Here Comes El Niño

Research evidence excerpt

Here Comes El Niño

Idea

July 6, 2026 07:00 AM GMT

Morgan Stanley C.T.V.M. S.A.+MLatin America | Latin America Thiago A. Machado, CFA

Economist

Here Comes El Niño Thiago.Machado@morganstanley.comJulia Rizzo +55 11 3048-6249

Equity Analyst and Commodities Strategist

Julia.Rizzo@morganstanley.com +55 11 3048-6114

El Niño is now a question of severity, not occurrence. The main Morgan Stanley & Co. LLC

macro risk is higher inflation — mainly in Brazil, Colombia & Nicolas Eterovic

Peru — that could delay rate cuts amid spillovers to EconomistNicolas.Eterovic@morganstanley.com +1 212 761-1245

expectations and core prices. Agri analysts flag crop-window Morgan Stanley C.T.V.M. S.A.+

risks, with sugar/palm oil most exposed, grains more mixed. Julia Lobato Barbosa

Julia.Lobato.Barbosa@morganstanley.com +55 11 3048-6016

Key Takeaways Ana Madeira

Evidence points to significant risks for a strong El Niño in 2H26; this is especially Economist

Ana.Madeira@morganstanley.com +55 11 3048-9582

inflationary for BZ, PER, and COL; neutral/beneficial for ARG, MEX, and CL Fernando D Sedano

Chief LatAm Ex-Brazil Economist

We run scenarios considering different El Niño intensities to assess how higher Fernando.Sedano@morganstanley.com +55 11 3048-6605

food inflation would impact the headline Julia Habermann

Research Associate

We expect central banks will look through the initial El Niño shock, but a very Julia.Habermann.Oliveira@morganstanley.com +55 11 3048-6096

strong event could delay easing cycles or keep policy restrictive for longer

Fiscal costs from El Niño should be manageable across most of LatAm, though

Peru appears particularly exposed while Argentina remains relatively insulated

Agri impacts should be crop-window and commodity specific, with the clearest