Brazil Attracts Data Centers With Tax Breaks and Cheap Power

Brazil has become a key market for data centers, with 215 million daily messages sent to ChatGPT, according to OpenAI. The country ranks third in weekly user numbers behind the U.S. and India.

Google plans to double its cloud infrastructure in Brazil by 2030 and has partnered with the Brazilian Football Confederation to integrate Gemini across national teams. Other tech giants, including Amazon and Microsoft, have also invested heavily in the country.

Local demand, rather than U.S. companies moving operations abroad, has fueled much of Latin America’s data center growth. However, some experts believe the U.S. may shift some operations to Brazil due to its low electricity costs and renewable energy supply.

Brazil’s electricity costs are less than half of U.S. prices, with nearly 87% of the country’s power coming from renewable sources. The government is also addressing potential cost increases by planning new transmission lines to connect data centers to the grid.

To support AI growth, President Lula signed a law cutting taxes on qualifying data center equipment. This contrasts with some U.S. lawmakers who have proposed taxing data centers’ electricity use and output. The law, called REDATA, also requires companies to invest in local research and development.

Brazil’s government hopes the tax break will help local businesses develop AI products and reduce reliance on foreign services. Currently, 60% of Brazilian digital data is processed abroad. The law also mandates that companies offer at least 10% of their computing services to Brazilian customers.

Despite the benefits, Brazil faces challenges, including environmental concerns and political resistance. Federal prosecutors recently challenged a TikTok-linked data center project, demanding an environmental impact study and consultation with the Indigenous Anacé people.