S&P Global Market Intelligence's recent webinar "Beyond Connectivity: Digital Infrastructure Trends in Latin America" was the result of our Latin American analyst teams across 451 Research and Kagan pooling expertise to provide customers with in-depth insights into the region's evolving digital infrastructure landscape. With its cell tower, fixed broadband and leased datacenter segments growing in recent years, Latin America has seen significant enhancements in digital infrastructure that better position the region to handle its population's evolving technology needs.

451 Research is a technology research group within S&P Global Market Intelligence. For more about the group, please refer to the 451 Research overview and contact page.

It is the dawn of a new age for digital infrastructure in the Latin America and Caribbean region. The area has made progress and laid the groundwork to, at least partially, fill a gap in the infrastructure that has, for a long time, constrained connectivity among many of its nations. With expanded coverage and higher levels of investment, Latin America is in an entirely different position than it was a mere five years ago, although obstacles remain. As technology needs evolve along with infrastructure requirements, providers in the region appear to be picking up speed, seemingly more attuned to the region's unique needs and, most importantly, its challenges. In the age of AI, these infrastructure developments may be critical in helping position the region strategically as a potential destination on the global technology stage.

Tower market

Latin America's tower base is growing, but the coverage gap is still an issue. The region ended 2023 with 265,178 total towers, with 85.3% of those being traditional towers (226,254) and 14.7% (38,924) being small cells and distributed antenna systems (DAS). South America represented the biggest market, with 64% of the total tower base, followed by the combination of Mexico and Central America (31%) and the Caribbean region (5%). American Tower Corp. with 17% of the towers (45,210), followed by Sitios Latinoamérica SAV de CV with 16%, (42,520) and Telesites with 8.5% (22,476) were the biggest tower companies in the region at the end of 2023.

Kagan estimates that Latin America's small cell/DAS market could grow at a CAGR above the single-digit mark over the next 10 years, but density is focused on big cities such as São Paulo, in Brazil. Still, the higher spectrum bands needed for 5G should push an overall growth for all towers too. And while 5G fixed wireless access (FWA) is gaining traction, it is still too early to have any significant impact in the region — mostly because of how cost-effective aerial fiber networks are.

Fixed broadband

The Latin America and Caribbean region has shown significant growth in terms of fixed broadband connectivity over the last decade. Growing connectivity needs and internet service providers' (ISPs) push to reach new markets in large countries such as Mexico and Brazil, among others, has led to a faster deployment of services.

As of 2023, Kagan research figures point to 53.7% of regional households having a fixed broadband connection — around 112 million subscriptions — which represents an 8.4% year-on-year expansion, and the trend is expected to continue at a 3.4% CAGR over the next seven years, to end at a 64.6% broadband penetration rate for the region by the end of 2030.

Fiber-to-the-home (FTTH) connections have been at the forefront of the expansion, reaching a 56.3% market participation in 2023 and expected to reach nearly 69% of the broadband market by 2030, displacing hybrid fiber coaxial (HFC) connections along the way. The platform has benefited from the expansion of small ISPs in countries such as Brazil, as well as the emergence of neutral network providers that have made it easier for service providers to expand into new markets.

Datacenters

The past five years have been especially transformative for Latin America's datacenter sector. The sector originally took shape in the region within the portfolios of telecom providers, with those firms operating datacenter assets as one component of their broad array of services. Then, in the early 2010s, specialized datacenter providers began emerging in the region. Those players put the datacenter at the center of their business models, often operating more efficiently and offering more modern, well-maintained facilities. Demand for colocation services in the region grew, as enterprises began moving away from on-premises configurations toward leased facilities.

With the COVID-19 pandemic, enterprise demand surged. On one hand, those firms looking for physical infrastructure increased demand for leased datacenter services. On the other hand, several enterprises opting for public cloud led to higher demand for cloud providers, who in turn began building out their presence in the region. Since 2020, over a dozen new cloud regions have been announced in Latin America, as players like Alphabet Inc.'s Google, Microsoft Corp.'s Azure and Amazon Web Services Inc. grew their presence across the region's markets, primarily Brazil, Mexico and Chile. Cloud provider growth was also good news for leased datacenter providers. As cloud service providers invested heavily in the region, they often turned to third-party colocation players to house part of their infrastructure. In fact, since cloud providers often try to make their footprint in a market redundant by placing their infrastructure in several datacenters locally, a single cloud players' entry into a market meant higher demand for several datacenter firms. Cloud has become the primary driver behind datacenter industry growth in the region. In 2023, Latin America surpassed 1,000 MW in net datacenter capacity for the first time, according to S&P Global's 451 Research Datacenter KnowledgeBase. With additional expansions and new builds coming online, capacity is set to double by 2027.

Furthermore, in the past year, AI has also emerged as a potential future growth driver for the business. Datacenter providers believe AI could fuel additional demand for their services by cloud and enterprise customers alike, as those firms look for more sophisticated infrastructure to house those deployments, which tend to have higher density requirements. Although the full extent to which this additional demand will play out has yet to be observed, AI has been the source of much optimism for the industry, leading datacenter providers to continue pursuing expansions across the region's main markets.

In terms of investment, a handful of markets has seen the highest level of industry activity in recent years. São Paulo, Brazil's largest city and economic hub, is by far the largest market in the region in terms of net datacenter capacity, accounting for over 43% of Latin America's total net capacity according to S&P estimates. The city has seen a changing datacenter landscape post-COVID-19, as several large-scale builds are brought online to service hyperscaler customers, increasing the number of wholesale facilities in what was historically a retail-oriented market. Brazil's Rio de Janeiro also ranks in the top three largest datacenter markets in the region, albeit with notably a much smaller share than São Paulo.

Santiago, capital of Chile, has also emerged as an industry favorite due to its favorable economic climate and subsea cable offerings, seeing a number of hyperscaler-oriented builds coming online in recent years as well. Lastly, Mexico has also seen high levels of datacenter industry investment in the region. The Mexican market was traditionally focused around the nation's capital city, Mexico City, which still ranks among one of the largest markets in the region. However, Querétaro has gained momentum as a datacenter hub for providers looking to service hyperscaler customers, due to being less susceptible to seismic activity than the capital and located along major fiber routes and will likely rise in the rankings as all the builds announced fully come online in the next few years.

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