A large volume of natural storage within a drainage basin has a marked effect on its regime of hydrologic extremes. In this paper, the carry-over effects from one year to the next that result from large interannual storage are quantified for the Lad¿rio gauging site below the Pantanal, the world's largest wetland, in the drainage basin of the River Paraguay. The presence of carry-over effects introduces correlation between extremes in successive years, with the consequence that commonly used methods for calculating the frequencies of extreme events, all of which assume that values in successive years are statistically independent, are no longer appropriate. When serial correlation between annual flood peaks at Lad¿rio is allowed for, the estimated mean length of longest drought period in a 100-year period is extended by two years. The possibility that other factors contribute to the serial correlation in Lad¿rio flood peaks is considered: no evidence was found of correlation with ENSO events as defined in the literature.