Major tech firms, including ByteDance, are investing in large-scale data center expansion in Brazil and other Latin American regions facing water scarcity. Critics warn that these facilities consume up to 80% of extracted water for cooling, exacerbating ecological stress in drought-prone areas. Local communities and researchers are raising concerns about environmental impacts, labeling the trend as ‘digital extractivism.’ Sustainability challenges are now central to debates about the growth of digital infrastructure in the region.
Today, however, data centers are one of the fastest-growing asset classes in commercial real estate, and especially in emerging markets. A large portion of this growth is now concentrated in so-called “secondary markets” such as Latin America, where the larger data center companies are expected to invest more than US$2 billion in 2024 alone. The increased use in cloud computing in the digital economy, combined with data localization rules and “nearshoring” to the US economy, has spawned near exponential growth in their construction in Mexico and other “trusted” Latin American countries.
Data centers are extremely resource-intensive, requiring large amounts of power, water and land. More off-site space close to urban centers—as well as reliable water and power supply—is needed than ever before to support the large amount of computing and processing capabilities for AI and 5G technology. This unprecedented, rapid growth has necessitated careful infrastructure and finance planning from governments and private investors. This article examines the nature of the demand for data centers in Latin America, the challenges they pose for project developers and sponsors, and how this may impact investment and financing approaches.
The LatAm data center market is expected to double by 2029, with a value of up to US$10 billion
Data Center Expansions gets exponential in Latin America
The data center expansion market in Latin America is expected to double over the next five or so years, from roughly US$5 to US$6 billion in 2023 to anywhere from US$8 to US$10 billion by 2029. The market is dominated by the usual countries—Brazil, Mexico and Chile—with Colombia, Peru, Costa Rica and Panama as emerging centers for investment. The most active data center companies in the region include Scala, Equinix, Cirion, Ascenty, Kio and Odata. Since 2022, there have been approximately 30 new data centers built or under construction (11 in Brazil and ten in Chile) and 90 active projects.