The growth of Latin America’s cloud market has been accelerating since the early days of the Covid-19 pandemic. According to a report published in late 2022 by S&P Global, one of the major financial information companies, the area is now home to more than 12 cloud regions, and Amazon Web Services (AWS), Google, Huawei, IBM, Microsoft Azure, Oracle and Tencent are building out 10 new regions between them since early 2020.
The growth of cloud services has been particularly prominent in Chile and Mexico, which Capacity noted in our reports during 2022. In the five years up to 2020, Chile’s cloud services were growing by 16% a year, but this expansion is expected to reach 22.5% a year by 2025.
Until 2020, Mexico’s market was remarkably static, growing at just 2.1% a year. But as the pandemic has stimulated the use of cloud services, S&P Global believes the Mexico’s sector will grow at a rate of 22.2% between 2020 to 2025 – almost as fast as Chile.
Charles Meyers, president and chief executive of the data centre company Equinix, agreed with the assessment. Last year, he said that “Latin America holds enormous potential” and that Equinix’s “commitment to the region has exponentially grown, since we entered back in 2011”.
Oracle is another company that has taken advantage of the opportunity in Latin America. Last year, it became the first hyperscaler to launch a cloud region in Mexico, when it opened its first Oracle Cloud Infrastructure (OCI) region in the country.
Impact in LatAm
Maribel Dos Santos, senior VP and general manager for Oracle in Mexico, said the new OCI region, which covers the state of Querétaro, “will offer public and private organisations, as well as partners and developers, the opportunity to leverage OCI to grow their businesses”.
Dos Santos added that the region “offers organisations a wide range of services, including access to emerging technologies, to help improve the customer experience and positively impact the country’s ecosystem of innovation”. The region will give Oracle’s customers in Mexico access to cloud services with built-in security, disaster recovery and price performance, she said. Oracle has pledged to power its OCI regions only from renewable energy sources by 2025, including the new Querétaro OCI region.
Kyndryl, a spin-off of IBM’s infrastructure services business, welcomed this development, said Julio Heshiki, Kyndryl’s global senior program executive. “It’s an excellent opportunity to address the specific needs of businesses as they continue to embrace cloud technologies, and it is a further step in Kyndryl’s strategy to support its customers in moving and managing their operations to hybrid and multi-cloud environments.”
Equinix also supported the increase in cloud services in the country. Amet Novillo, Equinix’s managing director for Mexico, said: “With changing business requirements, businesses need a new level of speed, reliability, and security for their cloud workloads.”
Returning to Chile, Equinix’s Meyers said: “Companies are thirsting for the digital infrastructure required to thrive in today’s economy. With today’s expansion, we’re broadening digital access and accelerating digital transformation across Latin America, while supporting growth in a responsible and sustainable manner.”
S&P Global said Chile is “one of the Latin American markets to see the earliest levels of cloud activity, which some might consider surprising considering the country ranks seventh in the region in terms of population. Yet it offers one of the region’s most connectivity-rich and business-friendly environments, both of which were crucial for multinational cloud providers looking to enter the region.”
Huawei also has a cloud region in Chile – its first in Latin America – and enlisted 36 partners, including Telefónica, which uses Huawei to offer cloud services across much of the region.
Challenging
In its report, S&P Global characterised Brazil as “a large, yet challenging industry”.
“Top global public cloud providers like AWS, Microsoft Azure and Google have been active in Brazil for years using leased data centres in the country,” according to S&P’s report. “Public cloud services are commonly used in Brazil, so in addition to offering their own cloud services, many colocation providers choose to partner with the hyperscalers.”
Scala Data Centers is one such company expanding in Brazil, by implementing its FastDeploy design and construction technology. Rio de Janeiro and Porto Alegre will be the first markets in Brazil to have access to FastDeploy. Scala began construction regional data centres in those areas in 2022, and they are expected to be operational in the first quarter of 2023.
Scala is aiming to deploy data centres in Latin America in half the time traditional models require. Marcos Peigo, the company’s CEO, said: “With FastDeploy, our hyperscale customers will be able to explore new regional and strategic markets in record time, with all the advantages that pioneering brings, scaling their operations as demand grows.”
Ramps of growth
“As FastDeploy’s capacity blocks are independent and can be added on demand, this approach allows for long-term contracts with smooth ramps of growth to higher demands,” he added. “It will also allow for the implementation of shared buildings, without losing the individualised customisation feature that was already available in our single-tenant developments and present in high-capacity buildings.”
Despite increasing in availability, cloud services in Brazil will remain notoriously expensive, largely due to heavy taxes, S&P Global warned. “Taxes will depend on factors such as revenue, price of the service and profits generated in Brazil,” S&P’s report said. “General challenges of doing business and infrastructure costs also contribute to higher prices. As a result, customers in Brazil and other Latin American countries without low-latency requirements may opt for platforms housing their infrastructure in other countries, including the US.”
TeleGeography, the market research company, predicted that the international bandwidth used in Latin America will grow from 150Tbps in 2021 to almost 700Tbps by 2026, rising at an annual rate of 36%. Nearly 30% of Latin America’s used capacity was claimed by content providers in 2021, with demand increasing from key industry players such as Microsoft, Google, and Facebook. This has been partly driven by these players increasing capacity to accommodate demands for data during lockdowns.
“We see that bandwidth demand remains strong across the region,” said Anahí Rebatta, senior analyst at TeleGeography.
To help satisfy this demand, EdgeUno began a partnership to supply the public DNS resolver Quad9 with servers and network connectivity throughout Latin America. The deal means Quad9 can expand the global reach of its DNS security service.
Game-changer
Andy Bax, chief operating officer of EdgeUno, said: “Enabling Quad9 to deploy their platform across multiple locations in Latin America was a game-changer for them in servicing their users across the region with in-country infrastructure, as opposed to long-haul delivery from outside the region.”
EdgeUno’s presence reduced the service latency of Quad9’s DNS responses by an average of 100ms, and its deeply connected network enabled Quad9 to directly reach users in Latin America.
In 2022, Google confirmed that a new Google Cloud region will be coming to Mexico. And the company also made a US$1.2 billion commitment to improve the digital infrastructure across Latin America, including skills, inclusivity and sustainability. The new Google Cloud region will become the group’s third in Latin America, joining those in Santiago, Chile, and São Paulo, Brazil.
Google’s move into Mexico was welcomed by Juan Carlos Sarmiento Tovilla, director general of information systems at the country’s Federal Court of Administrative Justice.
“The cloud region in Mexico will unlock new possibilities for the use of cloud technologies by public sector organisations in the country,” he said. “Computer developments in Mexico are highly specialised, so they can become important references for other Spanish-speaking countries.”
Milestone
The Banorte financial group – one of the largest commercial banks in Mexico – was also cheered by Google’s move.
“For Banorte, this is undeniably a fundamental milestone that will allow us to accelerate our digital transformation and boost initiatives that we are exploring with Google Cloud within the regulatory framework,” said Francisco Martha, the group’s general director of digital business development. “For Mexico, it’s a turning point in the digitisation process that we already see taking place in many of our clients, partners and suppliers.”
S&P Global noted this with a touch of reservation: “Although some of these new developments have yet to be launched, the excitement around the local industry is palpable, with Mexico now on the map of global cloud and data centre players alike, as they consider new growth opportunities in the region.”
