When new a startup (eg, Instagram) comes along now it isn't allowed to serve the Brazilian market? I suspect that Brazil will suffer more than it gains.
I'm not sure about that. Let's assume that the startup offers a service the Brazilian populace are keen for.
In that case it may be worth it for the startup to invest in Brazilian data centers.
If they can't afford it, or simply don't see an opportunity in that market, then it may instead be an opportunity for a local company to do something similar employing locals to get it done. This happens all the time, but usually because of internationalization woes instead of the location of data hosting.
You could even argue that there's hidden value here in helping to maintain cultural diversity by not using U.S. services for everything you do online and increasing the demand for local educated talent.
> Let's assume that the startup offers a service the Brazilian populace are keen for. In that case it may be worth it for the startup to invest in Brazilian data centers.
I think it's would be good idea in general. If you provide significant infrastructure services from distant countries, you must move servers close.