Global Data Center Market Report

The Mexican data center market is considered the second most important in the LATAM region’s dynamic emerging markets landscape, following Brazil. As of April 2024, Mexico boasted an aggregate data center capacity of 587.2MW. 111.5MW of this capacity was live, while the remaining 475.7MW of the total capacity was under construction (Mexican Association of Data Centers (MEXDC), 2024).

Mexico offers a strategic location near the US and a skilled workforce, particularly in regions like Querétaro, Jalisco, and Guanajuato. Additionally, Mexico provides competitive salaries and enhanced security in regions such as Querétaro, making it an attractive option for data center development. Querétaro provides extensive land for development and industrial parks with competitive reserves, offering leasing and sale prices up to 20% below the national average. This affordability positions it as the leading choice for data center construction in Mexico (Area Development, 2023).

Consequently, Querétaro has emerged as the focal point of data center activity in Mexico and hosts the first data center cluster in the country. Despite representing a mere 5.0% of the country’s populace, Querétaro accommodates 67.3% of Mexico’s aggregate data center capacity (DC Byte, 2024) (Mexican Association of Data Centers (MEXDC), 2024).

Mexico’s data protection laws, primarily the Federal Law for the Protection of Personal Data Held by Private Parties (LFPDPPP) and the General Law for the Protection of Personal Data Held by Obligated Parties, have set robust standards for data privacy and security. Data localization requirements have triggered a spate of investments in data centers in Mexico as foreign investors have sought to host data locally. The appointment of Data Protection Officers and enforcement of data privacy requirements have ensured compliance and data centers’ alignment with international standards (Chambers and Partners, 2024) (European Commission, 2024).

In addition to this, Mexico’s National Digital Strategy, launched in 2013 and periodically updated, aims to accelerate the country’s digital transformation and enhance digital infrastructure by improving connectivity, fostering innovation, and enhancing the overall digital ecosystem. This has led to the increasing demand for data storage and processing capabilities, as offered by data centers. The adoption of emerging technologies such as AI, cloud computing and 5G will likely sustain the demand for advanced data center facilities (BNamericas, 2023).

The Mexican government offers fiscal and regulatory support to data center developers. Tax incentives in the form of import duty exemptions on data center equipment such as servers, cooling systems and power infrastructure and accelerated depreciation of renewable energy equipment have spurred investments into the data center market. In addition, tax breaks for renewable energy investments and support for energy-efficient technologies central to data center operations have been key enablers. Public-private partnerships (PPP) are also being encouraged to deploy capital on a scale to develop the digital infrastructure. For instance, the state government of Querétaro announced, in the second half of 2023, an investment of $293.2 Mn to strengthen the power grid, involving the construction of 75km of high voltage lines, two electrical substations, six switching stations, and the interconnection of 19 load centers (DC Byte, 2024). Additionally, in November 2024, to ensure reliability in the national electric system, the central government unveiled its $23.4 Bn investment plan for 2024-2030, including $12.3 Bn for 13.0GW of new generation capacity, $7.5 Bn for transmission grid reinforcement, and $3.6 Bn for distribution improvements (Cacheaux, Cavazos & Newton, 2024).

The Mexican government has been attracting foreign investments through tax incentives, including fiscal benefits for nearshoring. The Decree issued on October 11, 2023, provides accelerated tax depreciation on new fixed assets till the end of 2024 and additional tax deductions on training until 2025 (White & Case, 2023) (UNCTAD, 2023). As companies relocate their operations to Mexico to mitigate supply chain risks and reduce costs, there will be an increased need for local data centers to support their IT infrastructure. Special Economic Zones (SEZs) have been a key strategic route through which the Mexican government has offered fiscal and regulatory benefits. They offer a streamlined regulatory procedure which reduces the time and complexity in setting up data center operations. They also benefit from the availability of state-of-the-art infrastructure such as transportation networks, power supply, enhanced connectivity and essential services. Lastly, investors can avail of benefits such as exemptions from taxes on infrastructure investments and land and energy costs, thereby paring their operating expenses (ITR, 2018) (Foley & Lardner, 2017) (NovaLink, 2024) (Research and Markets, 2024).

In terms of promoting renewable energy usage to make data centers more sustainable, the Mexican government has offered tax incentives under Article 40 of the Law of Corporate Income Tax, which provides for accelerated depreciation of 100.0% for investments in equipment and machinery for electricity generation through renewable sources. Further incentives include an exemption from import and export tax and a tax credit for selected renewable technologies, including wind and solar (Mexico Business News, 2024) (Norton Rose Fulbright, 2016).