Central America: A new frontier for datacenter expansion

Due to its geographic location, availability of clean energy and good connectivity, Central America is on its way to becoming an attractive region for the development of datacenters.

Some of the major players in the segment have already deployed datacenters, prepared projects or are assessing building such structures in Central America.

This is the case of Telecom Sparkle, for example, which invested in the Panama Digital Gateway datacenter.

Telecom company Liberty Latin America also recently said it was assessing locations in Panama, Costa Rica or Mexico to develop datacenters.

Another company, Tigo (Millicom), opened its second datacenter in Guatemala last month. The new facility for business services required an investment of US$7.5mn.

Also in Guatemala, Ufinet has a project for a 0.8MW datacenter.

Meanwhile, hyperscale datacenter solutions provider Layer 9 said last year that it is looking for sites in Panama or Costa Rica for datacenters.

Google may also invest in a datacenter in El Salvador after opening offices in that country.

This year, El Salvador opened Data Trust, the first tier III commercial datacenter in that market.

Some of the other players that already have datacenters in the region are Navégalo, ADN Datacenters and Loqui.

In addition to commercial datacenters, the public sector is also investing in these structures.

A US$55mn IDB loan will enable El Salvador to adapt government data infrastructure equipment to meet tier III standards and be affordable and energy efficient.

IDB also provided US$10.2mn for the renovation of the datacenter of the Dominican Republic's general tax service.

The advantages

“A lot of the submarine fibers that provide connectivity to the Americas go through Central America,” Héctor Cabrera, executive director of Guatemalan company Loqui, said at an event hosted by Data Center Dynamics on Tuesday.

Loqui is a business services company and it has a datacenter in the country.

The region has important submarine cables in place such as Maya and Arcos, and various under development such as TAM-1, AMX-Tikal and Manta.

According to Cabrera, the existence of good connectivity and the proximity between markets in Central America allows companies to be close to network edge connectivity needs.

“We are 25-30 milliseconds away from a response from the NAP [the interconnection center] of the Americas,” he said.

María Waleska Álvarez, CEO of NAP's Caribbean data and interconnection center, said demand for datacenters has increased in the region due to the need for companies to be more resilient.

Issues such as climate-related events, political incidents and even economic issues have pushed companies to choose to move their IT workloads to third-party datacenters.

The main hubs

While Panama and Costa Rica are the main technological hubs in the region at present, other countries are coming into focus for investors, such as Guatemala, El Salvador and the Dominican Republic.

“Guatemala is projected to grow by 6% CAGR in 2024-29, above other markets that are averaging 5%. Costa Rica and Panama are a little below that average, precisely because they are already economies with fairly consolidated datacenters,” Dante Pinto, business development manager for Telxius' product area, said at the Data Center Dynamics event.

El Salvador is an interesting development hub, although there is still work to be done on land connectivity. “El Salvador depends a lot on the connectivity of neighboring countries,” said Pinto.

Meanwhile, Cabrera underscored that Guatemala “has interesting potential” although it still needs to resolve issues regarding legislation and access to energy.

Energy

Guatemala is the country in Central America with the most expensive energy, according to Cabrera, who pointed out that a kWh costs around US$0.30 in the country, compared with only US$0.15 in Costa Rica.

In the Caribbean, the availability of energy at reasonable prices is also a problem. In Barbados or the Cayman Islands, energy can cost more than US$0.40 per kWh.

“One of the challenges faced by the data-centric industry is the high energy consumption it requires, which has become even more demanding with the integration of artificial intelligence systems,” said Álvarez.

Considering this, the Dominican Republic, home to the Caribbean NAP, has seen significant growth in green energy in recent years thanks to political efforts to reduce power prices.