Three regional climate simulations covering the austral summer season during three contrasting phases of the El Ni¿o-Southern Oscillation cycle were conducted with the Regional Spectral Model (RSM) developed at the National Centers for Environmental Prediction (NCEP). The simulated interannual variability of precipitation over the Amazon River Basin, the Intertropical Convergence Zone, the Pacific and Atlantic Ocean basins, and extratropical South America compare reasonably well with observations. The RSM optimally filters the peturbations about a time-varying base field, thereby enhancing the information content of the global NCEP reanalysis. The model is better than the reanalysis in reproducing the observed interannual variability of outgoing longwave radiation at both high frequencies (3--30 days) and intraseasonal (30--60 days) scales. The low-level jet shows a peak in its speed in 1998 and a minimum in the 1999 simulations. The lag correlation of the jet index with convection over various areas in continental South America indicates that the jet induces precipitation over the Pampas region downstream. A detailed moisture budget was conducted over various subregions. This budget reveals that moisture flux convergence determines most of the interannual variability of precipitation over the Amazon Basin, the Atlantic Intertropical Convergence Zone, and the Nordeste region of Brazil. However, both surface evaporation and surface moisture flux convergence were found to be critical in determining the interannual variability of precipitation over the southern Pampas, Gran Chaco area, and the South Atlantic Convergence Zone.