Drought And Its Effects on the Agricultural Sector
According to a study developed by the Bank of Mexico (Banxico), the agricultural sector and the manufacturing industry may lose the equivalent of 0.56 percent of gross domestic product (GDP) as a consequence of this year’s drought in the northern regions of the country, missing out on an equivalent of MX$102 billion (US$5.08 billion) for 2022.
Banxico explained that the impact of drought on the primary sector may be less immediate or evident compared to other natural events such as hurricanes or earthquakes. Nonetheless, if this phenomenon continues to intensify, it could have significant adverse consequences in the medium and long term.
The study titled “Drought in Mexico and Its Potential Impact on the Economy” revealed that the level of damage is directly proportional to the severity of the drought. The agricultural sector can experience yearly losses of 0.8 percent of the GDP from severe drought, 0.12 percent from extreme drought and 0.16 percent from exceptional drought.
The agricultural sector is always one of the first to be affected, since water represents a fundamental input for these activities. The value creation of this sector is often complex due to the tight supply chain in the production stages. Therefore, a lack of water in the early stages of cultivation can cause costs to spiral out of control, even making harvesting impossible.
Droughts are a cyclical weather phenomenon that affects Mexico every year. However, these events have intensified in recent years because of climate change. “Drought is associated with several factors, but climate change is the one having the heaviest impact worldwide. Some people still doubt it, but from a scientific point of view, its effects on rain and drought cycles are irrefutable. This inevitably means facing extreme weather events such as longer cycles of drought and more violent storms,” commented José Luis Luege, former Director of the National Water Commission (CONAGUA) in a Forbes interview.
In recent years, the size of the Mexican territory affected by droughts has increased, with the north-central region including the states of Coahuila, Baja California, Chihuahua, Baja California Sur and Sonora being the most susceptible. In May 2018, at least 7 percent of Mexico’s municipalities, distributed across 11 states, presented drought levels in the emergency category. By September 2019, that number increased to 18 percent distributed across 18 states, while by May 2021 that percentage was 35 percent distributed across 23 states. In fact, the most serious drought since 2012 was registered last year.
This year’s episode of drought has not yet concluded. It is estimated that 15.1 percent of the population of the country lives in regions that currently face water scarcity problems, Banxico pointed out.