Data bites

The future of data centres in Chile. 

Chile has long positioned itself as a prime destination for international and domestic investors, leveraging its competitive tax regime, robust state institutions and economic stability. These factors have made Chile a hotspot for data centre investment. 

Despite these advantages, one of the primary regulatory challenges facing Chilean data centres is compliance with the General Law on Environmental Bases (Ley 19.300), which mandates stringent environmental impact assessments. “The Chilean environmental law is outdated,” remarked the industry insider. “It doesn’t meet the European standard, which sets the cannon for the industry.” Recent amendments to the Water Code have further complicated the situation by prioritising human consumption and environmental sustainability over industrial use.  

These regulations reflect the growing concern over water scarcity in Chile, which has faced significant drought conditions recently. Data centres, which typically require vast amounts of water for cooling systems, are thus under increasing scrutiny. However, “if you can’t develop your data centre in central Chile due to water scarcity, you can do it in southern Concepción, where water supply is more stable,” informed a local data centre business customer. 

“if you cant develop your data centre in central Chile due to water scarcity, you can do it in southern Concepción, where water supply is more stable.”

Local data centre business customer, Chile

Additionally, data centres must adhere to the Personal Data Protection Act (Ley 19.628), which imposes rigorous data security measures. While these regulations are designed to protect personal information, they add another layer of complexity for data centre operators.

As a country, we don’t have the same advantage as before.” A telecom expert and consultant continued, “Now, investing in Chile and Peru, for example, is essentially the same. Investors will quickly turn to Peru if you add another obstacle in Chile.” However, opportunities do exist within the regulatory framework. An industry insider confided, “Investors’ expectations are quite optimistic.” Elaborating that “one data centre from Microsoft and one from Google are in the pipeline.”  

The Law on Non-Conventional Renewable Energies (“NCRE”) offers incentives for sustainable practices and integrating renewable energy sources. By leveraging these incentives, data centres can reduce their environmental impact and align more closely with national sustainability goals. However, the industry insider stated, “We must be careful in the trade-off between the public interest and the right incentives for private investment.”   

The recent ruling by a Chilean tribunal to block the opening of a USD 200 million data centre in Santiago highlights the severity of these challenges. “What happened with Google in Cerrillos is bad because we need many data centres in Chile.” The telecom expert exclaimed, “It is a bad sign for the industry.” 

The tribunal’s decision was based on the excessive water demand of the centre, which would have required 7.6 million litres of water per day for its cooling systems. “The biggest problem today with data centres is energy,” conceded the expert. “However, there are initiatives to consume desalinated water, which allows you to have greener data centres.” 

This ruling directly impacts Google’s plans, who “submitted a project with precarious water-management,” cited the industry insider, necessitating the adoption of alternative cooling technologies. “Energy is a significant bottleneck,” confirmed the small data centre owner.Costs are rising, and the government wants you to use as much renewable energy-sourced energy as possible.” 

Chile’s investment climate also faces challenges related to tax and legal issues. Investors need assurance of stable policies beyond political cycles to bring their money into Chile. “The only way to ensure investors bring their money to Chile is certainty—tax and legal certainty,” affirmed the local data centre business customer. Complicated tax legislation and the lack of “tax invariability” make it difficult for foreign investors. Natural disasters like earthquakes pose risks, although these do not affect the entire country. 

“The only way to ensure investors bring their money to Chile is certainty—tax and legal certainty.”

Local data centre business customer, Chile

Chile’s well-developed telecommunications infrastructure and strategic geographical location present significant opportunities. “Chile is well-connected, and we could become data sellers; currently, we’re net importers of data… I imagine that’s why Google is interested in installing its data centres here,” commented the telecom consultant. 

“The government is promoting a National Plan to complete over 50 data centres by 2030,” informed the industry insider. “I don’t think that is viable; we have only 22 today. The good news, however, is that they plan to decentralise the data centres” from the central Metropolitan and southern Biobío Regions. The entry of new players like Amazon in satellite connectivity could also significantly change the market dynamics. “It is practically monopolised by Elon Musk’s Starlink and Musk charges whatever he wants,” added the insider. 

Chile’s advanced communication infrastructure and favourable geography make it an attractive option for data centres, especially compared to larger countries like Brazil and Argentina. Its Pacific Ocean coast, with fewer submarine cables than the Atlantic coast, further enhances its appeal. However, Chile must commit to a state policy and make “a serious decision on whether we want to develop the data industry (or not).” The industry insider concluded, “Today, that decision is unclear.”

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