Market Trends of South America Data Center Construction Industry
Cloud Segment Expected to Grow Fastest During the Forecasted Period
- The demand for cloud services is promising in Brazil, Chile, Argentina, and other countries. In Argentina, the evolution of the legal and regulatory environment for cloud computing has been faster and more in line with recent technological developments compared to other regional countries. Recently, Amazon Web Services announced plans to invest approximately USD 800 million over a decade in a new data center in Argentina.
- Cloud service providers are the main contributors to Latin America's data center storage market. Expanding cloud presence through establishing multiple cloud regions across countries like Brazil, Chile, Colombia, and Argentina is expected to drive high-performance storage adoption in the market. Software-as-a-service (SaaS) was the leading business model of Brazilian startups, accounting for more than 41% of emerging companies in the country. With platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS), SaaS is one of Brazil's three principal categories of cloud computing.
- In Mexico, 48% of businesses made investments in cloud-related goods and services in 2018. Microsoft announced "Innovate for Mexico" in 2020 to aid in the development of the country. The primary goal of the strategy is to hasten Mexico's digital transformation through democratizing access to technology. The corporation's five-year USD 1.1 billion investment plan would be implemented to build an area for cloud data centers in the country.
- The IT sector contributed 2.7% to Chile's GDP in 2021. Many data centers run by well-known companies, like Google, Century Link, Huawei, and HP, as well as regional telcos Entel and Gtd, are already located in Chile. As more players enter, Colombia is emerging as the next major Latin American market. Huawei targets a dedicated physical location for its cloud infrastructure and is expecting to activate a new cloud point-of-presence (PoP) in Colombia. The Argentine government is implementing a 'cloud first' policy by investing in and developing a robust national data center at ARSAT. Overall, the Latin American market for cloud data centers is expected to grow significantly.
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Brazil is Projected to Witness Majority Data Center Construction Activities
- Brazil and Chile hold the largest South American data center market shares. The Brazilian government provides incentives through the Regime Especial de Tributação do Programa Nacional de Banda Larga (REPNBL) program, which includes incentives for purchasing infrastructure that help improve colocation services in the country.
- Rio de Janeiro is expected to lead investments in public data processing and IT entities in Brazil in 2023, with close to BRL 592 million initially earmarked by the state's Proderj company for ICT services and expansions. In January 2023, Brazilian telecom services company Telecall announced plans to expand its fiber optics network to interconnect the main data centers in Rio de Janeiro. The three new redundant and underground fiber routes, totaling 80 km, will be deployed by Telecall to connect at least four new data centers that are being installed in Rio de Janeiro. Overall, Brazil is a major hub for data center locations.
- Chile has competitive energy prices, primarily fueled by plans to take advantage of its natural renewable energy generation potential over the coming years. Energy costs have dropped to one-third of what they were five years ago, mainly based on renewable energy that now makes up 46% of the total produced.
- Chile traditionally has some of the region's best telecommunications infrastructure, and two major fiber projects are underway to ensure it will have a fully redundant fiber backbone. These include the state-funded Fibra Optica Austral (FOA) submarine cable connecting the deep south and Gtd's 3,500 km north-south submarine cable. In 2022, colocation operators, such as Scala Data Centers, ODATA, Ascenty (Digital Realty), and EdgeConneX, were the major investors in the Chilean data center market.
- Chile has competitive energy prices, primarily fueled by plans to take advantage of its natural renewable energy generation potential over the coming years. Energy costs have dropped to one-third of what they were five years ago, mainly based on renewable energy that now makes up 46% of the total produced. Chile traditionally has some of the region's best telecommunications infrastructure, and two major fiber projects are underway to ensure it will have a fully redundant fiber backbone. These include the state-funded Fibra Optica Austral (FOA) submarine cable connecting the deep south and Gtd's 3,500 km north-south submarine cable. In 2022, colocation operators, such as Scala Data Centers, ODATA, Ascenty (Digital Realty), and EdgeConneX, were the major investors in the Chilean data center market.
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