Latin America Becomes Key Data Center Investment Hub

Latin America has become a strategic focus for data center investments, with Brazil, Mexico, Chile, and Colombia leading the way. These investments are driving digital transformation, generating employment, and improving local infrastructure. However, they also bring environmental challenges related to resource consumption and the need for more responsibility in constructing these centers.

In recent years, Latin America has attracted data center investments from technology giants eager to capitalize on the region's strategic geographic location and relatively low operating costs. 

In 2023, Brazil led data center investments in Latin America, accounting for 40% of the region’s total investment, followed by Mexico, Chile and Colombia. According to Cushman & Wakefield's Americas Data Center Update report, São Paulo, Santiago, Bogota and Queretaro have established themselves as the top four data center hubs in the region, ranking as secondary markets in terms of colocation and hyperscale presence.

Mexico

Queretaro has become the main data center cluster in Mexico, with its robust digital infrastructure, low-latency connections to the United States, government incentives, and low risk of natural disasters attracting Central American developers. 

Operators such as Ascenty, ODATA, KIO Networks, Equinix, and Telmex have a significant presence in the state. KIO Networks has begun constructing its 12 MW QR02 facility and acquired additional land for future development.

In May, Microsoft inaugurated its first hyperscale cloud data center region in Mexico, located in Queretaro. Google Cloud also announced its first data region in Mexico, set to open in Queretaro in 2025. This investment follows similar commitments from Amazon Web Services (AWS), which plans a new region in Mexico by early 2025. AWS will invest more than US$5 billion in the country over the next 15 years, creating three availability zones to improve the availability and security of cloud applications.

Brazil

São Paulo stands out as the main data center hub in Brazil, benefiting from its access to 10 of the main submarine cable routes connecting to South America. This market has seen a significant increase in investment by regional and international operators, with Ascenty, Equinix and ODATA being the main operators in the region. 

As for hyperscalers, Microsoft has launched projects in Campinas and Hortolandia, the first of their kind in Latin America. AWS, Google, Huawei, Tencent and Oracle also have a presence in the region's cloud market, with expectations of continued growth in the sector.

Chile

The country announced the construction of 28 new centers in the coming years, marking significant progress since Google opened its first data center in Quilicura in 2015. Over the past 12 years, 16 additional data centers have been approved in the Santiago metropolitan area, reflecting accelerated growth in the country's digital infrastructure.

Santiago has experienced significant growth in the data center sector, with a cable landing station that facilitates six subsea connections to major Pacific markets. 

Until 2021, Chile’s market was dominated by local companies with modest colocation offerings, but the entry of Ascenty, ODATA, Scala Data Centers, and EdgeConneX has accelerated expansion. Chile's mix of renewable sources, including hydro, wind, and solar, which account for nearly half of the country's total power generation, has driven this growth. Santiago is anticipated to continue expanding its data infrastructure as hyperscalers expand their presence.

Colombia

Bogota has become the main hub for data center development in Colombia, due to its strategic location and solid digital infrastructure. The city has access to superior power generation and distribution infrastructure compared to other Colombian cities. 

Since 2017, Equinix and ODATA have established operations in Bogota, followed by Ascenty, KIO Networks, Scala Data Centers, and HostDime. In 2022, AWS announced a local zone for Bogota, and in 2023, KIO acquired a data center with 6 MW of capacity, while HostDime added 3 MW of additional capacity.

Facing the Future

According to Social Geek, Latin America's strategic location offers technology companies the ability to improve latency and provide faster, more efficient services to local users. The relatively low cost of land and labor compared to other global markets represents a considerable economic advantage for building and operating data centers in the region. 

Gerardo Sandoval, Cloud Architect & Data Scientist, highlights that the expansion of data centers brings several advantages, such as access to content with lower latency, some content independence within their country, and compliance in sectors such as banking that can now access managed services within the country. 

"This infrastructure not only improves connectivity and disaster recovery capabilities, but also fosters economic growth and local employment opportunities," said Sandoval.

However, the expansion of data centers also poses challenges. Activists are pushing for greater environmental compensation and transparency in the water and energy consumption of these centers, especially in countries facing drought  issues like Chile and Mexico.

Although many data centers promise to use renewable energy in their operations, a recent Rest of World report mentions activists' intention to halt the construction of new centers and demand greater environmental responsibility from the companies behind them. 

In Mexico, to meet the industry's energy needs, the Mexican Data Center Association (MEXDC) has projected an estimated investment of US$9 billion over the next five years, with funds coming from both established and new investors, as previously reported by MBN. 

An estimated total of US$9 billion in direct investment and US$28 billion in indirect investment is anticipated over the same period to build the necessary supporting infrastructure. This increase in investment is expected to contribute significantly to the national GDP, which is estimated to reach 5.2% by 2029.