Is Argentina set to reboot its digital infrastructure investments?

It may still be too soon to call, but investors are cautiously optimistic about the potential resumption of robust investments in Argentina's digital infrastructure segment, particularly in datacenters.

This view has been echoed by various executives, investors and analysts in recent months, although most agree that South America's second-largest economy continues to face significant macroeconomic and foreign exchange challenges.

At present, Argentina lags a long way behind its Latin American peers in both datacenter capacity and projects under development.

"There's a significant amount of demand in the market. There are definitely pockets of the digital infrastructure landscape that are underserved or emerging that the country could take advantage of," Judah Levine, CEO of HIP Consult, told BNamericas.

HIP Consult is an independent strategic and management consultancy specializing in emerging markets, with a focus on digital and ICT infrastructure.

"One significant area is datacenters, where investment in current capacity is relatively lower than in some of the neighboring countries like Chile and Brazil," Levine said.

Chilean capital Santiago currently has around 10 times the datacenter capacity of Buenos Aires, while Brazil's biggest city, São Paulo, has eight times that of Santiago.

At the recent Capacity LatAm digital infrastructure event in São Paulo, Argentina was the focus of a dedicated panel discussing its data investment potential and challenges.

According to industry executives, Argentina's economy is showing signs of recovery, and the country has relatively abundant renewable energy resources, as well as natural gas-fired energy options and affordable land for datacenter developments.

Interest in new datacenter projects is also being driven by Argentina's large population of around 46mn people and sizable enterprise sector, which has long faced repressed demand for colocation and cloud migration services.

Renewed investor interest

"There's a lot of demand for Argentina, something we didn't see before the [Javier] Milei administration," Serafim Abreu Jr., CEO of Latin American datacenter group NextStream, told BNamericas in January. 

"Looking at the cloud market, companies in Argentina have been quite neglected for a long time. So, with the economy recovering, I imagine that enterprises will start investing again. And investing means changing their entire technological structure and moving to the cloud. We have clients interested in cloud services there," he added. 

At the Capacity LatAm panel, DatacenterHawk analyst Steve Sasse predicted that Argentina could become Latin America's second-largest market for digital connectivity.

Among the new projects, Oracle is reportedly considering establishing a cloud hub in Buenos Aires. Meanwhile, Cirion is searching for land to build a second datacenter in the country and is looking to expand its existing Buenos Aires facility from 5MW to 6.5MW, albeit still far from hyperscale status.

Infrastructure expansion and AI opportunities

Despite its growth potential, Argentina still faces key challenges, including the concentration of data facilities in the capital and an insufficient intercity network. The country also has gaps in other critical data infrastructure areas, such as edge computing, terrestrial fiber and submarine cables. Reducing latency in connectivity and data delivery will be crucial as businesses resume tech projects and digital transformation investments.

To address these issues, Latin American IP transit and connectivity provider EdgeUno recently announced a new 2,550km fiber optic route connecting Santiago to Buenos Aires. The route, which features 24 fiber pairs, will significantly enhance connectivity between the two major cities.

Artificial intelligence (AI) could provide another key investment driver.

Levine noted that Argentina can "certainly capitalize" on AI-related investment opportunities, but disparities between urban and rural areas in terms of data access and internet connectivity remain a challenge.

"We can't miss this opportunity with AI. We have to prepare the networks. Coming next year, I see that Argentina will have important datacenters for AI training," said Diana Lozano, Nokia's systems engineering director for the Southern Latin America (SOLA) region, during the Capacity LatAm event.

Similarly, Salvador Bertenbreiter, CEO and co-founder of IXP operator PIT, emphasized that Argentina has the potential to become a key hub for content and AI – provided it can ensure a stable investment climate.

"Not just in Buenos Aires, but in many other places. So, I think that will happen if the political climate can ensure stability," Bertenbreiter said in São Paulo.

A shifting investment landscape

HIP's Levine pointed to a noticeable shift in investor sentiment.

"When it comes to relative investment opportunities, there has obviously been a change in climate and perception. The current administration seems to be working to make the market more investor-friendly, provide more predictability and stability, and move away from the cyclical boom-and-bust scenario that Argentina has experienced for years," he said.