It’s no secret that hot peppers, more specifically capsaicin the compound in hot peppers that makes them so spicy can be harmful to mammals including humans if not consumed with care (make sure you use gloves while cooking with them). Animals can have allergic skin reactions to peppers if eaten or touched and of course be hard on their digestive systems as well. Birds however are immune to capsaicin.
You can more read about the immunity between birds and hot peppers.
Parrots are just as immune, however they have an extra special power against hot peppers. Their tongues are naturally dry. Instead of producing saliva on the base of the tongue, most of the saliva is found at the back of the tongue so food and go down smoothly.
In addition, unlike humans, parrots have very few tastebuds on their tongues and have naturally an inferior sense of taste and smell. They can’t taste the heat of a pepper or smell it.
Most diets that are common for parrots are lacking in Vitamin A which chili peppers have a healthy dose of. So adding chilis in addition to their normal feeding can help increase their essential vitamin intake.
Many parrot owners treat their feathery pet with fresh peppers, dried chili peppers or even ground red habanero chilis, but only as special treats. A diet solely of hot peppers may cause sensitivity or digestive issues.
Here is a video of a Mexican Parrot eating a spicy green pepper.