Climate change poses power risks in Central America

Significance Rising temperatures and reduced rainfall have strained power systems across Central America in recent months, with hydroelectric dams generating less power while demand rises. Calls are growing for investment to strengthen power systems and prepare the region for increasing demand, but structural issues complicate the outlook. Impacts Unreliable power supplies weigh on economic activity, threatening losses for businesses. Unreliable power could hit investor confidence, for example in manufacturing, affecting Costa Rica’s plans to become a semiconductor hub. Disruptions to daily life as a result of restrictions will increase protest risks. Other Latin American countries, including Colombia, Ecuador and Mexico, are likely to face similar power supply challenges.