As global demand for cloud computing, AI and digital services surges, Latin America is emerging as a hotspot for data center investment. Data centers are one of the fastest-growing asset classes in global commercial real estate, with capacity projected to grow at around 15 percent per year—though even this will not be enough to meet demand—and LatAm is no exception.

This extreme demand is pushing hyperscalers to seek capacity outside the oversaturated North American and European markets. Latin America's relatively untapped landscape offers both opportunity and a chance to diversify global operations in a fast-growing region.

Brazil, the region's largest economy, accounts for more than 40 percent of sector investment, with hyperscalers expanding rapidly on the back of reliable power and water infrastructure.

Mexico is also growing fast, with Querétaro becoming a hub for hyperscale and co-location facilities that support nearshoring and cross-border digital operations. Together, the two markets anchor LatAm's expanding cloud, AI and telecom ecosystem.

The sector's rapid expansion is not without challenges. Data centers are highly resource-intensive, and their need to be close to urban hubs requires delicate infrastructure and financial planning.

Although tariffs introduced by President Donald Trump last year—and recently ruled against by the US Supreme Court—have created economic friction and prompted Mexican developers to diversify their equipment supply chains toward Europe and Asia, investment has continued largely unhindered. This may well remain the case following the high court's ruling, even though other avenues exist for imposing tariffs. Demand for data center services is so strong that political changes and tensions appear to have only have so much impact.

Brazilian data center infrastructure may end up looking even more attractive to investors looking for opportunities—and stability—outside of the US-China axis.

Brazil booms…

Brazil has emerged as one of the region's main data center markets , supported by relatively reliable power sources including abundant renewable energy resources, a favorable policy environment and strong water infrastructure.

The market is dominated by hyperscalers, including Ascenty, Scala and OData, which continue to expand to meet growing demand from international clients. Global players such as Oracle, Amazon, Alphabet and Meta typically rely on these local operators to help them navigate Brazil's regulatory environment.

In addition to large-scale facilities, Brazil is seeing a rise in "edge" data centers—smaller, bespoke facilities serving specific customers with dedicated power projects. Patria's Omnia project, for example, illustrates this trend, combining tailored infrastructure with private energy sources. Renewable energy projects in northeastern Brazil are increasingly being paired with edge data centers, providing power that is both sustainable and reliable.

Regulatory support is improving as well. Legislation announced in May 2025—known as Redata—offers tax incentives for equipment imports, aiming to attract foreign investment. Fitch Ratings estimates that each megawatt of installed capacity requires approximately US$10 million in equipment spending, much of which is imported at a tax rate of 100 percent. This tax break could translate to billions of dollars in cost savings for hyperscalers, Fitch concludes.

Investors continue to closely monitor how import duties, energy regulations and local permitting impact project economics.

Water and energy allocation remains a sensitive topic depending on the region, particularly in high-density areas such as Rio de Janeiro and São Paulo. These factors have prompted developers to explore alternative locations with sufficient renewable power availability and community engagement plans.

…while Mexico catches up

In Mexico, Querétaro has quickly become the epicenter of data center development. The city hosts both hyperscale facilities and co-location operations, benefiting from its central location and industrial base. Mexican operators have scaled rapidly from small regional fiber projects to major long-haul networks.

The boom in Mexican data centers has been driven in part by nearshoring, where US companies relocate production and digital infrastructure closer to North American markets. Data centers in Mexico support not only domestic demand but also operations serving the US, including cloud computing and AI applications. While the tariffs announced last year initially slowed some investment, interest remains robust.

But despite strong demand, data center development in Mexico faces infrastructure bottlenecks, particularly in power and water. Claudia Sheinbaum's government, however, recognizes the strategic importance of this sector. In early 2025, the government passed a new electricity law—the Ley del Sector Eléctrico—which introduces fast-track permits for private power generation projects within industrial parks, enabling developers to create dedicated electricity networks for data centers. This should reduce concerns over power supply, although it will take time before the benefits are fully realized.

Water supply also presents challenges. Data centers require substantial water for cooling, and developers must balance operational needs with local community access. Querétaro faces high drought risk due to the combination of increased demand and climate change.

Mexico is also expanding its digital connectivity beyond data centers. Dark fiber initiatives, often supported by local sponsors, are growing, with approximately 750 kilometers of new dark fiber investment planned in and around Querétaro. These networks enhance the broader ecosystem for cloud, AI and telecom services.

Geopolitics, US investment and Trump 2.0

While both Mexico and Brazil present opportunities, geopolitical factors and US policy changes continue to influence investment decisions. The renegotiation of the US-Mexico-Canada Agreement (USMCA) this year adds further uncertainty for Mexico, specifically.

US companies remain interested in investing in the country: In September 2025, US tech company CloudHQ said it would invest US$4.8 billion to build six data centers in Querétaro in the coming years. Speaking after the deal was announced, Mexican economy minister Marcelo Ebrard said investment in data centers will allow the country "to train our people, integrate services, integrate companies," with such projects being "one of the main drivers" of growth in both the local and global economy.

Unlike Mexico, where nearly half the country's foreign direct investment came from the US in 2024, Brazil maintains a broader investor base. Recently, there has been US investment in strategic areas such as data centers, smart cities and rare minerals—and this has not changed with the new US administration. Brazil's role as a producer of natural resources and food supply will continue to attract foreign investment, even amid global geopolitical tensions.

Trump's push to limit Chinese participation in critical tech infrastructure has indirectly boosted LatAm , positioning both Mexico and Brazil as reliable alternatives for US capital seeking politically aligned opportunities.

This is especially visible in the data center market, where US hyperscalers are rapidly expanding. Mexico and Brazil have become priority destinations for new capacity because they offer broad political alignment, proximity to US markets and expanding renewable-energy baselines.

Financing timelines have also lengthened due to enhanced due diligence requirements, particularly for strategic projects.

Looking ahead

Latin America's data center sector is likely to continue to grow throughout 2026. In Mexico, new power generation projects and regulatory clarity should ease bottlenecks, while in Brazil, edge data centers and renewable-linked infrastructure projects are likely to accelerate. Both markets are experiencing strong US investment, driven by strategic priorities in cloud computing, AI and industrial nearshoring.

Social engagement—particularly regarding water and energy usage—will be critical to the sustainability of this growth. While there are risks from regulatory uncertainty and geopolitical shifts, the consensus is overwhelmingly positive: The data center market in Latin America is entering a phase of rapid expansion.

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