by Privcap
July 27, 2015

Data Center Demand Emerges in Brazil

Prolifico is eyeing the development of a pure colocation data center platform targeting largely domestic demand for facilities in Brazil, with expectations that the country—and particularly São Paulo—could become an Internet hub for the entire Latin America region.

With the U.S. data center sector close to saturation, one private equity real estate firm is turning its attention to Brazil amid expectations that it will become the hub for much of Latin America’s Internet connectivity.

Prolifico has formed a joint venture to develop pure retail and wholesale colocation data centers in the country, with plans to build facilities with up to 20 megawatts of capacity over the next five to seven years.

Alvaro Britto, Axis Data Centers

According to Prolifico managing partner Peer Buergin and Alvaro Britto, a founding partner of Axis Data Centers—Prolifico’s JV partner—the strategy would be the first “pure play colocation” service to be developed in Brazil.

Colocation data centers are ready-to-use spaces where power, cooling, and security are provided by the owners. In retail colocation centers, tenants lease space within a data center—usually a rack or multiple racks, space within a rack, or a caged-off area. In wholesale colocation, tenants lease entire data centers or large footprints within a shared data center and are sometimes responsible for all IT operations.

In Brazil, however, Britto says much of the existing carrier-neutral data centers provide managed services such as hosting, cloud connection, firewalls, and telecoms, among other things, on top of the real estate facility. “You really don’t have a pure colocation operation in Brazil that can offer companies lower rates for their data center needs,” says Britto. “This represents a true market gap—and therefore a massive opportunity.”

For Buergin, data center demand in Brazil could grow more than tenfold over the next five years. “Currently it’s a less-than-20-megawatt business, but just the demand from multinationals, particularly Internet giants such as Google, Microsoft, and Amazon, should represent a 200-megawatt business,” he says.

In addition, local Brazilian companies could represent an even bigger opportunity for Prolifico. “Around 90 percent of companies in Brazil store their data in-house versus just 40 percent in the U.S., so right there you’ve got tremendous market potential among these enterprise customers,” Buergin adds.

Peer Buergin, Prolifico

Britto also argues that São Paulo will become an entry point for Internet traffic for much of the Latin American continent following the laying of the Seabras-1 submarine cable between New York and São Paulo, as well as a couple of other planned international submarine cables—which are expected to go live in 2017. Increasing amounts of data are also being exchanged locally rather than through Miami or other locations in the U.S. as they have in the recent past. We’re seeing a real shift in content flow in Brazil, with traffic increasingly being exchanged here. As a consequence, more companies are now storing their data here,” says Britto.

The JV has been structured to allow a split as either an operating company or a real estate company upon exit, which could be done through an IPO or a sale. Buergin, though, admits it can “sometimes be challenging to convince foreign investors of how early-stage the market really is.

“We realized that the market in Brazil is nowhere near where it is in the developed world,” says Buergin. “Investors speak about price compression and overcapacity in places like the U.S., but in Brazil the data center market has yet to pretty much start. We’re still at a one-size-fits-all stage with no segmentation of services.”


Prolifico talks about its plans to develop pure retail and wholesale colocation data centers in Brazil with up to 20 megawatts of capacity.

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