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AWS cloud pavilion cebit 2016 Sean Gallup/Getty Images
AWS cloud pavilion at the 2016 CeBIT digital technology trade fair in Hanover

Amazon is Said to Pit Argentina Versus Chile in Data Center Race

The two countries are competing to be the site of a new AWS data center in South America, sources told Bloomberg. Amazon is still deciding how to proceed and could ultimately end up with sites in both locations

Charlie Devereux (Bloomberg) -- Argentina is in the running along with Chile to be the site of a new data center for Inc. in South America, according to people familiar with the matter, a sign of President Mauricio Macri’s success in bringing the nation back into the global economy.

Macri met with Elaine Feeney, Amazon’s vice president for global infrastructure expansion, in New York late last year. Chile held several meetings with Amazon up through mid-2017, and President Michelle Bachelet visited Amazon’s headquarters during a trip to the U.S. in June. Amazon is still deciding how to proceed and could ultimately end up with sites in both locations, another person said.

The idea that Argentina could compete with Chile for foreign investment would have been unthinkable under the government of Macri’s predecessor, Cristina Fernandez de Kirchner. Currency controls and restrictions on imports kept investors at bay.

“Beyond what this could mean in actual investment, symbolically it would be very important,” Enrique Carrier, director of Buenos Aires-based telecom and internet market researcher Carrier y Asoc., said in a phone interview.

Cloud Expansion

Amazon has been expanding its cloud computing infrastructure across the globe as more companies pay to have their data and applications hosted remotely. For tech companies, having an Amazon data center nearby helps reduce costs and improve data speeds compared with having to rely on sites outside the country, Carrier said.

Chile, with an economy and population half the size of Argentina’s, regularly attracts about double the foreign direct investment of its neighbor. In 2015, Chile had $20.5 billion, compared with Argentina’s $11.7 billion, according to the United Nations’ Latin America and Caribbean unit, known as Cepal in Spanish. In 2014, Chile quadrupled Argentina in FDI, according to Cepal.

Under Macri, Argentina has attracted interest from investors, so far mostly in the financial sector. Long-term investors have been wary of Argentina’s financial and political volatility. Macri has received about $79 billion in pledges from foreign investors, of which 8 percent has been disbursed while 43 percent is underway, according to the Argentina Investment and Trade Promotion Agency. The other 50 percent remains on hold for now.

Market Assessment

An Amazon team recently visited Argentina to assess the market for cloud services and learn more about how they would be taxed, according to the people familiar with the matter. The government is doing what it can to drum up demand: the central bank last month authorized banks to farm out their technological services to the cloud.

Chile has a more developed track record in technology investment. Google chose Chile in 2012 to establish its first data center in Latin America, and Santiago ranked two places above Buenos Aires in a survey of global tech hubs by Savills, the real estate firm.

Chile is attempting to develop its fiber-optic network and establish the southern region of Patagonia as a digital hub by offering tax incentives, according to a person familiar with the plan.

Argentina has different attractions. Its economy is double the size of its neighbor across the Andean cordillera, and it boasts a collection of tech unicorns unrivaled in the region -- MercadoLibre Inc., Globant SA, Corp. and OLX, all valued at more than $1 billion.

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