Tencent Cloud, the data storage arm of one of China´s tech giants, is investing in Brazil´s cloud market, where price and taxation are still challenging, according to S&P Global Platts.
In a new study of Latin American cloud markets, S&P says that, in November 2021, Tencent Cloud opened its first datacenter in Brazil.
The Chinese giant is “entering the market due to increased demand for digital services and hoping to connect Brazilian and other Latin American businesses to opportunities in China and the broader Asia-Pacific region”.
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Top global public cloud providers like AWS, Microsoft Azure and Google have been active in Brazil for years using leased datacenters in the country.
Public cloud services are commonly used in Brazil, so in addition to offering their own cloud services, many colocation providers choose to partner with the hyperscalers.
“Despite a seemingly promising market opportunity for the cloud, Brazil still faces notoriously expensive cloud services, largely attributable to heavy taxation”, S&P says.
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“How taxation is applied to these services is not clear-cut, and tight regulation appears to be lacking, but under existing laws, use of cloud computing is likely viewed as a license of software or provision of services. In either of those scenarios, numerous taxes are levied when they are consumed from a foreign provider that has a physical presence in the country, and taxes will depend on factors such as revenue, price of the service and profits generated in Brazil”, S&P adds.
General challenges of doing business and infrastructure costs also contribute to higher prices. As a result, customers in Brazil and other Latin American countries without low-latency requirements may opt for platforms housing their infrastructure in other countries, including the U.S, according to the same source.
Despite its obstacles, the country also saw renewed interest from the global cloud industry due to the circumstances of the pandemic. Oracle entered the market in 2020 with its first cloud region in São Paulo and only a year later, added a second. IBM also launched its first Latin American multizone cloud region in Brazil, announcing the expansion in March 2021, highlighting the increasing levels of hybrid cloud adoption in the area as the major factor behind the new region.
