top of page
Search

Digital Acceleration: Mapping Latin America’s Data Revolution

  • Frontera Capital
  • Aug 14
  • 10 min read

Updated: Sep 14


Data Center

By: Alejandro Rosales Mayr, Chris Hernandez & Fernando Mendez


Introduction

As Latin America rapidly adopts cloud services and AI to improve productivity and enhance services, data centers are becoming critical infrastructure for the region’s digital economy. We believe Latin America’s data center development outlook is broadly constructive, driven primarily by structural forces and, to a lesser extent, cyclical trends, such as in interest rates, currencies, and energy prices.

Investment in the sector has seen rapid growth. As seen in Figure 1 below, digital infrastructure investment in Latin America reached nearly $14b in 2024 – a 111% increase since 2019, (16% CAGR)[1] – with data centers representing close to 50% of the total. Most of this growth is concentrated in Brazil, Mexico, and Chile, where the necessary scale, energy capacity, and regulatory clarity required to support large-scale deployments is available. Other countries might not have the dependable energy grid and regulatory frameworks needed to sustain larger projects; nevertheless, Central America and the Caribbean are also increasingly active, attracting niche developers and regional operators.

 

Figure 1: Digital Infrastructure Investment in Latin America, USD billions (left) and % of total (right)

Source: Frontera Capital Advisors, LLC, using data from Statista Market Insights (As of June 2025)
Source: Frontera Capital Advisors, LLC, using data from Statista Market Insights (As of June 2025)

 Key growth drivers include the push for data sovereignty (regulation around data within a country’s boundaries), the continued rollout of 5G, and efforts to reduce latency via localized infrastructure. The increasing digital consumption, spanning from financial technology to streaming services, is rapidly advancing cloud adoption among middle-market users. This trend is driving the demand for colocation and localized hosting services. Varying scales are being developed with differences in size, capacity, and use cases. Additionally, different tiers exist (I-IV), with developers seeking Tier IV status due to added reliability and redundancy. Consequently, both hyperscalers and emerging developers are increasing capacity to accommodate this expanding and increasingly diverse user base.


Figure 2: Data Center Scale Overview

 

HyperScale

Co-Location

Edge

Power

100-300 MW

10-50 MW

5-10 MW

Size

500,000 sq. ft.

50,000 sq. ft.

10,000 sq. ft.

Cost

>$1b

$50-150m

$10-30m

Latency

<100ms

<60ms

<10-40ms

Racks

10,000-30,000

1,000-2,000

500

Interconnections

10,000-100,000

2,000-20,000

500-2,000

Use Case

Cloud Services

Hosting Hardware

Real-time, Low Latency

Source: Frontera Capital Advisors, LLC, using data from data from Telescent (As of August 2025)


Demand is rising for high-performance computing environments, as AI and edge workloads proliferate. Submarine cable expansions—such as Google’s Firmina and EllaLink—are strengthening international connectivity and integrating Latin America more deeply into global data flows.  Local policymakers seeking to attract foreign direct investment to the sector are reinforcing this momentum by offering targeted incentives (such as accelerated depreciation and tax benefits), cloud-first strategies, and digital infrastructure frameworks. Environmental, social, and governance (ESG) priorities are also drawing capital to markets such as Chile, Colombia, and Costa Rica, where renewable energy may enhance the sustainable growth of data centers. While the region faces challenges, including grid connectivity, energy costs, regulatory uncertainty, and contract enforcement, we believe Latin America can present compelling digital infrastructure investment opportunities where energy infrastructure, fiscal policy, and required capital are aligned. The following outlook examines key inflection points in the market, highlights emerging trends shaping operator strategies across the region, and provides insight into the region's key markets, namely Brazil, Mexico, and Chile.

 

Navigating Challenges: Energy, Water, and Regulation

Latin America has seen unprecedented data center growth, with approximately 599 data centers currently in operation[2] in the region and over 87 additional projects in development[3]. Despite the promising growth trajectory, investors and operators must contend with several challenges that primarily revolve around infrastructure limitations (incl. power generation, transmission, and storage) along with environmental pressures and regulatory requirements.


Figure 3: Data Center Concentration, by country in Latin America

 

Source: Frontera Capital Advisors, LLC, using data from DataCentersMaps and Statista (As of June 2025)
Source: Frontera Capital Advisors, LLC, using data from DataCentersMaps and Statista (As of June 2025)

Regulatory Framework & Energy Capacity and Reliability

The current regulatory framework for data center operations across Latin America remains uneven[4]. While the increasing focus on data sovereignty is driving demand for in-country data centers, this can create complexities for operators active in multiple markets. Legal protections around property rights, data protection, and contractual obligations are paramount to attracting and securing foreign capital. Brazil’s framework is anchored by 2020’s General Data Protection Law, calling for data localization obligations for classified state information & financial institutions. Similarly, in March 2025, Mexico changed their data protection laws to require foreign financial institutions to obtain approval to process corporate & personal data for cross-border transactions. Chile, however, is still in the process of aligning themselves with international data best practices.

 

Mexico’s data centers face challenges as the state-owned Federal Electricity Commission has struggled to keep up with energy demands from data centers. Famously power-intensive, data centers consume 10 to 50 times more electricity than standard commercial buildings[5]. This places pressure on existing grids and necessitates a strong focus on integrating renewable energy and developing sustainable cooling technologies. As noted in Figure 4 (Average energy prices, commercial), electricity costs vary significantly across the region, directly impacting operational viability. The substantial energy pull from data centers mandates significant grid investments, influencing capital deployment decisions.


 

Figure 4: Average commercial energy prices in Latin America, versus select markets ($/kwhr)

 

Source: Frontera Capital Advisors, LLC, using data from US Energy Information Administration, GlobalPetrolPrices, and Statista (As of June 2025)
Source: Frontera Capital Advisors, LLC, using data from US Energy Information Administration, GlobalPetrolPrices, and Statista (As of June 2025)

Water Scarcity

Geography plays a crucial role, as data centers are significant water consumers (a 1-MW facility can use up to 25.5 million liters of water annually[6]). Regions experiencing water scarcity, such as parts of Mexico, have already witnessed community impacts resulting from water reallocation. The confluence of water shortages and inconsistent energy grids presents a concern for investors, as overbuilding could strain national resources.

 

Brazil: The Regional Anchor

Brazil, with 187 data centers and a projected revenue of $8.3b by 2030 (10% CAGR from 2025-2030)[7], firmly anchors Latin America's digital infrastructure boom. It leads the region in data center construction, fiber deployment, and telecom tower expansion, driven by its sheer market scale, policy alignment, and relatively deeper capital markets.

 

Brazil commands approximately 40% of regional data center investment[8], with São Paulo solidifying its position as the region's hyperscale hub. Major cloud providers—AWS, Microsoft, Google—and operators like Ascenty (Digital Realty), Scala, and ODATA have significantly deepened their presence, responding to surging demand for cloud, AI, and local computing. Recent capital injections include Microsoft's stated plans for up to $2.7b in AI infrastructure and Grupo FS's $1.8b development for three hyperscale data centers.

 

Figure 5: Data Center Market Revenue, Brazil (2018-2029F, USD billions)

 

Source: Frontera Capital Advisors, LLC, using data from Statista Market Insights (As of June 2025)
Source: Frontera Capital Advisors, LLC, using data from Statista Market Insights (As of June 2025)

The country benefits from a robust renewable energy base, with over 80% of its grid powered by hydroelectric and other renewable sources. Local national and state governments have been instrumental, offering tax exemptions, customs relief, and expedited permitting, particularly in free trade zones like Manaus and Ceará. The state of Minas Gerais for example, is seeking to attract foreign direct investment in this space, drawing investors away from the more commonplace locations of Sao Paulo and Rio de Janeiro. This supportive environment has resulted in increased investment, evidenced by Brazilian telecom and IT company Century's $27m development of a second data center in the state[9].


Brazil's digital infrastructure is transitioning from rapid expansion to strategic refinement, with energy availability, permitting speed, and returns on deployed capital now central concerns. Its robust demand, policy continuity, and maturing capital ecosystems position Brazil as Latin America's most active space for next-generation digital infrastructure.

 

Mexico

With the Mexican Association of Data Centers stating the data center industry will contribute $75.5b overall to Mexico’s economy, or 5.2% of GDP by 2029, Mexico aims to strengthen its position as a key destination for data infrastructure investment to satisfy growing data demand. Mexico hosts 173 data centers and has become the second country in Latin America to host all three major global cloud operators: Amazon Web Services, Microsoft Azure, and Google Cloud.

By 2029, the Mexican Association of Data Centers expects 73 new data centers and investments of up to $9.2b were expected by 2029[10]. Despite drought concerns, Queretaro has emerged as the country’s digital infrastructure hub.

 

Figure 6: Data Center Concentration, Mexico

Source: Frontera Capital Advisors, LLC, using data from DataCenterMaps and Statista (As of August 2025)
Source: Frontera Capital Advisors, LLC, using data from DataCenterMaps and Statista (As of August 2025)

Mexico’s proximity to the United States presents a strategic advantage for its data center industry, especially as nearshoring trends gain momentum and the U.S. begins to face capacity constraints. Latency benchmarks reinforce this edge: data transmission from Mexico to New York is typically 50 milliseconds, significantly lower than the approximately 124 milliseconds observed from São Paulo[11][12].

 

Figure 7: Latency in Latin America, by City Connectivity to New York (in ms)

Source: Frontera Capital Advisors, LLC, using data from WonderNetwork
Source: Frontera Capital Advisors, LLC, using data from WonderNetwork

Continued investments demonstrate further evidence of demand for the sector in the country. AWS continues to invest in the country after announcing a $5b injection over the next 15 years and launching the AWS Mexico (Central) Region in January of 2025[13], with estimates showing the project will add $10b to Mexico’s GDP. Datacenter operator ODATA recently announced the largest data center campus in Mexico, DC QR03, a $3b project providing up to 300MW[14]. In March 2025, Grupo Fermaca unveiled plans to develop one of the largest data centers in Latin America, a 250MW facility with an estimated cost of $2.7b[15].


To facilitate these projects, the Mexican government has implemented incentives to encourage the use of renewable energy in data centers, including tax exemptions, accelerated depreciation schedules, and exemptions on import and export duties for certain renewable energy technologies.

 

Chile

With 65 data centers, Chile’s data center market is experiencing robust expansion, with around $1b in investments set to be made in developments by 2030[16]. Chile’s economic & political stability relative to the region, renewable energy base, and connectivity infrastructure allow it to stand out as a top destination for capital destined for data center expansion. The data center boom is supported by the government, which launched the National Data Center Plan in 2024 with the intention of tripling the industry's size within five years and attracting investments of $2.5b.


Exemptions & benefits for digital services facilitate investment into the country. Chile’s digital services law includes exemptions from VAT and reduced tax rates for certain activities. Additional benefits exist for operations in Chile’s Free Trade Zone through corporate income tax, VAT, and customs exemptions


While Chile’s prolonged drought since 2010 raises concerns over water usage, there is continued investment. In May 2025, AWS announced a $4b investment to build its first infrastructure region in Chile, with operations expected to start in late 2026. To curb environmental concerns, AWS have stated plans to only use water for cooling for just 4% of the year and will source 100% of its energy from renewables[17]. Operators benefit from Chile’s abundant renewable energy (especially solar), which accounted for 68% of electricity generation in 2024. According to the International Energy Agency, the country is aiming to reach 90% renewable energy mix by 2030[18] despite water shortages. In January 2025, Atlas Renewable Energy closed an agreement to power ODATA’s Chilean data centers with 100% renewable energy[19].

 

Outlook & Opportunities

Latin America is undergoing a data center revolution driven by unprecedented global investment. While demand will continue to grow through data sovereignty protections, latency improvements, and a higher adoptability of AI, certain steps must be taken to ensure supply can grow. Financing needs for large-scale projects will likely boost the development of local debt markets. Brazil is poised to remain the regional leader, given its renewable energy base, favorable government policies, and continued announced investments. Mexico presents challenges, particularly around geographic constraints such as water scarcity, but its proximity to the US & Canada could position it as a prime investment destination due to its lower latency relative to the region in an age where processing times are of paramount importance. Chile should continue to grow as an emerging player in the space via a mix of its renewable energy, costs, and its connectivity infrastructure to reach other areas of the world.


The key constraint is energy infrastructure, as many countries in the region have unreliable grids that fail to meet demand. Additional government incentives pave the way for projects that should revitalize the region’s power infrastructure, a shift that supports both sustainable data center growth and broader regional development. In our next part, we will assess the energy needs associated with data center development across the region.

 

 

References

[1] Compound annual growth rate (CAGR). Source: Statista Market Insights (As of June 2025)


Disclaimer: This has been prepared by Frontera Capital Advisors, LLC. Information herein has been obtained from sources deemed reliable and while we have no reason to doubt its accuracy, we have not independently verified the information nor make any representation or warranty, either express or implied, as to its accuracy, completeness or reliability. This article has been prepared solely for informational purposes. The Company should not rely on the contents of this presentation or construe the contents as legal, tax, accounting or investment advice or a recommendation. The company should consult its own counsel and tax advisors as to legal and related matters concerning any transaction described herein.​

 
 

Newsletter

bottom of page