News
A Historic Shift: From Telecommunications Investments to Data Centers
What is driving this unprecedented investment in data centers in Latin America, and what challenges does it present? Although the report by the Economic Commission for Latin America and the Caribbean (ECLAC) is not specifically about data centers, its analysis of digital foreign direct investment (FDI) provides insight into trends and factors that also influence the growth of the data center sector. The report, titled “Digital Foreign Direct Investment in Latin America and the Caribbean: Opportunities and Challenges” (2025, originally in Spanish language), was authored by Nikolas Passos and Andrea Laplane.
The document situates investments in data centers within a historic transformation of foreign direct investment in the digital sphere. It notes a shift in digital FDI from traditional telecommunications to new areas such as data centers, cloud services, software, and digital platforms. In particular, investment in the communications sector has evolved from traditional telecommunications toward digital services based on data processing and hosting.
“The shift in investment leadership from traditional telecommunications companies to large technology firms reflects more than just a change in subsectors. It also shows changes in strategy among companies entering the region. Telecommunications companies have focused on expanding connectivity infrastructure. In contrast, digital multinationals drive projects in data centers and cloud services. These projects redefine Latin America’s integration into the digital economy and pose new challenges around localization, regulation, and capabilities”.
This transformation in telecommunications and the entry of big tech companies into the field are bringing the existing model into crisis, as Chile’s former undersecretary of telecommunications recently stated—a development that warrants further examination.
Regarding investment dynamics, the document indicates that investment peaks are primarily driven by specific large-scale projects, particularly in communications and data centers. Furthermore, it notes that announcements of FDI projects focused on data centers have accelerated over the past decade, reaching historic highs in 2023 and 2024.
As for the economic characteristics of these investments, there are a couple of red flags that point to the extractive nature of data centers in this part of the world and to their little value to our economies in the long term. First, the text points out something that is already well established but is conveniently glossed over in public announcements: investments in data infrastructure reveal a profile of capital-intensive investments but low job creation. Regarding local capabilities, it states that heavy reliance on foreign suppliers limits the development of local capabilities and poses challenges for digital sovereignty. Furthermore, it notes that much of the added value is concentrated in technology clusters in high-income regions rather than in our countries.
With regard to energy and environmental impact, the text notes that data center projects are raising environmental concerns due to their energy and water consumption, and points out that environmental organizations and academics have questioned their net benefits because of associated social and ecological costs. It therefore highlights the need for policies that balance capital attraction, environmental sustainability, and the strengthening of national capacities.
Categorised in: News