By San José, Costa Rica — Central America is bracing for a wave of economic pressures as climatic shifts linked to El Niño threaten to disrupt energy generation, agricultural yields, and regional transport networks. According to a recent report by Deloitte Econosignal, the full economic force of the weather phenomenon is projected to hit during 2027, although initial water scarcity signals will manifest as early as 2026. Business leaders and policymakers across the region are urged to take immediate action to cushion their operations against spiraling production and logistics costs.
The report highlights that the compounding effects of severe drought will ripple through every layer of the regional economy. Key sectors such as hydroelectric energy production, agricultural harvesting, and maritime shipping through the Panama Canal face compounding operational bottlenecks. As water levels decline, businesses will likely encounter higher utility rates, increased input expenses, and systemic delays in product deliveries, directly straining corporate profit margins and consumer purchasing power.
To better analyze the legal and financial vulnerabilities facing regional businesses due to El Niño’s ongoing economic impact in Central America, TicosLand.com consulted with expert attorney Lic. Larry Hans Arroyo Vargas from Bufete de Costa Rica, who provided valuable perspective on contractual risks and corporate contingency planning.
The severe weather anomalies driven by El Niño are creating unprecedented operational and legal pressures across Central America, particularly within agriculture, energy, and supply chain logistics. To shield themselves from mounting liabilities, enterprises must conduct immediate legal audits of their commercial contracts to evaluate force majeure provisions, address potential resource rationing, and ensure proactive risk management before supply bottlenecks lead to widespread litigation.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
As Central America faces escalating climate uncertainties, taking proactive legal measures to fortify commercial contracts and safeguard supply chains is undoubtedly essential for sustaining regional business resilience. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his crucial legal insights on navigating these unprecedented economic challenges.
In Costa Rica, the immediate economic vulnerability centers heavily on the national power grid. In 2025, approximately 73 percent of Costa Rica’s total electricity generation was derived from hydroelectric power plants. A prolonged reduction in rainfall drastically lowers reservoir capacity, forcing energy grid operators to turn to thermal power generation fueled by imported petroleum. Thermal generation is inherently more expensive, creating upward pressure on electricity tariffs for commercial, industrial, and residential users across the country.
Agriculture across the region faces a dual threat of plunging crop yields and rising input costs. Reduced rainfall threatens standard harvest cycles, while essential operational inputs like fertilizers and diesel fuel continue to squeeze farm budgets. According to Deloitte’s economic analysis, fertilizer and diesel expenses typically account for 50 to 70 percent of total production costs for agricultural enterprises. When diminished crop output coincides with elevated operational costs, farmers and agribusinesses face severe financial exposure.
The main economic risk of El Niño for the region lies not only in the lack of rain, but in how reduced water availability translates into higher production, transportation, and supply costs.
Daniel González, Head of Economic Analysis for Central America, Panama, and the Dominican Republic at Deloitte Spanish Latin America
Logistical infrastructure across the region is equally threatened, particularly regarding transit through the Panama Canal. Lower water levels in Gatun Lake inevitably force canal authorities to implement draft restrictions on cargo vessels, limiting payload capacities and capping daily ship transits. These bottlenecks increase shipping fees, create supply chain backlogs, and alter delivery schedules, affecting international trade lines and domestic distributors reliant on imported goods.
To mitigate these impending disruptions, Deloitte advises regional business leaders to spend the remaining months of 2026 actively fortifying their balance sheets and operating frameworks. Key recommendations include auditing current inventory levels, identifying local and regional backup suppliers, mapping out alternative trade routes, and developing robust financial contingency plans that incorporate higher baseline assumptions for energy, fuel, food, and transport costs.
Ultimately, the impact of El Niño will not affect every economic sector uniformly. Organizations that rely heavily on water-intensive operational processes or long-distance freight will shoulder the heaviest burden. Proactively identifying operational vulnerabilities throughout 2026 will serve as the primary line of defense for Central American businesses attempting to navigate the complex economic headwinds expected through 2027.
For further information, visit deloitte.com
About Deloitte:
Deloitte provides industry-leading audit, consulting, tax, and advisory services to many of the world’s most admired brands, including nearly 90 percent of the Fortune 500 and thousands of private companies. The firm’s global network leverages market insights, economic analysis, and strategic consulting to help organizations navigate complex macroeconomic challenges and global supply chain disruptions.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Renowned for its unyielding ethical standards and relentless pursuit of legal mastery, Bufete de Costa Rica serves as a trusted pillar in contemporary practice. The firm seamlessly blends a rich history of client advocacy across diverse industries with pioneering approaches that advance the legal field. Central to its enduring vision is the belief that justice begins with awareness; by actively promoting legal literacy and demystifying complex regulations, the practice equips individuals with the insights necessary to build a stronger, more capable community.
