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Data centers in Latin America are a great opportunity for economic growth

by | Apr 14, 2024

Data centers in Latin America have become one of the region’s fastest-growing sectors. Governments of different countries, companies, universities, and organizations in various areas are the leading groups in Latin America that demand these services.

According to data from the consulting firm Research and Markets, the market for Latin American data centers is experiencing considerable growth. Brazil is by far the country that continues to lead the way, but some countries, such as Mexico, Colombia, and Chile, are emerging, especially in recent years. Looking to the future, the outlook is more than positive, and investments in data centers in Latin America are expected to amount to $9.11 billion between 2021 and 2027, with a compound annual growth rate (Cagr) of 7.13%.

How many Latin American data centers are there and where are they?

According to data from Statista, Mexico and Brazil have the most data centers (154 and 150, respectively, although numerous new projects are underway).

The digital transformation, the virtualization of information, the need for data, and the rise of large-scale projects in countries with marked growth, such as Mexico, Chile, and Brazil, are encouraging these significant investments.

The current trend promotes the definition of spaces to locate data centers. At the same time, attention is drawn to the regulations that each country must implement in terms of the tax revenue that this can represent and envisions a different panorama in terms of the demand for services such as electricity, connectivity, and water, among others.

In the short term, the data center market in Latin America will witness the following trends:

  • Greater connectivity. 5G networks are beginning to reach these countries. According to Statista, the six leading economies in Latin America (Brazil, Mexico, Argentina, Colombia, Chile, and Peru) will invest about 120 billion dollars in integrating 5G networks. This will lead to intensive use in artificial intelligence and edge computing, requiring lower latencies or the metaverse.
  • Greater market regulation. The urgent need to commit to sustainability and the environment is causing greater concern about the energy consumption of data centers. Vertiv has indicated that Latin American data center operators will be more interested in certifying their operations. Linked to this circumstance, modular and prefabricated solutions will begin to gain ground, which are smaller but have everything necessary, including more sustainable cooling options.
  • Search for green and clean energies. Latin America will have to start betting more fully on alternatives such as green hydrogen and options such as implementing new battery technologies, such as lithium-ion.

Challenges and problems to overcome

One of the biggest problems to be solved is the political instability and economic uncertainty that sometimes affect Latin American countries. The difficulty of predicting IT investments in the coming years will be one of the main challenges to achieving complete consolidation of the growth of data centers in Latin America.

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New data center locator

The year 2023 was marked by the inauguration of data centers in Latin America, mergers, acquisitions, and the implementation of strategic initiatives, among which the creation of the Mexican Association of Data Centers (MEXDC) stands out. These actions aim to strengthen further a sector that continues its expansion driven by the growing demand for data and the ongoing digital transformation.

Brazil has emerged as the leader in the recent opening of new data centers in Latin America, followed by Mexico, Chile, and Colombia. “Brazil stands out with its renewable and clean energy matrix, positioning itself as a fundamental player in the future of sustainability in our sector. The country maintains its relevance at a global level thanks to this energy matrix and its ability to supply energy,” explained Alessandro Lombardi, CEO of Elea Digital.

According to Marcos Siqueira, VP of Operations at Ascenty, studies reveal that in 2023, Brazil led investments in data centers in Latin America, representing 40% of total investments in the region.

“Frost & Sullivan also noted that the annual growth rate between 2019 and 2023 reached approximately 12.9%. At Ascenty, operations also continued to expand. Currently, the company has 24 operational data centers and another ten under construction in Brazil, Colombia, Chile, and Mexico. During 2023, the construction of data centers was driven by 5G, the demands of Artificial Intelligence, and various demands that these new technologies created,” said Siqueira.

For Eduardo Carvalho, Managing Director of Equinix in Latin America, Latin America has been the fastest-growing technology region in the world due to the rapid adoption of mobile devices, an emerging fintech startup environment, and a younger, tech-savvy population.

“Latin America data centers will continue to grow in 2024. At Equinix, we have invested more than USD$1 billion in LATAM, demonstrating that the region is highly attractive to expand our data centers and our digital offering,” said Carvalho.

DCD carried out a market study on data centers in Mexico. According to the study, a direct investment of approximately 7 billion dollars is planned until 2027 in the Mexican data center industry. Of this amount, 3 billion dollars are already in the construction process, while 3.9 billion dollars constitute the planned and/or announced investment.

“Data centers in Latin America have become the nerve center of modern institutions and companies. Mexico has many advantages for more companies to invest in data centers that will strengthen the growth of the digital economy, generating new companies, more jobs and multiplying the opportunities of digital businesses,” said Amet Novillo, president of the Mexican Association of Data Centers.

In conclusion, the burgeoning data center industry in Latin America presents a compelling opportunity for both investors and stakeholders across the region. With Brazil leading the way and countries like Mexico, Chile, and Colombia swiftly emerging as key players, the sector is witnessing substantial growth driven by digital transformation, increased connectivity, and the imperative for sustainability. Despite challenges like political instability and economic uncertainty, the momentum remains strong, bolstered by strategic initiatives, investments, and the establishment of industry associations. As Latin America continues to position itself as a hub for technological innovation and infrastructure development, the outlook for the data center market remains promising, poised for further expansion and integration into the global digital landscape.

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