Although the Amazon Basin contains giant reservoirs of fresh water, vast populations in arid or highland zones live far from these natural endowments. Rapid urban growth has outpaced water infrastructure,6 particularly given urban landscapes are estimated to store five times less water than natural environs.7 Mega-cities like Mexico City, Lima and São Paulo ballooned in size throughout the 20th century, often depleting local aquifers and relying on distant, overtaxed reservoirs.8
Many countries long focused on expensive supply-side projects—such as dams and aqueducts—but neglected maintenance and demand management. Even by the late 1990s, the limits of this approach were becoming clear,9 and today this legacy has left many communities ill-prepared for stress.10 For instance, São Paulo’s main reservoirs fell to only 4% of capacity during a 2014 drought, forcing emergency rationing.11 At the time, one climate scientist bluntly concluded, “Our policies on water management are unsustainable ... no city in south-east Brazil seems prepared to handle a drought like this.”
As a result of these dynamics, approximately 150m people in the region live in water-scarce areas.12 Subjective measures of water insecurity suggest that nearly half of Peruvians experienced moderate-to-high water insecurity in 2022, and 45% reported experiences of not having water available at all.13 According to analysis from the Inter-American Development Bank, when taking water quality and water management practices into account, nearly two-thirds of the region’s population face at least medium-high water stress.14 Such trends will only accelerate in light of global climate change: Andean glaciers, critical for year-round water across much of the region, have lost 30–50% of their ice in the past 30 years, shrinking dry-season water flows.15 “Historic” droughts have become the new normal, like the 2024 dry spell that broke records across the Amazon Basin.16
Recent severe droughts have had profound impacts: in Brazil, the 2024 Amazon drought led to critically low river levels that disrupted transportation and livelihoods.17 Indigenous communities along the Amazon River in Colombia faced isolation due to receding waters, necessitating emergency interventions to provide essential supplies.18 Chronic droughts in the Central American Dry Corridor have intensified food insecurity.19
Across the region, droughts threaten economic activity. Agriculture, which accounts for between 35% and 86% of freshwater consumption in Latin American countries,20 is particularly vulnerable to droughts. Countries like Argentina and Brazil—major global exporters of soybeans, beef and corn—have seen crop yields decline as a result of erratic rainfall patterns,21 driving up food prices and reducing export revenues. In Argentina, drought conditions during the 2022-23 season led to a 52% drop in soybean production,22 costing the economy an estimated US$20bn in lost agricultural output, equivalent to 3% of GDP.
Beyond agriculture, water shortages are disrupting energy production. Hydropower produces 45% of the region’s electricity.23 However, prolonged droughts have led to power shortages and increased reliance on fossil fuels, which in turn raise energy costs and contribute to inflation. In Chile, declining water levels in hydroelectric reservoirs have forced the country to import more expensive fossil fuels,24 pushing up electricity prices for consumers and businesses alike. Over 60% of the electricity in Brazil comes from hydropower.25 Although this figure is lower than it used to be, it still poses risks during unusually dry periods. In 2021 Brazil experienced its biggest hydrological crisis in decades (until the 2024 droughts), which led to a severe energy crisis and blackouts.
Taken together, poor water management can lead to large economic losses and has at times contributed to political instability.26 A 2020 World Bank report estimated that Colombia could forfeit between 1.6% and 3.1% of its total GDP owing to the impacts of droughts and floods, largely through job losses, productivity declines and reduced farm yields.27 The “dry shocks” of drought translate into lost revenue, higher costs and shakier economies across Latin America.
Water insecurity typically hits the poor and vulnerable hardest,28 often in cruelly ironic ways. In cities, wealthier districts enjoy swimming pools and lush lawns, while marginalised neighbourhoods queue at tanker trucks. In fact, when network supply falters, low-income families frequently pay more for water than affluent ones. In Lima, Peru, for example, residents of slums on the city’s desert hillsides rely on water delivered by trucks and pay US$3.90-US$10.40 per cubic meter,29 many times the average price (US$0.87) paid by higher-income households with regular taps.
This “poverty penalty” in water exacerbates inequality and undermines public health. Rural communities suffer as well: many depend on unreliable rain or springs. In Central America’s Dry Corridor (Guatemala, Honduras, El Salvador and Nicaragua), repeated droughts have triggered crop failures for subsistence farmers, contributing to hunger and pushing families to migrate.30 In 2015 alone, a severe drought left 3.5m people in Central America needing humanitarian aid. At the same time, unsafe water quality remains a silent emergency. With only about a third of wastewater treated in Latin America,31 contamination of rivers and aquifers is widespread. Poor communities often draw water from polluted sources, leading to diarrhoeal disease and other health burdens.
At the heart of the issue is the historical lack of comprehensive regional water management policies.32 Without stronger institutional frameworks, water scarcity threatens to become a significant constraint on economic growth, raising costs for businesses, increasing food and energy insecurity, and fuelling social unrest. These risks force difficult re-evaluations of the relationships between industry, agriculture, public investment and human consumption. In response, countries are pursuing technological innovations,33 policy reforms and community-led initiatives.34 ,35
Despite these efforts, challenges persist, including funding constraints, political instability and the need for regional co-operation. To mitigate water stress, stakeholders must implement water-conservation strategies, invest in diversified clean energy and sustainable infrastructure—particularly in areas such as storage, flood protection and water reuse36—and create regulatory frameworks that balance economic growth with environmental sustainability. Doing so will require additional infrastructure investment, integrated water management and policies that promote public-private partnerships (PPPs).37 Currently, only 6% of the region’s infrastructure PPPs focus on water and sanitation.38
This gap represents a major opportunity for the private sector. Businesses, investors and innovators are already finding footholds: AI-powered precision irrigation tools are cutting agricultural water use in Argentina;39 Chile’s mining sector is scaling up desalination to reduce freshwater withdrawals;40 and greywater treatment is reclaiming wastewater for reuse in cleaning and irrigation in Bolivia,41 among many solutions.
These innovations remain the exception, not the rule. But for forward-looking firms, that scarcity signals market potential. With water insecurity rising, businesses that offer solutions for supply resilience, affordability and quality will be well-positioned—not just to help communities adapt but also to thrive in emerging growth sectors.
Latin America’s water challenge will continue to test governments, but it also invites business leadership. Investing in water resilience is no longer simply a matter of sustainability. It is a business imperative, and one that offers rewards in the form of operational stability, consumer trust and first-mover advantage. From scarcity can come strategy. The companies that act now could shape the region’s most vital markets for decades to come.
1 C Rodríguez, B García, C Pinto, et al., "Water Context in Latin America and the Caribbean: Distribution, Regulations and Prospects for Water Reuse and Reclamation", Water 14, no. 21: 3589, 2022, https://www.mdpi.com/2073-4441/14/21/3589; World Bank data, https://data.worldbank.org/indicator/SP.POP.TOTL?locations=1W-ZJ.
2 A Wellenstein, M Makino, “The Latin American climate crisis is also a water crisis. How do we move forward?”, World Bank, November 14, 2022, https://blogs.worldbank.org/en/latinamerica/latin-american-climate-crisis-also-water-crisis-how-do-we-move-forward.
3 JM Libra, JS Collaer, D Datshkovsky, et al, “Scarcity in the Land of Plenty”, Inter-American Development Bank, January 2022, https://publications.iadb.org/en/publications/english/viewer/Scarcity-in-the-Land-of-Plenty.pdf.
4 “Running Dry: Addressing Water Stress in LAC”, UNDP, June 26, 2024, https://www.undp.org/latin-america/blog/running-dry-addressing-water-stress-lac.
5 S Kuzma, L Saccoccia, M Chertock, “25 Countries, Housing One-Quarter of the Population, Face Extremely High Water Stress”, World Resources Institute, August 16, 2023, https://www.wri.org/insights/highest-water-stressed-countries.
6 D Michel, “No City is an Island: Urban Water Security, Infrastructure, and Resilience”, Center for Strategic and International Studies, June 3, 2024, https://www.csis.org/analysis/no-city-island-urban-water-security-infrastructure-and-resilience; E Savelli, M Mazzoleni, G Di Baldassarre, et al., “Urban water crises driven by elites’ unsustainable consumption”, Nat Sustain 6, 929–940, 2023, https://www.nature.com/articles/s41893-023-01100-0.
7 D Michel, “No City is an Island: Urban Water Security, Infrastructure, and Resilience”, Center for Strategic and International Studies, June 3, 2024, https://www.csis.org/analysis/no-city-island-urban-water-security-infrastructure-and-resilience; HJ Jongen, GJ Steeneveld, J Beringer, et al., “Urban Water Storage Capacity Inferred from Observed Evapotranspiration Recession”, Geophysical Research Letters, 49 (3), February 2022, https://agupubs.onlinelibrary.wiley.com/doi/10.1029/2021GL096069.
8 J Wagner, ER Mega, S Sengupta, “Mexico City has Long Thirsted for Water”, The New York Times, May 18, 2024, https://www.nytimes.com/2024/05/18/world/americas/mexico-city-water.html; K Ritter, “Water Access in Lima Complicated by Inequality and Climate Uncertainty”, Circle of Blue, June 28, 2018, https://www.circleofblue.org/2018/water-policy-politics/water-rights-access/water-access-in-lima-complicated-by-inequality-and-climate-uncertainty/; B Miller, E Sweigart, “How Countries Manage Water: Peru”, Americas Quarterly, October 15, 2019, https://www.americasquarterly.org/article/how-countries-manage-water-peru/; J Langlois, “Severe Year-long Drought in Sao Paulo Threatens Water Supply for Eight Million”, Vice, October 26, 2014, https://www.vice.com/en/article/severe-year-long-drought-in-so-paulo-threatens-water-supply-for-eight-million/.
9 “New currents in water resources management”, IADB, August 1, 1997, https://www.iadb.org/en/news/new-currents-water-resources-management.
10 V Vazquez, A Serrano, R Cestti, et al., “Water Matters: Resilient, Inclusive and Green Growth through Water Security in Latin America”, World Bank, 2022, https://siwi.org/wp-content/uploads/2022/04/wb-siwi-watermatters-report-2022.pdf.
11 “Drought Shrinking Sao Paulo Reservoirs”, NASA Earth Observatory, https://earthobservatory.nasa.gov/images/84564/drought-shrinking-sao-paulo-reservoirs.
12 A Juarez-Lucas, LC Perez, HC Mizrav, “A closer look at droughts in Latin America and the Caribbean”, World Bank, March 21, 2024, https://blogs.worldbank.org/en/latinamerica/a-closer-look-at-droughts-in-latin-america-and-the-caribbean.
13 S Young, H Bethancourt, E Frongillo, et al., “Water Insecurity Experiences (WISE) Country Profiles”, Institute for Policy Research, Northwestern University, 2024, https://arch.library.northwestern.edu/concern/generic_works/xk81jk81j.
14 JM Libra, JS Collaer, D Datshkovsky, et al, “Scarcity in the Land of Plenty”, Inter-American Development Bank, January 2022, https://publications.iadb.org/en/publications/english/viewer/Scarcity-in-the-Land-of-Plenty.pdf.
15 A Wellenstein, M Makino, “The Latin American climate crisis is also a water crisis. How do we move forward?”, World Bank, November 14, 2022, https://blogs.worldbank.org/en/latinamerica/latin-american-climate-crisis-also-water-crisis-how-do-we-move-forward.
16 “Intense, Widespread Drought Grips South America”, NASA Earth Observatory, https://earthobservatory.nasa.gov/images/153447/intense-widespread-drought-grips-south-america.
17 M Poynting, “Amazon’s record drought driven by climate change”, BBC, January 24, 2024, https://www.bbc.com/news/science-environment-68032361.
18 S Grattan, “In Colombia, Amazon River’s extreme drought falls hard on Indigenous communities”, AP News, October 24, 2024, https://apnews.com/article/amazon-river-drought-indigenous-water-aid-colombia-a3a5cfacf4099c7372e52b30ab7e86d5.
19 “As drought breeds hunger in Guatemala, farming program aims to help”, Reuters, August 24, 2024, https://www.reuters.com/world/americas/drought-breeds-hunger-guatemala-farming-program-aims-help-2024-08-23.
20 O Salazar, C Chinchilla-Soto, S de los Santos-Villalobos, et al., “Water consumption by agriculture in Latin America and the Caribbean: impact of climate change and applications of nuclear and isotopic techniques”, Natural Resource Modelling, 49. 1-21, 2022, https://www.researchgate.net/profile/Antonio-Samudio-Oggero/publication/360238073_Water_consumption_by_agriculture_in_Latin_America_and_the_Caribbean_impact_of_climate_change_and_applications_of_nuclear_and_isotopic_techniques/links/626a8e7c6a39cb1180e25670/Water-consumption-by-agriculture-in-Latin-America-and-the-Caribbean-impact-of-climate-change-and-applications-of-nuclear-and-isotopic-techniques.pdf.
21 G Cabezas, “The Impact of Climate Change and Irregular Weather Patterns on Agriculture in South America in 2024”, Tridge, January 31, 2025, https://www.tridge.com/stories/the-impact-of-climate-change-and-irregular-weather-patterns-on-agriculture-in-south.
22 “Drought slashes Argentina’s soybean production by 51.5%”, Buenos Aires Times, April 7, 2023, https://www.batimes.com.ar/news/economy/drought-slashes-argentinas-soybean-production-by-515.phtml.
23 “Climate Impacts on Latin American Hydropower”, IEA, January 2021, https://www.iea.org/reports/climate-impacts-on-latin-american-hydropower.
24 “National Climate Resilience Assessment for Chile”, IEA, July 2024, https://www.iea.org/reports/national-climate-resilience-assessment-for-chile.
25 https://revistapesquisa.fapesp.br/en/shortage-risk/
26 J Vidal, “As water scarcity deepens across Latin America, political instability grows”, The Guardian, March 1, 2017, https://www.theguardian.com/global-development-professionals-network/2017/mar/01/water-scarcity-latin-america-political-instability.
27 “Colombia, Turning the Tide, Water Security for Recovery and Sustainable Growth”, World Bank, April 2020, https://documents1.worldbank.org/curated/en/099705005192290214/pdf/P1668950fc32ab00b092d60fe159922167c.pdf.
28 “Unequal access to water”, USGS, https://water.usgs.gov/vizlab/vulnerability-indicators/index.html#/en.
29 “Living in a high-tech world yet dragging an ancient problem: water insecurity”, Lancet Reg Health Am, November 12, 2024, https://pmc.ncbi.nlm.nih.gov/articles/PMC11605680/.
30 S Merken, “Torn Social Fabric: Water, Violence, and Migration in Central America”, New Security Beat, February 8, 2017, https://www.newsecuritybeat.org/2017/02/torn-social-fabric-water-violence-migration-central-america/.
31 JM Libra, JS Collaer, D Datshkovsky, et al, “Scarcity in the Land of Plenty”, Inter-American Development Bank, January 2022, https://publications.iadb.org/en/publications/english/viewer/Scarcity-in-the-Land-of-Plenty.pdf.
32 “Regional water action agenda: Towards universal access to clean water and sanitation”, CEPAL, March 31, 2023, https://www.cepal.org/en/notes/regional-water-action-agenda-towards-universal-access-clean-water-and-sanitation; V Vazquez, A Serrano, R Cestti, et al., “Water Matters: Resilient, Inclusive and Green Growth through Water Security in Latin America”, World Bank, 2022, https://siwi.org/wp-content/uploads/2022/04/wb-siwi-watermatters-report-2022.pdf.
33 “Chile has 28 desalination plants in operation and under construction”, Invest Chile, March 31, 2023, https://blog.investchile.gob.cl/chile-desalination-plants.
34 F Mares, “Government Unveils National Water Plan Amid CONAGUA Budget Cuts”, Mexico Business News, November 25, 2024, https://mexicobusiness.news/infrastructure/news/government-unveils-national-water-plan-amid-conagua-budget-cuts.
35 I Rolz, “A Mayan Farming Technique to Fight Guatemala’s Food Insecurity”, Think Global Health, August 8, 2024, https://www.thinkglobalhealth.org/article/mayan-farming-technique-fight-guatemalas-food-insecurity.
36 V Vazquez, A Serrano, R Cestti, et al., “Water Matters: Resilient, Inclusive and Green Growth through Water Security in Latin America”, World Bank, 2022, https://siwi.org/wp-content/uploads/2022/04/wb-siwi-watermatters-report-2022.pdf.
37 JM Libra, JS Collaer, D Datshkovsky, et al, “Scarcity in the Land of Plenty”, Inter-American Development Bank, January 2022, https://publications.iadb.org/en/publications/english/viewer/Scarcity-in-the-Land-of-Plenty-Water-Risk-in-Latin-America-and-the-Caribbean.pdf.
38 “Infrascope 2023/34”, Economic Impact, 2024, https://impact.economist.com/new-globalisation/infrascope-2024/downloads/Economist_Impact_Infrascope_2024_Report_ENG.pdf.
39 L Stones, C Malleret, F Pinnow, “Low-carbon milk to AI irrigation: tech startups powering Latin America’s green revolution”, The Guardian, January 30, 2024, https://www.theguardian.com/global-development/2024/jan/30/low-carbon-milk-to-ai-irrigation-tech-startups-powering-latin-americas-green-revolution.
40 A Gonzalez, “Why Chile’s mines are turning to the sea”, Mining Technology, May 29, 2025, https://www.mining-technology.com/features/why-chiles-mines-are-turning-to-the-sea.
41 S Holroyd, “From forest schools to greywater recycling – these start-ups are powering a green revolution across Latin America”, World Economic Forum, March 7, 2024, https://www.weforum.org/stories/2024/03/startups-latin-america-green-innovation-technology/; Aquakit Bolivia, https://aquakitbolivia.com/.
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