THE SILENT IMPACT OF DROUGHTS ON GLOBAL TRADE

The presence of more and more droughts has begun to alarm the population, but especially foreign trade. How do droughts affect trade? Here are three examples of how Mexico's trade has been affected by droughts.

Agricultural sector

Mexicans are concerned about the effects of droughts, since 2009, the country suffers at least 5 drought events per year. Agriculture is one of the main economic activities in the country; and within foreign trade, agri-foods are always positioned at the top of Mexico's most exported products.

Of the 134 million cultivated hectares in the country, 82% of them are directly dependent on rainfall. If the country continues to experience more and more droughts, irrigation of crops will have to be done directly through irrigation systems in both seasons, which would increase the cost of products.

The last record as of October 2023 indicates that 67% of Mexican territory is in some kind of drought condition. In addition to this, the government eliminated from the federal budget, the technification of irrigation in the countryside. In recent months we have seen an increase in the price of fruits and vegetables, and we have heard about their scarcity; however, little is said about the impact on livestock.

Many of the crops directly require rainfall behavior to feed livestock. Looking for alternatives in livestock feeding or integrating a technified irrigation system to these crops would also increase the scarcity and price increase in animal products such as meat, poultry, dairy products, sausages, etc.).

Panama Canal

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Water is an indispensable element in our lives and droughts have begun to affect almost every action we take. Another example is the crisis that the Panama Canal is experiencing due to droughts. The Canal requires large amounts of water to operate, especially to lower and raise the vessels, even the maritime crossing measurements are between 30% and 50% below normal.

The decrease in its crossings has led to higher shipping costs and delayed deliveries. Shipping companies are beginning to look at the option of opting for longer routes to avoid the Panama Canal, which not only increases the cost of shipping, but also increases greenhouse gas emissions.

Peter Eavis comments in an article on the Panama Canal drought published in The New York Times that "it is estimated that the transit of one ship in the Panama Canal requires as much water as is consumed by half a million Panamanians in a day." (Eavis, P., 2023, para. 3).

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Affectations in the manufacturing sector

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Manufacturing companies are beginning to suffer changes in their production chain due to the droughts that have occurred, especially those companies dedicated to the production of beverages.

Did you know that...?

-17,000 liters of water are required to produce just 1 kg of chocolate.

-It takes 15,400 liters of water to produce 1 kg of beef.

-8,000 liters of water are required to make a pair of jeans.

-It takes 5,400 liters of water to produce 1 kg of butter.

-It takes 3,400 liters of water to produce just 1 kg of rice.

Every industry depends on water to keep producing, and the amounts of water required just to manufacture a product are staggering. If we continue to face more and more droughts, water scarcity in the country will increase and the production of manufacturing companies will have to be drastically reduced.

The water shortages and droughts experienced in the north of the country in 2022, especially in Nuevo Leon, affected the production levels of manufacturing companies. "Water scarcity in Nuevo Leon was the second most mentioned obstacle for the performance of companies, with 35.2 percent of affectation." (Hernandez, E., 2022, para.9)

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Climate change is already a reality, and it is the main cause of droughts. Our country imports a lot of food, so local consumption has not been so scarce, however, our exports have decreased due to droughts, especially in fruits, vegetables, and grains; and this reduces our income as a country.

If we do not do our bit to combat climate change, droughts will increase and trade will be affected by higher prices and dependence on imports, since orchards will reduce their production, and domestic production will not be able to supply local consumption.

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