El Niño could cost Colombian industry more than $10.7 billion

The arrival of El Niño earlier than anticipated has raised alarms across Colombia’s business sector, with potential economic losses estimated at over 10.7 trillion pesos for the country's industry. According to Zurich Insurance, based on reports from the National Institute of Meteorology and Hydrology (Ideam), climate conditions linked to the phenomenon have already appeared in the Pacific Ocean, three months ahead of expectations. The probability of El Niño reaching a "very strong" intensity stands at 63%, which would make it one of the most severe episodes recorded since 1950. Colombia’s industrial sectors, particularly manufacturing, agriculture, and commerce, face heightened financial risks due to this early onset. The effects could disrupt production in key regions such as the Caribbean, Andean, and Pacific areas, where much of the nation’s output is concentrated. Reduced rainfall levels threaten reservoir levels, leading to water shortages and increased pressure on hydroelectric power generation, potentially raising operational costs for businesses. Zurich Insurance warned that even without El Niño, inflation is likely to continue rising. The company urged the private sector to strengthen resilience strategies and risk management practices, emphasizing that these factors are no longer just environmental challenges but also financial and operational ones. Nicolás Marchant, CEO of Zurich Insurance, stated that the early arrival of El Niño highlights the need for immediate decisions. He emphasized that business leaders must prioritize proactive prevention to safeguard employees and ensure operational continuity amid impending energy and water-related challenges. In response to the situation, Zurich Insurance outlined four priority actions for businesses to take. First, reinforcing energy and water protection through measures such as water conservation, storage optimization, consumption efficiency, and backup electrical systems. Second, diversifying supply chains to reduce dependence on regions vulnerable to droughts and reviewing inventory levels of critical raw materials. Third, strengthening fire prevention by inspecting extinguishing systems, evacuation plans, and maintaining electrical and air conditioning equipment due to rising temperatures. Lastly, advising companies to continuously monitor Ideam alerts and review their policies for physical damage and business interruption to ensure coverage aligns with risks posed by extreme weather events. The insurance company stressed that the early arrival of El Niño requires the private sector to adjust its operational and logistical strategies now to minimize impacts on business continuity during the second half of the year. Meanwhile, Minister of Mines Edwin Palma has reportedly sent a letter to the Regulatory Commission of Electric Energy (CREG) urging them to expedite measures to address the challenges posed by El Niño. This move underscores the urgency felt by government officials and private entities alike in preparing for the potential disruptions caused by the climatic phenomenon. The situation has prompted discussions among various stakeholders regarding the best ways to mitigate the effects of El Niño on Colombia’s economy. Businesses are being encouraged to reassess their contingency plans and invest in infrastructure that can withstand prolonged periods of drought and heatwaves. Additionally, there is growing emphasis on developing long-term strategies that incorporate climate change projections into planning processes, ensuring that both public and private sectors are better prepared for future climatic extremes. As the country braces for the impacts of El Niño, the focus remains on implementing effective measures to protect economic stability and ensure sustainable development.