SÃO PAULO, 26 Feb (Reuters) – Latin America has structural advantages that position it as a natural hub for the next wave of expansion of digital infrastructure, notably the construction of data centers, and Brazil can take on a leading role in this movement, says a study by the investment banking area of Galapagos Capital.
‘It is no exaggeration to say that the country can be for the digital economy what it was for agribusiness – a global breadbasket, but for data processing’, says Carlos Parizotto, partner and responsible for the group’s investment banking area, in a statement about the work.
According to the Galapagos survey, global demand for data center capacity is expected to reach 219 gigawatts by 2030, from 82 GW in 2025, while the cloud services market is expected to surpass US$1.6 trillion in the same period and the artificial intelligence market is expected to reach almost US$4.8 trillion by 2034.
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The volume of capital needed to close the gap between data center supply and demand could reach US$7.9 trillion between 2025 and 2030, in a scenario of accelerated demand, the study states. And the big hyperscalers – Alphabet, Meta, Microsoft and Amazon – are accelerating unprecedented investments.
‘We are facing a generational change. The combination of cloud expansion and the explosion of artificial intelligence is creating a demand for digital infrastructure that traditional markets – the United States, Europe, Asia – simply cannot meet alone,’ says Parizotto.
‘It’s a capital allocation opportunity that you don’t see often’, adds the executive.
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CENTER OF GRAVITY
Globally, the study shows, vacancy rates on colocation sites are at historic lows, and rental prices have risen by around 50% since 2020.
The demand for energy for these data processing centers, which currently represents approximately 3.5% of global electricity generation, states the work, is expected to exceed 9% by 2030, transforming energy availability into the main bottleneck for the expansion of the sector.
It is in this scenario of ‘global scarcity’ that Galapagos assesses that Latin America gains relevance, citing among its structural advantages cleaner, cheaper and surplus energy, in addition to an underpenetrated market with strong growth potential and a concentration that benefits incumbents.
And in the region, according to the investment group, Brazil figures as the ‘center of gravity’, already being the major protagonist, consistently accounting for around 54% of total Latin American demand.
‘Brazil brings together a rare combination of attributes for data centers: predominantly renewable energy, electricity prices below the global average, a nationally interconnected grid, connectivity via submarine cables and, now, a competitive regulatory framework’, says Parizotto.
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According to the study, the country is already home to 189 data centers – 70% in the Southeast region, with São Paulo as the undisputed hub – and its market is expected to grow from US$5.3 billion in 2024 to US$7.1 billion by 2029.
Galapagos highlights that the Brazilian regulatory framework has made a significant leap forward, citing the National Data Center Policy (PNDC), which, through the ReData program, provides for the elimination of federal taxes on equipment for data centers, reducing the sector’s tax burden.
‘The reduction in the tax burden from 52% to 18% on ICT equipment is transformational. When you consider that taxes represent almost 70% of the cost of an imported GPU, the impact on the return of projects is substantial’, assesses Parizotto.
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‘This changes the equation for hyperscalers and global investors who are deciding where to put the next billions’, estimates the executive. According to estimates from the Ministry of Finance, ReData could attract private investments of R$2 trillion over ten years.
There is also, the study highlights, the extension of the benefits of Export Processing Zones (EPZs) to digital services, including data centers focused on AI and cloud infrastructure.
CHILE, COLOMBIA AND MEXICO ALSO ON THE MAP
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The study also mapped Chile, Mexico and Colombia as key markets in the region, with Parizotto emphasizing that whoever positions themselves now will have an advantage.
In the case of Chile, the study considers the expected annual growth (CAGR) of 18-19% in installed capacity until 2030, reaching 579 megawatts. Santiago concentrates more than 85% of the current capacity, and the country offers a 30% tax incentive on investments in the Arica & Parinacota region.
The Andean country’s great opportunity, according to the survey, lies in the renewable surplus in the north, where around 20% of solar and wind generation is wasted due to transmission limitations, the equivalent of 6 terawatt-hours per year.
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For Mexico, the calculation considers an annual growth (CAGR) of 31% in demand, reaching more than 1,300 megawatts in 2032. And the proximity to the United States, as well as the USMCA agreement and the IMMEX program (which allows temporary import of equipment tax-free) boost competitiveness.
Colombia, in turn, projects growth of 33% per year in demand, with Bogotá concentrating 70% of the country’s 42 data centers. The country offers incentives such as a 50% income tax deduction for renewable projects and tariff and VAT exemptions for clean energy equipment.
