Telecoms & IT

Mexico’s Data Center Revolution

How is the combination of rising digital literacy, energy security, and strategic geography stimulating a data center revolution in Mexico?

Image credit: Shutterstock / Anton Balazh

With cloud computing and cloud storage becoming the default way of doing things these days, the world is in need of more data centers. After all, the cloud data must be stored somewhere on physical hard disks drives or—increasingly—smaller, solid-state drives (SSDs).

Aside from cloud computing and the more traditional business of web hosting, data centers are in higher demand because of the rise of streaming services, which require exceedingly large storage spaces, and e-commerce transactions, which depend on highly reliable data storage with almost zero tolerance for error.

There are currently around 8,000 data centers in service in the world.

However, the volume of data that humanity generates seems to be growing at an accelerated rate. It is estimated that humans created 120 zettabytes of new data in 2022 (equivalent to 120 trillion GB).

To put things in perspective, given that an average portable external hard drive stores 4TB of data these days, it would take approximately 30 million external hard drives to store the data created each year.

And this growth is accelerating at the rate of approximately 30% per year, which means that over 150 zettabytes of information will be generated by the end of 2023, while up to 200 zettabytes will be added in 2024 (equal to 50 million average portable drives).

Suffice it to say that the data center industry is booming, in what some are calling Mexico’s data center revolution.

Mexico has been home to data centers since the early 2000s, though local companies are now seeking to claim a larger share of the pie, especially as investments in data centers are projected to grow to over USD3.5 billion by 2024. But does Mexico have a good chance of succeeding in the world’s growing data center market?

Data centers best function when a set of prerequisites are in place, including a robust telecommunications infrastructure, a favorable regulatory environment, and affordable—and preferably sustainable—electrical energy. Data centers notoriously consume huge amounts of electricity.

Mexico fulfills all three requirements.

The country has a well-developed telecommunications infrastructure, with Telmex dominating the market.

he quality and reach of internet connectivity in Mexico is well above average in the developing world. With over 96 million internet connections, the country is among the top 10 nations worldwide in terms of connectivity.

As for speed, although the median broadband speed of 62Mbps does not put Mexico on top of the list of nations with the fastest internet connections, it is reassuringly above most developing countries of comparable size and population.

Mexico enjoys a relatively high degree of energy security.

“We have secured 50MW of power capacity for our Mega Campus in Querétaro,” Santiago Suinaga, CEO of KIO Data Centers, told TBY during an interview.

There are not many developing markets where a private company can secure 50 MW of electrical power, trusting that there will be no wavering in the supply of electricity throughout the year.

From a regulatory point of view, we have to remember that over a decade ago, “in 2013, Mexico embarked on an overhaul of its telecommunication,” which was followed by an “overhaul of its legal framework and polices,” according to the Organization for Economic Cooperation and Development (OECD).

After the reforms, and with the implementation of 28 out of 31 recommendations made by the OECD, Mexico’s IT and telecom industry is in a much better position to be part of the global telecoms value chain.

Moreover, and aside from technical considerations, geographic and human factors also play a role. Data centers should ideally be close to the so called “internet backbone,” or the principal data routes between geographical regions which connect the core routers of the internet.

Mexico is situated at a critical point: it is a link between the US and Latin America as well as an ideal hub for transatlantic and transpacific routing. “Mexico is becoming popular because of its geographical location for hyperscalers and cloud providers.

Many players now realize Mexico is the ideal location to set up operations on a tech level,” Mexican Association of Data Centers (MEXDC) President Amet Novillo told TBY.

He also noted this “has only intensified with the nearshoring movement that has many companies setting themselves up in Mexico close to the US border.”

As for human factors, Mexico does have the resources to run world-class data centers, thanks to its young population with a high level of “digital literacy.” As of 2022, there were over 1.5 million graduates in Mexico trained in computer science, IT, or telecoms technology, according to National Institute of Statistics and Geography (INEGI). At the same time, “the mastery of technological skills among Mexican students reached 52%,” according to Mexico Business News in 2023.

In other words, Mexico has 1.5 million computer and IT engineers, while over half of the country’s students (36.5 million) have a relatively high level of digital literacy. This simply means that Mexico has a readymade IT workforce to run the data centers which may be launched over the next decade. Indeed, there is a good chance that this will happen. “The acceleration of the digital transformation has also meant many new companies are looking to develop and invest,” as MEXDC’s Novillo puts it.

Therefore, the industry is considering further specialized training programs to prepare the skilled workforce that the sector requires. This is more important as the IT industry in general is evolving at an accelerated pace, necessitating the constant retraining of the workforce. The industry, led by MEXDC, wants to make sure that talent shortage will not create any bottlenecks in the future. “We have alliances with important universities in Mexico such as UNAM and the Autonomous University of Querétaro to provide internship programs for their students, for example,” CEO Novillo pointed out to TBY.

Querétaro, whose main university is now introducing IT programs for data center specialists, has become a regional and national hub of data centers. There are several large-scale facilities—both operational and under construction—including KIO’s third data center. More investment is coming toward the sector, with big names such as Tesla and Microsoft showing an interest in developing their new data centers in Mexico.

2024 will undoubtedly see the addition of more data centers to the country’s 154 existing facilities. Martín Antúnez, CEO of LATAM Entry, who has been at the forefront of data centers industry for over two decades, told TBY that, “for every dollar we spend developing data centers, our clients, namely cloud providers, end up investing an additional USD2-3.” This means that the industry will also become a source of FDI, provided that the internal investment in the sector is kept up.