(Bloomberg Opinion) — From Querétaro to Valparaíso, a digital revolution is quietly unfolding across Latin America. The region is capturing unprecedented investments for the construction of data centers, the physical facilities that house servers, networks and data storage units to run applications and other digital services.
Despite its political and economic upheavals, Latin America offers important advantages for these capital-intensive projects, including abundant renewable energy and natural resources such as metals and rare earths, a skilled local workforce and, in some cases, favorable jurisdictions or even tax incentives.
As companies from Google to Amazon scout the world for new locations to establish these units – critical to support cloud services and the artificial intelligence boom – the region’s digital footprint keeps expanding: According to IDB Invest, the private sector arm of the regional development bank, annual data center investments are poised to double in just a few years, jumping to almost $10 billion by 2029 from about $5 billion in 2023. Arizton Advisory & Intelligence estimates that Latin America’s share of the global market will rise to more than 2.1% by 2030 from 1.7% in 2024, with the region adding 2,820 MW of data center power capacity by 2035 from its current 1,450 MW as so-called hyperscale projects come online.
By comparison, the Hoover Dam, one of the largest hydro power stations in the US, has an installed capacity of 2,080 MW.
Considering that large data centers typically demand hundreds of millions of dollars, the economic impact of these projects – dubbed the gold rush of the 21st century – result in productivity gains, infrastructure upgrade, industrial integration and overall economic development.
Yet the trend comes with inescapable caveats: Data centers consume huge amounts of electricity, with the most advanced AI projects taking city-sized amounts of power. Water to cool systems is also critical, as are large tracts of land. Making sure that investments in data centers are made in a sustainable way, without depleting the environment and in harmonious coexistence with the communities that host the units, is crucial.
Latin America, one of the world’s most biodiverse regions, has a long history of social conflict linked to the exploitation of its natural resources, and its existing data centers have already triggered controversies. To replicate those mistakes with the technological revolution of our time would be both wrong and ironic. Notwithstanding the massive opportunity in capturing a piece of the strategic data processing business, we shouldn’t lose sight of how technological advances, particularly the AI explosion, can exacerbate inequalities in a region that already suffers from huge gaps between the haves and have-nots.
“Addressing how these resources can be leveraged sustainably to support data processing and AI infrastructure is an urgent task for the region and a potential new source of growth and development if Latin America and the Caribbean is able to provide solutions to the AI global value chains,” Amir Lebdioui, Ángel Melguizo and Víctor Muñoz argued in a recent research paper for the University of Oxford.
The good news is that some governments are embracing this industry, working with the private sector, regional authorities and civil groups to guarantee that these investments avoid energy shortages and social unrest. Take the case of Chile, which has been betting on digital transformations for years now and tops regional AI rankings: The administration of President Gabriel Boric in December launched a National Data Centers strategic plan to capture investments and consolidate the country as a regional hub.
The government is in conversations with several business groups to find appropriate locations after geo-mapping the country while also coordinating the projects with relevant stakeholders, says Aisén Etcheverry, Chile’s minister for science, technology, knowledge and innovation.
The goal is to attract investments and generate local strategic capacities “in an accelerated and sustainable manner,” she told me from Santiago. “Latin America has an opportunity to be a relevant player, a sovereign player, and also a player that actively influences the role and direction these technologies take in the construction of our societies.”
Chile expects to add 30 sizable data centers through 2028, up from 22 facilities it now has, requiring investments of more than $4 billion. And while most of these data centers are in the Santiago metropolitan area to take advantage of electricity grids and fiber connectivity, the government has identified other locations including the northern Antofagasta and Atacama regions where companies looking to install AI campuses can benefit from abundant renewable energy and access to industrial and scientific clusters.
Brazil is also working on a long-awaited policy framework of regulations and tax incentives to promote the industry. Data centers don’t generate many jobs, but those they create tend to be well paid and highly skilled. The emergence of this technology is also key for any industrial policy and to consolidate local supply chains. In addition, the national security component is undeniable: Nearly 60% of all Brazilian data processing takes place in the US due to lower operating costs; reducing this ratio will make the country less vulnerable to potential outages.
In our fractured world, the geopolitical implications of the data center industry are inescapable. Minister Etcheverry says Latin America has an opportunity to change a pattern where earthshaking technological developments always take place in the US or Europe. That’s ambitious and maybe a tad too optimistic. But even the possibility for the region to be part of this challenge should be a reason to embrace it smartly.
