The increase in hyperscale sites for global cloud providers in Latin America is expected to trigger a 7.6% compound annual growth rate of the market between 2021 and 2026.
According to our sources, the main driver behind this increase is the development in modular, ‘edge-of-network’ data centres that are getting closer to the end-user to increase speed.
In Latin America, telecommunication suppliers favour the use of modular models considered more energy efficient and designed to sustain high-track density saving 30% of the average cost of standard data centres. The technical complexity of these investments is also generating a significant influx of IT and infrastructure providers that partner with data centres offering digital solutions, installation and physical security services.
The director of a data centre consultancy business, active across Latin America, gave us his perspective, “The data centre market is growing in Latin America due to the increasing demand for data (financial, operational and public sector). The market, excluding Brazil, is still in its infancy though which presents a great opportunity for investors. Mexico, Chile and Colombia are all doing well.”
A US-based cloud and data centre expert agreed, “Data centres are moving closer to the end user because there is more information to process and there are speed advantages when processing closer to the user.”
“Data centres are moving closer to the end user because there is more information to process and there are speed advantages when processing closer to the user.”
Cloud and data centre expert, US
Major technology companies such as Microsoft and Brazil’s Ascenty have carried out large data centre investments in the region. Brazil is the regional leader in data centre facilities, followed by Chile, Colombia and, to a lesser extent, Mexico. Investors are attracted to well-connected urban areas with high consumer demand. Thus, investments in Brazil and Chile are expected to attract the highest investments due to high level internet penetration among consumers and growing cloud-based services.
International connectivity is also an important consideration, as the data centre consultant outlined, “There is potential to grow in all Latin American countries but it is important to note that the most attractive ones have good connectivity with other continents. For example, Colombia has 10 submarine cables.”
“There is potential to grow in all Latin American countries but it is important to note that the most attractive ones have good connectivity with other continents.”
Director, data centre consultancy, Brazil
The main risks for investors are regulatory and political instability which create de facto no-go areas which remain unattractive for data centre development. Countries like Venezuela, Bolivia and Paraguay risk lagging behind.
The consultant agreed, “The main risk to growth that I can see is investor assurance and maybe this explains why, to date, they have focused on countries with lower levels of political and economic risk. Having said that, Colombia is suffering from significant social unrest but we have recently been appointed to project manage two data centres under construction there.”
The US based expert shared this view, “Political risk is the big one in Latin America. The political situation in Colombia, Chile and even Argentina is challenging. Mexico isn’t stable either but still attracts investment because of its proximity to the US. In Brazil, projects have been backed by the government but COVID-19 has stalled them. Costa Rica would be great but they don’t have many people [and so less data], and data centres are all about numbers.”