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According to the most recent Data Center Hawk market update, in Q3 2023, the data center markets of Latin America faced a series of challenges that led to a temporary slowdown in their growth trajectory. Let’s dive into the details.

Macroeconomic Factors

The major Latin American economies have observed a decline in GDP growth, coming down to 1% from the post-COVID growth that ranged between 3 to 8% in 2022.

Inflation and Interest Rates

Inflation, which had peaked in late 2022, has since receded to more manageable levels. This decline can be attributed to the swift measures taken by several countries in the form of raising interest rates. The current focus now is to rejuvenate the economic growth in 2024.

Supply Chain Delays

Unforeseen delays in the supply of crucial infrastructure equipment have pushed back delivery timelines. Data center providers who did not make equipment procurement decisions two years ahead of time are now grappling with commissioning delays.

Power Constraints

Particularly in Querétaro, power constraints have become a major roadblock, causing delays in both the onset of construction and certain investment decisions. A few projects have either been postponed or cancelled due to these power accessibility issues.

Political Influence

In Colombia, the ongoing debate within the government regarding the ‘zona franca’ beneficial tax incentives is causing a halt in some projects. Progress is stalled as the industry awaits clarity on this matter.

Did you know? Latin America boasts an inventory of 750 MW of commissioned power spread across its data centers. São Paulo, Querétaro, Santiago, Bogotá, and Mexico City, the top five markets, account for 550 MW or 73% of the total capacity. São Paulo, in particular, continues to dominate with 270 MW of commissioned power.

Notable Trends & Markets

Querétaro’s Power Challenges

Rapid data center expansion in various markets often encounters power accessibility issues, and Querétaro is no exception. Limited power access and transmission infrastructure have led to construction delays and even prompted two global hyperscale data center providers to retract from the market. This power crisis gave birth to MXCD, the Mexican Data Center Association, which aims to work in tandem with the government’s Federal Electrical Commission or CFE. In a significant development, the Querétaro Energy Agency announced the Querétaro transmission PPP project in September, which promises the installation of 140 kilometers of high-voltage lines and two substations.

Prospective Expansion into Secondary Markets for AI

The conversation seems to be shifting towards AI and its feasibility in Latin America. The region could potentially support larger AI deployments in the future, given adequate power and fiber density. However, it’s anticipated that substantial AI deployments may not materialize until 2025, paving the way for future growth.

Looking Forward

Latin America’s digital infrastructure lags behind the rest of the developed world. For perspective, while the U.S. has approximately 66 MW of data center capacity for every 1 million people, Brazil, Mexico, and Colombia have 2.75 MW, 2 MW, and 0.8 MW, respectively. As hyperscale deployments come into play, it will bolster LATAM’s numbers. However, the rapid AI infrastructure growth in the U.S. will maintain this disparity. It’s crucial for Latin American leaders to prioritize data center infrastructure to bridge this digital divide.

Layer 9’s Bajio data center campus promises to address many of these challenges by bringing 96MW of needed capacity to the Queretaro region. If you’d like to learn more, please contact our team today.

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