Two weeks ago, Mexico announced a 4.8 billion USD data center investment sponsored by CloudHQ, one of the top 12 operators globally by number of sites. The target city is Querétaro, the leading Mexican data center location with 19 facilities. Querétaro is also among the top 15 developing-country towns in the data center race.
The new investment envisions expanding the existing hyperscale data center campus by adding six more to the seven CloudHQ already manages. If we look at the map on datacentermap.com (DCM), we notice that, unlike other operators, CloudHQ data centers are already clustered, as expected. The company has access to 52 hectares (128 acres) of land near the local airport. However, it is not clear whether such land is owned by, leased to, or provided to the U.S. company as an incentive. Even so, reports indicate that indigenous communal lands have been sold to accommodate new data centers.
By the way, I noticed for the first time that two of the 19 Querétaro facilities mapped by DCM are actually in next-door Guanajuato. As a result, I will probably need to check all the other developing-country cities I analyzed in a previous post!
The enhanced hyperscale facility will be the largest in Mexico. It is expected to deliver 900 megawatts of power, equivalent to the energy consumed by 1.5 million Mexican households (assuming each consumes 0.6 kilowatts/day on average). That entails that the local grid should have the required capacity. Not explicitly mentioned in the announcement is the fact that, in late 2024, Mexico’s Federal Electricity Commission (CFE) agreed to support a 50 percent increase in Querétaro’s energy supply. That suggests that the new investment has been in the works for a while and is indeed part of a broader state strategy, supported by the central government.
Unfortunately, the same cannot be said about water. Querétaro has been experiencing a long-term drought, affecting most municipalities in the state (PDF). According to the latter report, water scarcity has resulted from overconsumption, pollution, accelerated urbanization, and monopolization. However, the top 10 water-consuming companies do not include any of the state’s seven data center operators—albeit Kimberly-Clark and Michelin do make the cut.
In fact, the report does not mention data centers at all, perhaps unaware that water is vital to quench the facilities’ thirst. Moreover, the current state secretary for Sustainable Development calls it a non-issue, claiming that most data centers use little water thanks to new technologies. One of the incentives the state offers to data center investors is an exemption from the requirement to prepare environmental impact assessments. Data on water consumption in data centers is thus not publicly available, hindering the work of researchers and community activists. Perhaps that is one of the reasons the report does not tackle the digital factories.
Astonishingly, nature and climate change have come to the rescue this year, with record rainfall across most of Mexico, including Querétaro. While that is excellent news, the problem’s root causes persist. CloudHQ and the Mexican government explicitly addressed the water controversy by emphasizing that the new facilities will operate using waterless cooling technologies. In principle, some of these new technologies reuse water, thereby substantially reducing consumption. But not all of them are exactly waterless. At any rate, the water issue in Querétaro has not been caused solely by data centers. But undoubtedly, they have added more fuel to the fire.
Local indigenous communities and civil society organizations have organized and mobilized to demand a solution to the water issue, while pointing to data centers. In 2022, the local government essentially privatized water provision, a policy decision that was not supported by the former groups or others affected. The case was brought all the way to the Mexican Supreme Court, which ruled in favor of the state.
While Querétaro’s case has decidedly distinctive traits, it is certainly not unique by any stretch of the imagination. Many other local communities in both developed and developing countries are confronting similar struggles. They have also organized to ensure their voices are loudly heard and acted upon (see references below for a partial snapshot). For example, a recent U.S.-centered report claims that community opposition, identified as NIMBY (Not In My Back Yard), has stopped data center projects worth over 18 billion USD. Other projects have been substantially delayed, costing investors over $45 billion. The report also indicates that 142 NIMBY groups operating in 24 states are active in the U.S.
The average cost of a 65k-square-meter (700k-square-foot) data center with a 60-megawatt capacity is between 420 and 770 million dollars. To simplify, let us take 500 million as the average. We can conclude that 36 data centers have not seen the light of day, thanks to local communities. Recall that the U.S. has over 4 thousand data centers and counting. That means that the impact of NIMBY is still minimal, relatively speaking. But it could get out of control.
Under that light, the document proposes a corporate playbook to tame NIMBYers. That includes mapping the opposition early, making environmental data and impacts public, discussing local and tangible economic benefits, and avoiding shifting data center costs onto local communities. Community engagement is thus the driver. While such a playbook might be suitable for developed countries, it might not be feasible in developing economies with fractured democratic institutions and a fragile rule of law. I certainly do not expect that to happen in Querétaro, for example.
Notwithstanding, some of the critical issues that communities confront usually include the following.
1. Energy consumption and ensuing higher energy bills for local households.
2. Excessive water consumption leading to either rationing or higher water bills.
3. Noise pollution for data centers embedded in urban environments.
4. Real estate impact of data center construction and use of public lands as incentives to attract them.
5. Economic incentives to investors in the shape of very lax environmental reporting requirements, significant tax exemptions, and special deals regarding land use and energy and water consumption.
6. Little to no direct economic benefit to local populations, while overselling the geopolitical and job creation cards.
7. Little to no access to detailed data center data and information for local and regional populations. This, in turn, is exacerbated by the systematic use of technical jargon to obfuscate the issues at stake.
8. No meaningful consultation with local stakeholders when data center plans are designed and decisions are made.
The current AI bubble, triggering massive data center investments, will surely put more pressure on local and central governments to rapidly embrace the seemingly lucrative surge. Local communities, in turn, will need to react more quickly before they are completely steamrolled. That might be challenging, especially in developing economies where such communities have access to fewer financial resources and can hardly access local media networks and outlets.
From a research perspective, data centers have attracted significant attention across fields such as anthropology, media and communication, and infrastructure studies, among others. Recently, researchers have called for the creation of a field of critical data center studies (see the paper by Edwards et al. in the references), positing it as an interdisciplinary area that brings together the above. Hopefully, such a field can move beyond seemingly prevailing analytical frameworks such as technofeudalism, neofeudalism, or intellectual monopoly capital. Missing from their list is critical political economy, which is much needed to address economic issues and the ensuing power relationships that reinforce them.
Raul
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