Wall Street and other economists say Ecuador faces the highest risk from El Niño in Latin America

In an analysis of the impact of El Niño, the Wall Street investment firm Goldman Sachs reported Tuesday that Ecuador will suffer the largest social and financial losses in Latin America. Calling the country “ground zero for catastrophic weather events,” the firm predicted Ecuador’s Gross Domestic Product (GDP) will contract 1.85 points in 2027 and possibly more.

In a separate report issued Monday, the Latin American Economic Commission (ECLAC) projected a much greater El Niño loss for Ecuador, negative 4.4 percent.

Goldman Sachs said Ecuador faced “months of coastal flooding resulting in the possible dislocation of thousands of residents and severe damage to infrastructure and property,” noting that the population in vulnerable areas has almost doubled since the devastating 1997-1998 El Niño.

The Wall Street bank added that drought conditions in the sierra “will likely result in the breakdown of the electricity supply,” creating hardships for residents and businesses.

The GPD loss projections by Goldman Sachs and ECLAC are more extreme than Ecuador Central Bank estimate of a 1.4% contraction.

In its analysis, Goldman Sachs predicted that Brazil’s economy will contract by 1.21 points as a result of flooding. It also predicted 2.57% GDP growth for Argentina, which it says will suffer a “minimal impact” from El Niño. “Agriculture in that country will benefit from losses in other areas of the region and exports will accelerate.”

In an interview on CNN en Español, a Goldman Sachs spokesman criticized the Ecuadorian government for not adding electric generation capacity following the 2024 energy crisis. “The country suffered prolonged blackouts in late 2024 and this should have been a wake-up call to strengthen the power grid,” he said, adding that the country has not even kept up with the 25% increase in consumer demand since the blackouts.

In a Quito radio interview, former Central Bank vice president Jorge Iglesias said Ecuador’s estimate of 1.4% GDP decline is “probably much too optimistic.” “We are already seeing the beginning of this El Niño and by all measures it is even stronger than 1997-1998, which brought the country to its knees.”

He recalled that in 1997 the central bank projected a 5% GDP contraction, but the eventual loss was 14.5%, which was a contributing factor to the banking crisis two years later. “We must be honest and admit that everything at this point is a guess,” he said. “What we know from experience and the information we receive from experts is that this El Niño will cause severe damage and disruption. We can only hope for the best possible outcome.”