Brazil cuts data centre taxes as US backlash pushes AI buildout south
Brazil is courting the data centres that American communities are turning against, and it has just cut the price of building them. President Luiz Inácio Lula da Silva signed the REDATA law on 15 September, reducing taxes on qualifying data centre equipment after high federal import duties made large builds costlier there than elsewhere in the region.
The draw is power. Brazil generates nearly 87% of its electricity from renewable sources, according to its Ministry of Mines and Energy, and supply costs less than half what it does in the United States. Demand is real: Brazilians send 215 million messages a day to ChatGPT, OpenAI says, making the country its third-largest market for weekly users behind the US and India. Google plans to double its cloud infrastructure in Brazil by 2030, Amazon Web Services has spent more than $3.8 billion on data centre infrastructure there since 2011 and pledged another $1.8 billion through 2034, and Microsoft has committed $2.7 billion over three years.
Carlos Barrera, chief executive of Atlas Renewable Energy, told Fortune the region could act as "an attractive release valve" for US capacity constraints. James Mercer of Metro Colo Advisory argued the American backlash is not pushing hyperscalers out so much as pushing them "toward wherever power shows up first".
The law attaches conditions. Companies must offer at least 10% of their qualifying computing services to Brazilian customers and invest 2% of the value of tax-benefitted equipment in Brazilian research and development. Lula's government wants that capacity at home: 60% of Brazilian digital data is currently processed abroad, according to the Ministry of Development. Ana Carolina de Assis Nunes, a researcher at the Data & Society policy institute, said the aim is to improve data sovereignty so Brazil relies less on foreign services.
Resistance is emerging. Days before REDATA became law, federal prosecutors went to court over a TikTok-linked data centre project, seeking an environmental impact study and consultation with the Indigenous Anacé people before it operates. Barrera also said Brazil will need more transmission lines to connect large data centres to the grid, and officials are split on whether electricity bills will rise.
