Brazil’s data center push offers contrast to US backlash

The country is already a major market for AI. Brazil is OpenAI’s third largest market for weekly users after the US and India, with 215 million ChatGPT messages sent daily, according to the company. Local demand, rather than American companies moving operations abroad, has driven much of Latin America’s data center growth. Amazon Web Services has spent more than $3.8 billion on data center infrastructure in the country since 2011 and pledged another $1.8 billion through 2034. Microsoft committed $2.7 billion to cloud and AI infrastructure over three years, while Google has said it plans to double its cloud infrastructure by 2030 and in March signed a sponsorship deal with the Brazilian Football Confederation to integrate Gemini across its national teams.

Brazil’s electricity supply is a major draw. The country’s electricity costs less than half of what it does in the US, and according to its Ministry of Mines and Energy, nearly 87% comes from renewable sources. Rapid growth in wind and solar has created a surplus. “U.S. backlash isn’t pushing hyperscalers out of the country so much as pushing them toward wherever power shows up first,” James Mercer, a principal at data center advisory firm Metro Colo Advisory, told Fortune.

The Lula administration has lowered barriers to further construction. High federal import taxes had made building big data centers more expensive than in other countries in the region. President Lula signed a law on September 15, named REDATA, cutting taxes on qualifying data center equipment. “If Brazil wanted to be a player in the data center space, it had to do this tax law change,” Christopher Torto, CEO of Latin America’s largest data center and connectivity service provider, Ascenty, told Fortune.

The law includes conditions aimed at data sovereignty. Companies must offer at least 10% of their qualifying computing services to Brazilian customers and invest 2% of the value of the tax-benefitted equipment in Brazilian research and development. Currently, 60% of Brazilian digital data is processed abroad, according to the Ministry of Development. “It’s to improve the data sovereignty of Brazil, so we won’t rely so much on foreign services, especially in a time with Trump,” Ana Carolina de Assis Nunes, a Brazilian anthropologist and data center researcher at Data & Society, told Fortune. She noted the paradox of giving tax breaks to the same dominant foreign companies the government seeks to depend less on.

Despite the incentives, hurdles remain. Carlos Barrera, CEO of Atlas Renewable Energy, said Brazil will need more transmission lines to connect large data centers to the grid. Government officials are divided on whether electricity bills will go up. Opposition to data centers has also emerged in Brazil. Nunes said it is not as politically united as the U.S. backlash. Days before REDATA became law, Brazilian federal prosecutors went to court seeking an environmental impact study and consultation with the Indigenous Anacé people before a TikTok-linked data center project became operational. Nunes said foreign investment still carries prestige in parts of Brazil, especially among people who see it as a chance to join the global economy. She recalled growing up near a Unilever factory, and how her mother took pride in the connection to a global company, even as others worried about its use of local resources.