Wired for growth? Latin America’s digital infrastructure crossroads

Yet beneath this momentum, vast improvements in access coexist with persistent gaps in speed, affordability and infrastructure. Rural areas remain underserved, many still lack high-speed broadband, and millions are priced out of data plans or devices. As the global economy accelerates into an AI-enabled future, Latin America faces a defining question: can it build the digital foundations needed for inclusive growth, or will uneven progress leave the region trailing behind?

The great leap halfway: Connectivity challenges amidst progress

There have been major strides in the region over the past decade: internet adoption has surged, from 43% in 2012 to nearly 78% today, overtaking major economies, including China. Fixed and mobile connectivity have made impressive gains over the past decade, driven by falling hardware prices and expanding mobile coverage. In Chile, internet usage rose from 55% in 2012 to over 90% today.⁹ Brazil, Mexico, and Argentina are following closely, thanks in part to public investment programs and international development aid aimed at closing access gaps. Mobile connectivity has expanded rapidly as handset prices fell and networks spread. Between 2014 and 2025, the number of people with mobile internet access skyrocketed from 220 million to over 450 million, and mobile technologies and services account for more than 8% of Latin America's GDP, a reminder of the digital economy’s heft.¹⁰

Yet for all this progress, Latin America’s digital leap remains half-finished. Regional internet penetration still lags behind wealthy countries, which have access rates of over 90%¹¹. From rural broadband deserts to lagging cloud capacity, the region trails global peers.¹² As of 2021 only around half of Latin Americans had fixed broadband access,¹³ and fewer than 40% use 4G services regularly.¹⁴ In other words, connectivity has improved, but the region remains stuck in second gear – with patchy networks, subpar quality, and glaring gaps in usage. In a world increasingly defined by digital connections, and on the cusp of an artificial intelligence revolution, these shortcomings are a serious liability. For instance, according to AI policymakers in the region, the top barriers to adoption include infrastructure gaps and insufficient investment.¹⁵

Economics explains much of the remaining divide. Access may exist, but affordability and awareness lag. High broadband fees, low digital literacy and limited local content have stunted uptake, especially among the poor. Mobile coverage now blankets most populated areas, yet meaningful digital access remains largely an urban, middle-class privilege. The result is a region online, but not on equal terms.

Online, but not on equal terms: Inequalities limit digital opportunities

Inequality pervades Latin America’s digital landscape. Wealthy city-dwellers enjoy fiber broadband and unlimited data, while millions of rural and low-income citizens remain offline. The gap between rich and poor is often staggering: internet usage rates can differ by 50 percentage points or more between the top and bottom income brackets in the same country.¹⁶ In Honduras, for instance, about 55% of urban residents used the internet as of 2019, but only 20% of the rural population does.¹⁷ Household surveys across the region show similar chasms. Indigenous and remote communities are especially left behind, with many villages still waiting for a reliable phone signal, let alone broadband.

The cost of connectivity is a major culprit. On average, a humble 1 GB mobile data plan costs about 2.7% of monthly income in Latin America, well above the UN’s 2% affordability benchmark.¹⁸ For the poorest families, the expense is prohibitive: among the bottom 20%, a basic data plan can eat up 8–10% of monthly earnings. Even the devices are out of reach for many. The cheapest internet-capable smartphone costs between 4% and 12% of average monthly income, and as much as 31–34% of income in countries like Guatemala and Nicaragua.¹⁹ (In Haiti it’s a jaw-dropping 84%.) It’s no surprise, then, that internet adoption correlates neatly with socioeconomic status. Digital poverty layers atop existing inequality: those who are poor in income are often poor in information access too.

The social consequences are profound. Students in remote schools struggle to learn from outdated textbooks while their urban peers benefit from online resources. Farmers can’t get market prices or climate updates in real time, widening the productivity gap. Entrepreneurs in poor communities face steep barriers to e-commerce and digital finance. Countries like Colombia and have piloted digital inclusion efforts,²⁰ but these initiatives are often short-lived or underfunded. As a World Bank analysis warned, without deliberate efforts to reduce cost and expand access, the digital divide could entrench new forms of inequality in what is already the world’s most unequal region.²¹

The speed trap: Breaking through digital bottlenecks

Even for those who are connected, the quality of connectivity is frequently subpar.²² With a few exceptions (such as Chile), Latin America’s networks tend to be slower and less reliable than those of its global peers. Average broadband speeds in many countries rank near the bottom of international league tables. These differences matter. Moving from a 3G-quality network to 4G or higher speeds could significantly boost economic productivity; a 10% increase in mobile broadband speed is linked to a .2% increase in labor productivity on average, particularly in lower-income contexts.²³ Even those keeping up with the latest technological trends may struggle to take advantage; Economist Impact survey data finds that In Latin America, 45% of AI users cite better access to high-speed internet as something that would make AI tools more useful to them, compared to just 29% of users in high-income countries.²⁴ But Latin America risks missing out on these gains as long as it lingers in the slow lane. In countries like Honduras, there has been progress on high-speed buildout, but urban-rural divides remain stark and speeds still remain slow.²⁵ This hinders everything from streaming to cloud computing.

Latency, or the amount of time it takes data to travel from one place to another, is another lurking problem. Thanks to a legacy of hub-and-spoke network design, internet traffic often takes a circuitous route through North America. It can be easier (and cheaper) to connect Santiago to São Paulo via Miami than through neighboring countries.²⁶ The result is palpable delay: data packets ping-ponging up to the U.S. and back introduce lag that hampers everything from online gaming and financial transactions to cloud computing. A 100-millisecond delay—routine when data must travel intercontinental distances—is an eternity for emerging applications like telemedicine or real-time AI analytics. Latin America’s radial connectivity built around the United States made sense in the early internet era, when most content was hosted abroad.²⁷ Today, it looks woefully inefficient.

New investments are aiming to change this, such as Chile’s planned Humboldt submarine cable linking South America directly to Asia-Pacific for the first time.²⁸ Brazil and Argentina, for their part, have built some of the world’s largest Internet Exchange Points to keep local traffic local.²⁹ But vast swathes of Central America and the Caribbean remain poorly linked to regional backbones, leaving them disconnected from the faster lanes of global data flows.³⁰

Backend, not just bandwidth: Expanding core infrastructure

Building digital prosperity in Latin America will require attention to what lies behind the scenes. Here, Latin America’s infrastructure deficits are even more glaring. The region hosts less than 5% of the world’s data center infrastructure.³¹ While this is larger than China’s share, the region lacks China’s massive computational ability. Put plainly, Latin America generates a huge and growing volume of data, but far too much of it is stored and processed elsewhere. This has consequences for performance, cost and even sovereignty: relying on distant servers can raise latency (again) and expose countries to the whims of foreign regulators or companies. The region also sits well behind North America, Europe and Asia when it comes to the specialized data centers that will be critical for powering emerging AI technologies.³²

On the bright side, Latin America’s data centre market—now worth about US$5 billion—is forecast to double by 2029.³³ The private sector and governments alike have woken up to the need for local cloud and computing infrastructure. Hyperscale investors, such as Amazon Web Services, Microsoft and Google, are pouring billions into new cloud regions and server farms.³⁴ Brazil, Mexico and Chile dominate this build-out so far, with secondary markets like Colombia, Peru and even Panama starting to attract large facilities. Brazil’s national data center plan alone, if implemented, could push the country’s data center storage from about 1GW of installed capacity today to 8GW.³⁵

Increasing local cloud capacity lowers costs for businesses and improves user experience. It also primes the region AI. Training AI models or deploying AI-driven services requires immense computing power, specialized data centers and lots of electricity.

Sustainability’s cold shoulder: Ecological impacts of digital expansion

As Latin America races to build out cloud infrastructure and faster networks, it must contend with a daunting side effect: digital infrastructure leaves a heavy environmental footprint. Data centers and telecom networks devour immense quantities of power and water. In Brazil, over 40 centres are being constructed, some in regions with frequent blackouts and water stress, which raises important questions about the sustainability of such initiatives without further efforts to reduce impacts or improving siting.³⁶ Data centres there are already estimated to account for about 0.5% of national power demand.³⁷

Even so, the region is particularly well suited for AI infrastructure. Latin America produces clean electricity at much higher rates than the global average.³⁸ Brazil sources nearly 90% of its electricity from renewable sources.³⁹ Chile is investing heavily in solar and hydrogen.⁴⁰ Amazon and Microsoft have signed green energy deals to power their new centres in the region.⁴¹ Low-water systems, such as those in an AWS data center in Chile, can help further reduce the environmental impact of digital infrastructure buildout.⁴² Regardless, greenwashing concerns abound. Watchdogs warn that without clear environmental safeguards, the rhetoric of “sustainable tech hubs” may paper over serious risks to local ecosystems and power systems.⁴³

The policy problem: Better governance for digital infrastructure

Latin America has made real progress in closing the digital divide, attracting tech giants and expanding infrastructure. Yet the region now faces a more complex challenge: ensuring that this momentum translates into broad-based, sustainable growth. That will require not just more cables and cloud servers, but smarter coordination across both the public and private sectors.

Regulatory bottlenecks remain a stubborn obstacle.⁴⁴ Outdated telecom laws, fragmented permitting processes, and inconsistent enforcement have slowed infrastructure rollouts and discouraged private investment. In several countries, unclear licensing regimes have delayed spectrum allocation and undercut network upgrades. The region is behind others when it comes to planning and rollout of key aspects of AI governance.⁴⁵ Without clearer, more predictable rules, the full potential of digital transformation will remain out of reach.

This is also reflected in Economist Impact’s 2023/24 Infrascope, where most countries scored under 50 points on bureaucratic effectiveness measures (indicator 4.4.3.b)⁴⁶. Only a small group of better performers, like the Bahamas, Barbados, Chile and Uruguay, approach 70–80 points, proving that more effective bureaucracies are possible. This uneven performance mirrors the reality investors face: regulatory red tape remains a major brake on digital transformation.

But there are signs of progress In recent years, some countries have begun to break the logjam.⁴⁷ Chile has streamlined permit approvals with a “positive silence” law, El Salvador has launched a single-window system for telecom licensing, and Mexico’s Supreme Court has curtailed local taxes that once stifled network expansion. These may seem like technical fixes, but they can have real effects: countries with clear and predictable digital rules attract nearly 50% more ICT investment on average.⁴⁸

Charting the digital path ahead: Where policy meets innovation

At the same time, the private sector is not waiting on perfect policy. For instance, in addition to investment from international hyperscale cloud providers, IT infrastructure providers, regional contractors and colocation providers are stepping in to advance regional infrastructure. Even underserved areas have seen creative responses. In Peru, a public-private partnership backed by Telefónica, Facebook (Meta), IDB Invest and CAF provided wholesale rural 3G/4G access using open‑access infrastructure.⁴⁹ The Internet Society has supported grassroots networks in countries like Mexico, Argentina and Brazil.⁵⁰

To fully seize this opportunity, businesses should think beyond infrastructure to the services and ecosystems that ride on top of it. Regulatory reform and long-term infrastructure strategy are vital. These will require closing access gaps not just by extending coverage, but by ensuring affordability, boosting digital literacy, and building robust last-mile and regional backbone networks. It means readying systems for the AI era, through investment in low-latency local data centers, workforce training and green infrastructure capable of supporting rising compute demands. Still, the region’s cloud, data, AI, and digital inclusion markets are growing, and the firms building localized, affordable, and resilient platforms today will be tomorrow’s leaders.

The region has reached a critical juncture. With the right alignment of policy and private initiative, the region can build a future in which connectivity is not a privilege, but a shared engine of growth.