Is it because of Vicentin or is there something else?: why Amazon is moving away from Argentina and approaching another country in the region
Little has been heard in recent months from Amazon Web Services (AWS) definitions of installing its regional datacenter, a project announced nearly four years ago.
Since then, a vote between countries began - such as Chile, Argentina or Colombia - linked to which nation will stay with the multimillion-dollar investment of $ 800 million in which the project was estimated locally and which could incorporate some $ 400 million into the Argentine GDP.
Despite the fact that the city of Buenos Aires and Jujuy sounded like good alternatives, the Bahía Blanca-Coronel Rosales Free Zone (ZFBBCR) appeared as a favorite to host the datacenter. A space that, among other plans, provides for the installation of a digital currency farm and a technology district.
In addition, the project offers companies that settle there tax and tax benefits with the consequent savings:
- 100% in provincial taxes, municipal rates and Gross Income
- 46% in electricity and 42% in gas
- 26% in telephony and Internet and productive activities
- 100% in export duties and import taxes on supplies
- Rental of subsidized spaces for productive projects
Access to energy produced by wind farms and the strategic location of the city, in terms of connectivity and logistics, were attributes that ended up adding up. Lisandro Ganuza, president of the BBCR Free Zone Entity, confirms to iProUP that they worked for many months on this initiative and avoids talking about "transcended".
"Everything we can is referred to in the Official Gazette of the Province of Buenos Aires dated October 24, 2019," he remarks. There it is explained how the concession process of four sub-free zones to Amazon Data Services Argentina SRL was.
Argentina, further and further
The 2020 World Investment Report of the United Nations Conference for Trade and Development (UNCTAD) anticipates that foreign direct investment (FDI) in Latin America will fall between 40 and 55% this year, compared to 2019.
Thus, investment flows will decrease 50% in relation to the US $ 164 billion received last year. Argentina, Brazil, Chile, Colombia and Peru will be the most affected countries.
On argentinian soil, flows "were cut in half, hampered by an economic deepening of the crisis," while US companies - such as Amazon, General Motors and Nike - say they are freezing their disbursement plans.
Martín Kalos, chief economist at Elypsis adds to iProUP that, in terms of investments, multinationals are mainly seeking clarity regarding the perspective of their businesses.
In this sense, to the crisis generated by the pandemic and the economic policies that are being adopted throughout the world, Argentina is added a "double uncertainty" in the short and medium term: the recession that has dragged on since April 2018 and debt negotiation.
"The country has been economically stagnant since 2012 and is already coming off a pre-coronavirus course," explains Kalos. That translates into a very discouraging combo for companies that have investments of that magnitude in their portfolio.
Regarding the Vicentin case and the impact it may have on investor spirit, he states: "The entrepreneurs are following how this process is developing and they see that it is going backwards with what was most unfriendly in this situation. something that is detrimental to investments, what discourages is the climate of general uncertainty, "he says.
For Marina Rosso Siverino, vice president of the Technical Department of the Argentine Center of Engineers (CAI), Argentina was out of competition when the "economic penalty for the export of services" was added to the basic economic instability, with the decree of the Macri government that It set an aliquot of 12% and the obligation to settle the collections in less than five days.
"The conditions that Argentina offers to any company whose core business is the export of services are not good. The Vicentin case may not help, but this is a long-standing issue: everyone goes to Chile because it has much more motivating taxation "he emphasizes.
Political and economic instability makes long-term planning difficult, a basic condition for projects of this type, says Enrique Carrier, an analyst in the telecommunications market.
"The devaluations and limitations to move capital further complicate the situation. If the datacenter was going to be installed here or in Chile, it is a move from the same countries trying to generate something, it is the game that each one makes," he adds. that we will have to see what the world stage will be once the pandemic passes.
Is Chile the best country?
Whenever expectations about Argentina fade, those of Chile are revived. In addition to being one of the candidates to host Amazon's regional datacenter, the country has already been chosen by Google to become a "cloud region", the second in Latin America after the one inaugurated in São Paulo in 2017, and one of the 23 that the company has worldwide.
This bet is in addition to the datacenter that has been in operation since 2012, a new one that was announced last year (it will imply an investment of US $ 200 million), and the "Curie" submarine cable that connects California and Valparaíso. For now, IMB, Entel, Intersystem, Movistar, Sonda, Claro, Adexus, GTD also chose the trans-Andean country to host their data centers.
But why is Chile a more attractive country for foreign disbursements? Pedro Huichalaf Roa, a lawyer specialized in ICT and a former undersecretary of Telecommunications in Chile, mainly highlights two attributes: connectivity and institutionality.
Most of the developments made in that country, such as the "Austral Fiber Optic", had a continuity beyond the changes in government.
Huichalaf reveals to iProUP that "long-term planning not only generates confidence in investors, but is also necessary for the development of infrastructure and the formation of human and knowledge capital, which are fundamental assets for this type of project" .
"The fact that a company like Google has decided to strengthen its datacenter networks in Chile is probably an incentive to have local competition and a sign that these companies have been able to carry out their projects without major problems and without changes in the rules of the game" , emphasizes the expert, who also lists other attributes of the neighboring nation:
- More fluid economic and tax conditions for receiving investments
- Openness to free competition between countries
- Existence of collaboration agreements for the formation of an ecosystem that allows the inclusion of companies with a long-term perspective
"There is a promotion of cloud services and now there is talk of strengthening the critical telecommunications infrastructure to give more security to the services and companies that could be installed here," he remarks.
"Chile understood from the outset that it is an exporting country because it does not have the wealth that we have and is emphatic in protecting private industry," adds Rosso.
And he remarks: "Investors choose it because they are more afraid of economic crisis than earthquakes. In addition, it is a country that is increasingly connected, before it had a deficiency in submarine cable that it solved with Google and there are already several projects arriving. "
The new competitor
For Rosso, with Argentina out of competition, Colombia could become a new competitor. The new Modernization Law for the ICT sector, passed last year, seeks to encourage private investment, generate legal certainty and facilitate the deployment of last-mile infrastructure. In addition, that country has a highly developed free zone regime.
In fact, you're receiving a flurry of investments from the Silicon Valley:
- Amazon announced the creation of an incubator for technology companies
- HostDime announced a million dollar investment for the construction of a datacenter
- Zetta Data Center Complex, of the ZFB Group, will land next year in Bogotá with the largest data center in the coffee country
Colombia offers talent, advantages for companies and even has its own unicorn: Rappi
Specialists agree that the pandemic will leave a string of resentful sectors, but the knowledge industry will be one of the few that is going forward and with great force.
It remains to be hoped that Argentina can create the conditions to continue competing on the front line for investments of this magnitude.