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Amazon Deepens Focus on LATAM: Should Google & Others Worry?

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Amazon (AMZN - Free Report) is making every effort to strengthen cloud presence on the back of its increasing number of data centers.

Its cloud computing arm, Amazon Web Services (AWS), intends to invest $800 million to build a regional data center in a free-trade zone in Argentina. Notably, the data center will be located in the Bahia Blanca-Coronel Rosales districts of the province of Buenos Aires.

Notably, this move bodes well for the company’s initiatives to expand presence in the Latin America’s (LATAM) cloud space.

Further, Amazon will save on taxes by building the data center under review. It will get export tax breaks and income tax reduction from 35% to 15%, courtesy of the new Knowledge Economy Law of Argentina.

Additionally, the company will be exempted from national or provincial taxes on energy consumption owing to the location of the new data center. Consequently, these tax benefits are likely to aid margin expansion within AWS segment.

Further, AWS will achieve more efficiency and accuracy in data management with the rising number of data centers. This in turn will aid Amazon in sustaining dominance in the cloud computing space.

Moreover, these factors are likely to provide Amazon a competitive edge in the cloud computing market, where it is facing stiff competition from the likes of Microsoft (MSFT - Free Report) , International Business Machines (IBM - Free Report) and Alphabet (GOOGL - Free Report) .

LATAM is Gaining Steam

Growing adoption of IoT, AI and big data within the cloud infrastructure remain the key catalysts in the infrastructure as a service (IaaS) market in LATAM. According to a report from Frost & Sullivan, this market is anticipated to reach $7.4 billion by 2022 at a CAGR of 31.9%.

Moreover, IoT, AI and big data are aiding growth in the LATAM’s data center market. Per a report from Arizton Advisory & Intelligence, this market is expected to generate revenues above $1 billion by 2023 at a CAGR of more than 11% between 2018 and 2023.

Given the scenario, LATAM is an attractive market for technology providers.

Intensifying Cloud Battle in LATAM

We note that Amazon, Google, IBM and Microsoft are leaving no stone unturned to capitalize on the immense growth opportunities present in LATAM.

Google Cloud intends to invest $140 million in its Chilean data center located in Quilicura, Santiago. Notably, this is in addition to the company’s initial investment of $150 million. We believe this will expand the company’s storage capabilities and size of the data center.

Further, it has also three regions in LATAM with the newest one located at Sao Paulo.

Meanwhile, Microsoft Azure provides cloud facilities in LATAM through its data center in Brazil. Further, it has an availability zone in the country.

Further, IBM owns three data centers in LATAM – one located in Hortolandia, Sao Paulo, one in Jundiai, Sao Paulo and one in Queretaro, Mexico. Further, IBM Cloud Direct Link is now part of Ascenty’s connectivity portfolio. Notably, Ascenty is the largest data center infrastructure provider of LATAM.

Nevertheless, AWS’ growing initiatives in LATAM are likely to give a tough competition to these abovementioned companies. It recently selected Buenos Aires as the new location to set up its seventh Edge location in LATAM. Further, it is gearing up to set up a sixth location in Colombia with others being located in Sao Paolo and Rio de Janeiro.

Further, AWS has plans to set up advanced data centers in Chile. Moreover, it has three availability zones in LATAM, which are located in Sao Paulo, Brazil. Furthermore, it has offices in Brazil, Chile, Colombia, Argentina and Mexico.

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