Brazil Data Center Market Size & Share Analysis - Growth Trends & Forecasts (2023 - 2028)

Brazil Data Center Market Size & Share Analysis - Growth Trends & Forecasts (2023 - 2028)

The Brazil Data Center Market size is expected to grow from USD 2.14 billion in 2023 to USD 3.21 billion by 2028, at a CAGR of 8.45% during the forecast period (2023-2028).

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.

Brazil Data Center Market Trends

Tier 3 is the largest Tier Type

• The tier 3 data centers' capacity reached 383.3 MW in 2022 and is further projected to register a CAGR of 7.91%, surpassing 699.9 MW by 2029. On the other hand, the tier 4 data center segment is predicted to grow and register a CAGR of 22.12% to reach a capacity of 470 MW by 2029.
• Facilities in tier 1 & 2 are expected to gradually lose their demand and display a decrease in growth in the upcoming years. Tier 1 & 2 facilities are expected to hold a market share of nearly 22.5% by 2029 with minimal growth. This is a result of the prolonged and inconsistent outages. Most users will eventually switch to tier 3 and 4 facilities, holding 36% and 41.5% of market shares, respectively, owing to the increased demand for storing, processing, and analyzing data.
• The BFSI sector of the economy is expanding. The Brazilian Central Bank encourages initiatives to increase the adoption level of open banking. Therefore, e-banking and e-commerce opportunities are increasing in the market. For instance, investment in Brazilian fintech companies increased from USD 546 million in 2018 to USD 1200 million in 2021. The above instances guarantee the growth of data centers in the Brazilian market. This necessitates the construction of wholesale and hyperscale facilities, which have tier 3 and 4 requirements and are driven by the rising demand for e-banking and online transactions.
• Additionally, tier 4 data centers are expected to expand significantly in the future. This is because more businesses are providing cloud-based services, which has caused more companies to construct facilities to provide colocation space with the best technology.

Brazil Data Center Industry Overview

The Brazil Data Center Market is fairly consolidated, with the top five companies occupying 76.88%. The major players in this market are Ascenty (Digital Realty Trust, Inc.), EdgeUno, INC., Equinix, Inc., ODATA (Patria Investments Ltd.) and Scala Data Centers (sorted alphabetically).

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