Now that the everyone is in full World Cup fever, we thought it would be good to highlight some facts about the Brazilian Data Center Market. Brazil is the second largest emerging market, it garners the fourth largest level of Foreign Direct Investment, has created the largest and most stable economy in Latin America all while being the seventh largest domestic IT market in the world.
POWER
- More than 70% of all power generation is hydro-electric;
- Transmission and generation is under government control;
- Distribution is geographically based and fragmented with no major cross connections to establish regional or national grids;
- Generation costs are low, however delivered cost can be high due to multiple taxes at all levels of government;
- Average pricing is US $0.15 – $0.16 per kWh;
- AES Electropaulo and CPFL are the largest distributors;
- Power may be purchased on open market for larger power users.
NETWORK
- Most mature infrastructure in South America with 10 submarine cables that bring fiber to the country making landfall in Fortaleza before funneling to Sao Paulo or Rio de Janeiro;
- Virtually all of South America’s connectivity is non-terrestrial / submarine based, which can create greater latency due to longer than necessary fiber routes;
- 80% of internet traffic from Latin America passes through Terremark/Verizon facility (NAP of the Americas);
- PTT Metro maintains the 22 main internet exchanges points in Brazil, including the most important in Sao Paulo;
- Embratel and Telefonica are the dominant telecom and ISP carriers in Brazil and don’t participate in settlement-free peering;
- Several new submarine fiber cables are in the process of being completed, including WASACE (to Nigeria, Miami and Virginia Beach), Seabras I (to New York), AMX (Rio to Maimi) and BRICS Cable (to Russia, China and India).
SPACE
- Despite being the seventh largest economy in the world, there is less than 500K SF of operational data center space available;
- Three US based data center providers are in Brazil; Equinix (acquired local provider ALOG), Level 3 (via Global Crossing acquisition) and Verizon (via Terremark).
- Most facilities are less than 10K SF and have densities of less than 100 watts per SF;
- Very limited number of operators are capable of providing solutions for deployments greater than 500 kW, however 15 MW of wholesale space has been leased in Sao Paulo over the last 12 months;
- Several international data center providers are vetting expansion opportunities in the country given customer expansion needs and oil / gas sector demand.
SUBMARKETS
- Sao Paulo accounts for 50% of data center capacity with approximately 450K SF of operational space, largely driven by demand from financial institutions and multinational firms located in the region;
- A suburb of Sao Paulo known as Barueri is a emerging data center centric area with major providers setting up operations, while the Campinas & Hortolandia region (approx. 50 miles outside of the city) is known as the “Bazilian Silicon Valley” where the first wholesale offerings are occurring;
- Second largest market is Rio de Janeiro with 150K SF of operational space, largely related to oil & gas sector demand;
- Other secondary markets include; Belo Horizonte / Minais Gerais (southeast), Parto Alegre (south) and Recife (fast growing tech cluster in north east).
MARKET CHALLENGES & OPPORTUNITIES
- Taxes, duties and customs taxes are high and very complex with limited incentives. Major mechanical & electrical systems are difficult to source locally, however servers and network equipment can be thereby reducing tariffs;
- Skilled labor shortages of trained IT professional;
- Broad concerns about the privacy / security of online data;
- Entities are permitted full property rights unlike other emerging market countries like India and China;
- Limited Risk from natural disasters.
We tried to keep this to the point and easy to read, but we welcome the opportunity to provide you further details and assist with your needs whether it is in Brazil or through out the Latin America market.
Five 9s Digital Blog 