of El Niño. 
  • Opportunities for technology and consulting companies to provide innovative solutions for climate risk management, disaster recovery, and business continuity planning. 


  • Businesses are suggested to stay abreast of the environmental developments by closely monitoring the website of the National Oceanic and Atmospheric Administration (NOAA) via https://www.cpc.ncep.noaa.gov/. 
  • Develop contingency plans, forecast potential disruptions, and clearly communicate with suppliers, manufacturers, and customers. Ensure proactive and transparent communication with customers to minimize dissatisfaction. Set realistic expectations and provide updates throughout the process. Agile business models and cross-functional teams can enable rapid adjustments to changing circumstances. 
  • Optimize inventory management and maintain buffer inventory or safety stock to mitigate supply chain disruptions. If possible, explore local sourcing options for raw materials or components to reduce the reliance on long-distance shipping and minimize the impact of any potential disruptions in the transportation network. 
  • Assess potential financial impacts of El Niño on revenue, expenses, and profitability. Incorporate scenarios related to changing market dynamics into financial forecasting and planning processes. 

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