Brazil Is More Than Samba. Here We Unveil One Of The Fastest Growing Data Centre Markets In The Southern Hemisphere

Clarity 360, Clarity360, Clarity-360, clarity 360, Cloud Clarity, Procurement Clarity, simplified advantage, iot, disruption, digital supply chain, innovation, asia, americas, emea, imea, aspac,Nearly 50% of Latin America’s data centre capacity resides in Brazil and over $2.5bn have been invested in the last 24 months in the sector.

Samba. A rich and syncopated rhythm with voluptuous dance moves whose origins can be traced back to the 17th century in Recôncavo, within the region of Bahia.

It would take nearly 300 years, the abolishment of slavery, a War of Independence and a new Constitution until Samba effectively became a beacon of Brazil’s culture.

Heitor dos Prazeres, João da Bahiana, Pixinguinha, Nelson Cavaquinho, Martinho da Vila, and Carmen Miranda, are just some of the many greats that not only pioneered Samba, but made it one of Brazil’s greatest cultural exports in history.

From hundreds of Samba schools established all over the world, to historic music collaborations within the genre by big music names such as Quincy Jones, Dizzy Gillespie, Michael Jackson and Barbra Streisand, Samba is Brazil’s most valuable currency. Just look at Carnival, especially in Rio de Janeiro, the world’s biggest party!

However, as focus swiftly moves away from the Sambódromo to the digital systems behind it, data – even Carnival data – is becoming Brazil’s next big currency.

The country is Latin America’s largest technology ecosystem with the IT market growing 9.8% in 2018, reaching $47bn and surpassing previous forecasts of 4.1% growth for the period and will continue to grow at 10.5% in 2019, according to a study prepared by IDC in partnership with the Brazilian Software Association (ABES).

Clarity 360, Clarity360, Clarity-360, clarity 360, Cloud Clarity, Procurement Clarity, simplified advantage, iot, disruption, digital supply chain, innovation, asia, americas, emea, imea, aspac,Facebook, Uber, Airbnb, Tencent, Alibaba, Walmart and Amazon are just some of the word’s giants who currently have either large offices based in Brazil and/or are carrying out large-scale investments to expand their market reach.

The Brazilian telecommunications services market is expected to reach $45.76bn by 2022, a market growth of 20.42% since 2016 based on a study prepared by Frost & Sullivan.

The public cloud segment in Brazil is expected to reach $2.6bn in 2019, growing 35% annually to reach $6.5bn in 2022.

Within the data centre space, there is a growing momentum with more than 100 facilities in operation and several national and international companies such as Equinix, Digital Realty and CyrusOne firming up their prime positions in the market.

For instance, Digital Realty’s $1.8bn acquisition of Brazilian Ascenty operator in 2018 was one of the largest foreign investments ever carried out in the country.

There are also five international subsea cables being deployed adding over 200 Tbits to the existing capacity and improving connectivity to the US, Europe and Africa.

Nevertheless, the data centre market in Brazil and indeed the LATAM region as a whole is still small when compared to other spots on Earth. According to research think tank Arizton, the data centre market in Latin America is anticipated to reach values of over $1bn by 2023 and is projected to grow at a CAGR of more than 11% between 2018 and 2023.

Brazil alone is projected to top $528m by 2023 in terms of value, corresponding to more than half of the whole continent.

Clarity 360, Clarity360, Clarity-360, clarity 360, Cloud Clarity, Procurement Clarity, simplified advantage, “Brazilians are heavy data consumers being in the top 5 of the main social media platforms (WhatsApp, Facebook, Instagram) and OTT services (YouTube, Netflix). From the 50+ data centres in Brazil, carrier-neutral accounts for almost half of this, while others are telco, government and private-owned facilities,” says Gustavo Zucchi, business development director at Media Data Brazil, a company that supports foreign technology companies and investors doing business in the data centre space in Brazil.

He adds that except for the five recently launched facilities, most
of the data centres serving the B2B market are reaching over 98% occupancy, according to BroadGroup research.

“This restrained demand was a consequence of political and economic uncertainties that put some dark clouds over Brazil but now forecasts indicate blue skies again.”

Chris Torto, CEO of Digital Realty’s acquired Ascenty, continues: “The data centre market continues to experience rapid growth driven by the growth of both multinational and domestic companies. Enterprises today are seeing the true benefits of cloud computing and we believe Latin America, Brazil included, will continues to grow at a rapid pace.

“Looking ahead, this sector will be greatly affected by the arrival of 5G technology and the need for data to be close to end-users, which will be a major challenge, but also an opportunity to leverage our business.”

Economic Reform

Before we dive further into the data centre world, it is important to get some context around Brazil’s current and future socio-political situation.

Brazil is the world’s 8th largest economy with a nominal GDP of
$1.868tr (2018), projected to reach over $2tr by 2002 and nearly $2.5tr by 2024. With a population of more than 210 million today, this is also expected to grow considerably and by 2030, Brazil’s population is expected to reach nearly 229 million.

Clarity 360, Clarity360, Clarity-360, clarity 360, Cloud Clarity, Procurement Clarity, simplified advantage, iot, disruption, digital supply chain, innovation, asia, Americas, emea, imea, aspac, asean,A new president – Jair Bolsonaro – has taken to the land’s highest office on January 1, 2019, and his policies have been put into practice to much concord and disagreement of a divided Brazilian population as political stability falls to historic lows since the early 1990s, according to the World Bank.

Zucchi explains: “Although Brazil holds the 8th position among global economies, doing business in Brazil is considered very challenging.

“Social inequality is one of the main problems leading to public security issues and deficitary basic education. This will eventually lead to a semi-skilled or unskilled manpower for sectors like engineering and technology.

“Another challenge is the Brazilian tax system – which can be described as a nightmare. Confusing and complex, different taxes over income and goods, varying from state to state and even from city to city.

“Infrastructure and energy are other pain points but the good thing is that the new government has started to make the necessary adjustments.”

Nonetheless, the country is showing some signs of recovery, with the recent approval of a historic economic and tax reform expected to generate savings in the order of $200bn over the next decade. The tax system-restructuring plan is likely to be addressed more seriously in 2020.

Additionally, Zucchi says: “The economy minister Paulo Guedes promised what he is calling a “low-cost energy shock”, aiming to reduce the energy cost significantly, improving the business environment conditions – excellent news for data centre companies and investors, considering the main direct cost for the segment tends to decrease soon.

Luis Leão, is a Specialist Product Manager, Clarity 360 Americas, based in São Paulo
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