Brazil Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Brazil Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Brazil's data center market was valued at USD 2.23 billion in 2021 and is expected to reach USD 3.69 billion by 2027, with a growing CAGR of 5.49% during the forecast period (2022-2027). Brazil is the primary data center market among Latin American countries, contributing around 50% of its investment to Latin America. Sao Paulo is the central location in Brazil for developing data center facilities, hyperscale facilities, and cloud regions.

Key Highlights

• Cloud service providers AWS, Microsoft, Oracle, IBM, Tencent, and Huawei, have their presence in Brazil through their cloud region/availability zones; they majorly provide private and public cloud services to financial entities and Government sectors which attracts the colocation and hyperscale operators to invest in the country for data centers. Brazil implemented the data localization law, the Lei Geral de Protecao de Dados Pessoais (LGPD), enhancing the country's data center development.
• The significant factors driving the demand for data centers in the nation include the expansion of cloud computing, the penetration of various cloud suppliers, government laws for local data protection, and rising domestic player investment. According to Cloudscene, there are over 120 data centers in the nation. The deployment of data centers close to customers and businesses is accelerating the development of hybrid multi-cloud ecosystems, primarily driven by the demand for low latency and high performance, as well as the current culture of working from home as a result of the national lockdown.
• Brazil is working toward digital transformation to attract foreign investments. 5G network deployment fuels digital transformation, IoT, smart cities, and the fourth industrial revolution. The increasing deployment and coverage of 5G will lead to the development of edge data center facilities, thereby creating investment opportunities in the market.
• As companies in Brazil look to gain greater control of their data in the face of tighter compliance and protection regulations, data center vendors, like IBM, are targeting customers by providing cloud capabilities and a hybrid multi-cloud environment. However, due to increased cyber-attacks and natural disasters, data security is one of the major restraints in the studied market. Due to growing adoption, the energy infrastructure needed to provide uninterrupted cloud and data center services is also a significant challenge the country faces.
• Additionally, various industries are under intense pressure due to COVID-19 to accommodate remote working and are accelerating their cloud and digitization journeys. According to companies like IBM and Microsoft, the development of data centers allows businesses and governmental institutions to protect data sovereignty by keeping data inside the bounds of their legal authority, increasing the country's data center industry.

Key Market TrendsColocation Type is Expected to Hold Significant Share

• According to the data center map, Brazil presently has 65 colocation data centers spread over 21 different regions. The two biggest centers for colocation vendors are So Paulo and Rio de Janeiro. Because of the huge expansion of data centers, many industry experts predict that the multi-tenant data center markets will rise by 15% in Sao Paulo and 8% in Rio de Janeiro in 2021. Early signs suggest that this upward trend will continue in the upcoming years.
• Colocation services are mainly dominating the country's data center revenue. Most of the local vendors are primarily leveraging colocation services for growth expansion. Increased merger and acquisition activities have laid the foundation for significant investments in the industry. The Brazilian government provides incentives through the Regime Especial de Tributação do Programa Nacional de Banda Larga (REPNBL) program, which includes incentives for purchasing infrastructure that help improve colocation services in the country.
• Brazil has witnessed an absolute growth of 40% in investments from the 2021 values due to investments from colocation providers such as Ascenty, Scala Data Centers, and ODATA, and telecom operators such as GlobeNet Telecom, Ava Telecom, and Embratel. São Paulo, Brazil's significant financial capital, serves as the primary data center hub, with 28 existing third-party data centers. Other cities, such as Rio de Janeiro and Fortaleza, are major investment locations in Brazil.
• Ascenty, the leading provider of data center services in Latin America with headquarters in Brazil, has announced the building of five additional data centers, bringing the total number of its facilities, which are spread across three countries—Brazil, Chile, and Mexico—to 27. The new buildings, which have a combined energy capacity of roughly 25 MW each, are located in Sao Paulo at Hortolandia 5 and 6, as well as Sumare 3, 4, and 5. With a total capital investment of USD 250 million, Hortolandia 5 and Sumare 3 are anticipated to go online in the first half of 2022, Hortolandia 6 and Sumare 4 in the first half of 2023, and Sumare 5 in 2024.
• Equinix provides colocation in Brazil and is one of the country's significant carrier-neutral data center providers. The company's data centers in the country's top two business markets provide 17,695 square meters of colocation space. More than 1,500 companies colocate in Equinix's data centers in Brazil to connect to business partners and customers in their digital supply chains. Financial services in Brazil are the major end-users of the company's data center services.
• According to the company's survey, 76% of IT decision-makers named Interconnection as a fundamental facilitator in digital transformation. Therefore, by opting for Interconnection, a private and secure route for data traffic between partners, enterprises from various industries can respond efficiently to the challenges of digitalization.

IT & Telecom Sector Expected to Hold a Significant Share

• IT and Telecom is the most prominent segment of the Brazil Data Center Market. The IT infrastructure demand is the highest for this segment. Colocation providers, who are a substantial adopter of data center racks, are also considered under the study's scope under the IT & Telecom sector.
• The emergence of technologies such as 5G and immersive technologies such as augmented reality, virtual reality, and AI has also contributed to the need for allocating higher bandwidths for sharing data between enterprises. Brazil is witnessing a promising increase in its interconnection bandwidth capacity, and the trend is expected to remain strong shortly. The telecommunications sector presently holds the largest share in the market, owing to the increased demand for high-speed connectivity for enhanced customer experience. Furthermore, the rising demand for reduced latency in data transfers and improved connectivity amid the surging adoption of smart devices is creating growth opportunities for regional data centers.
• IT and telecom companies are making significant investments in the region. Ascenty, for instance, opened its USD 73 million data center facility in Brazil. The infrastructure has a 20 MVA energy capacity and a total size of 12,000 sq m. Additionally, Conexis Brasil Digital's balance sheet shows that investments by telecommunications providers came to R$ 8.3 billion in the first quarter of 2022. In nominal terms, the sum increased 3.8% from the same time in 2021. 40% of the sector's revenue was generated by telephony and mobile broadband, which also accounted for the most significant revenue share. These investments are anticipated to boost Brazil's data center business tremendously.
• The market share of IT and telecom companies is also rapidly increasing in Brazil due to mergers and acquisitions. For instance, Titania Telecom's most prominent provider, Mato Grosso, was purchased by Brazilian ISP Brasil TecPar in May 2022. Similarly, in July 2022, Vero Internet, Brazil's fifth-largest ISP, and Telefónica related to investment plans.
• The country's cloud storage providers, like AWS, Google, and Microsoft, are increasing their storage capacities to offer a more efficient workflow on the cloud. These organizations are investing in hyperscale deals. For instance, In 2022, AWS plans to open 30 new "AWS Local Zones" that include infrastructure, storage, and database services in Argentina, Chile, Colombia, and Brazil.

Competitive Landscape

The Brazil Data Center Market is fragmented, and the competitive rivalry is high. The key players in this market are Cisco Systems Inc., Dell Technologies Inc., IBM Corporation, Equinix Inc, etc. Through research & development, strategic partnerships, and mergers & acquisitions, companies have gained a stronger hold in the market. These players are gradually growing their presence in the market by offering the latest technologies, thereby increasing their market revenues.

• In August 2022, The World Bank Group's International Finance Corporation (IFC) invested US$35mn to aid in the expansion of Brazilian data center services provider ODATA. This funding will allow ODATA to expand its operations throughout Latin America and its three data centers in Brazil in cloud and telecommunications. Amid the ongoing pandemic, IFC's investment will help increase market competitiveness for data hosting services in Latin America and Brazil, enabling productivity and broader usage of digital services.
• In March 2022, Elea Digital and Vertiv partnered to deliver edge data center services in Brazil. Vertiv will provide operation and maintenance services for Elea Digital data centers in certain Brazilian metro areas, including Porto Alegre, Curitiba, and Brasilia. The partnership with Vertiv delivers much-needed accountability, automation, and real-time management of essential infrastructure. It will also employ software applications to ensure energy efficiency and cost control of Elea Digital's six data centers. Vertiv will gain access to a larger and broader market to support the Brazilian data center industry through this partnership.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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