Why is Brazil the main Latam destination for data centers?

In the pandemic, there was an increase in hyperscale data center development, colocation and investment by cloud providers. (Disclosure/Disclosure)

Brazil has the main data center market in Latin America, driving more than 40% of the total investment in the region. Second report released by ReportLinker, in 2021, there are approximately 17 third-party providers operating in more than 44 facilities in the country. In addition, the market generated more than US$ 680 million in 2020 alone. The acceleration of the digital transformation, projected by the covid-19 pandemic, heated up the sector and there has been an increase in hyperscale data center development, colocation and investment by cloud providers.

One of the factors that cannot be ignored is the fact that Brazil is the most populous country in Latin America, with more than 210 million inhabitants. According to IBGE, 2020 data indicate that the country has about 24.9 inhabitants per square kilometer, which is already an attraction for the sector. Furthermore, cloud services companies want and need to be close to their users. Therefore, Brazil becomes an attractive option when choosing a location to house your data processing center.

Today, when we talk about data centers, we immediately think about latency, in other words, the time that data takes to travel gives rise to the destination. It is more practical to opt for a country that does not only serve the national market, but also the countries that are close to it. According to a list made by Data Center Magazine, with the top ten, among emerging countries, data center markets in the world, São Paulo was in fifth place. Brazil is the only country in Latin America to enter the ranking. Also in 2020, São Paulo received more than US$ 295 million in investment in the sector.

The trend is for this number to grow, especially with the 5G auction held. The arrival of this new technology will lead to a massive increase in data traffic generated by the Internet of Things (IoT), virtual and augmented realities, and Big Data. Investments in more data storage spaces will get even stronger.

The application of a more powerful internet in the country, such as 5G, is essential. Since, according to the Organization for Economic Cooperation and Development (OECD), we have 78.3% of Brazilians connected and Brazil occupies the 5th position in the ranking of countries in terms of population online. In other words, Brazilian society is super engaged in digital terms. With the Covid-19 pandemic, where data consumption increased, this reality became even more evident.

To support all this demand for connectivity and data transfer, data center infrastructure such as Colocation, for example, needs to be prepared to host servers of all sizes. According to the report released in 2016 by the Department of International Trade of the USA (International Trade Administration – ITA), Brazil was appointed as the fourth largest consumer of American data centers, behind Canada, Japan and the United Kingdom. These numbers are expected to grow, which shows a potential attraction for our market, following the trend that data consumption is increasingly close to the edge.

Another relevant item is the geomorphological and geological nature. Compared to other countries in Latin America, Brazil has low risk of natural disasters, being an important and advantageous point for the country as a choice for data center deployments. It still has a favorable extension for the installation of a network and a super connected continental area. Since there are three different points of arrival for submarine cables: São Paulo, Rio de Janeiro and Fortaleza. States receive data from different continents, which allows for more data traffic, with high speed and with lower latency.

Also according to the report released by ReportLinker, one of the main attractions of the country for the data center market is the fact that there are more than 75 installations, which include colocation, telecommunications and service providers, accredited by Uptime Institute Tier III. This certificate guarantees the uninterrupted operation of the data center, preventing it from being deactivated due to a power outage, for example. It is a very expressive number and that collaborates with the market offer, that is, one more point in favor of Brazil.

Another factor that proved to be very relevant to the sector was the introduction of the General Data Protection Law (LGPD). This brought even more credibility to the market, consolidating data processing and storage in the national territory, aiming at what is most important: security.

This combination of factors, combined with a market that historically has a gap of a few years in infrastructure and virtualization, place Brazil as one of the main countries to attract such demand. Despite all these benefits, it is still necessary to invest more in specialized labor, as the scarcity of the information technology market continues to recur in the sector. In addition, another point of attention is the need to install more capacity, as with the speed of digital acceleration and the arrival of 5G, the trend is to need more and more spaces for data storage.

What we can also highlight is that we have an energy matrix that is favorable to the development of the industry, combining business growth with the ESG agenda. With a mature free energy market, which enables good supply solutions through clean and renewable energy sources. In addition, our energy transmission and distribution infrastructure stands out in the Latin American scenario.

*Victor Caram is director of expansion for Latam at Odata

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