Brazil and El Niño: Jackie, I can’t control the weather

Research evidence excerpt

Brazil and El Niño: Jackie, I can’t control the weather

Vinicius Moreira (55-11) 4950-3195 Mirella Sampaio (55-11) 4950-3289 Latin America Economic Research J P M O R G A Nvinicius.moreira@jpmorgan.com mirella.sampaio@jpmorgan.com

Banco J.P. Morgan S.A. Banco J.P. Morgan S.A. 07 July 2026

Gustavo Ribeiro (55-11) 4950-4059

gustavo.ribeiro@jpmorgan.com

Banco J.P. Morgan S.A.

Brazil and El Niño: Jackie, I The objective of this note is to use evidence from past El

Niño episodes as a guide to quantify the potential inflationary

can’t control the weather impact of the current phenomenon in Brazil in 2026–27. By

focusing on the historical transmission of weather shocks to

• With oil and fertilizer prices falling, El Niño is the new food supply, administered prices, and broader inflation

supply shock that poses upside risks to our CPI fore- dynamics, we aim to frame the range of plausible outcomes,

casts identify the channels most likely to matter, and set expecta-

• We estimate that a very strong El Niño could raise the tions for when the inflation impulse might emerge and how

long it might persist. CPI by 1 percentage point over a year

• Although the estimates appropriately reflect a similar The evidence suggests upside risks to our inflation outlook.

case, the 2015-16 episode heavily influences them However, in recent history, the only period in which Brazil

• In the short run, this could further complicate the faced an El Niño as strong as the one now building was the

BCB's effort to achieve its 3% target 2015–16 episode. That period coincided with prior years of

widespread drought, a necessary adjustment in key relative

The memorandum of understanding (MOU) signed by the prices (electricity bills and the exchange rate, most notably),

U.S.