As data centers face growing opposition in the U.S., Brazil is positioning itself as a top destination for tech giants with tax breaks and abundant renewable energy. The country is already a major AI market, with Brazilians sending 215 million messages daily to ChatGPT, making it OpenAI’s third-largest market after the U.S. and India. Companies like Google, Amazon Web Services, and Microsoft are expanding their cloud and AI infrastructure in Brazil, drawn by its cheap and renewable electricity, which costs less than half of what it does in the U.S.
To further attract investment, President Luiz Inácio Lula da Silva signed a law in September cutting taxes on qualifying data center equipment. The legislation, called REDATA, requires companies to offer at least 10% of their computing services to Brazilian customers and invest 2% of the value of tax-benefitted equipment in local research and development. This move aims to boost Brazil’s data sovereignty and reduce reliance on foreign services, with 60% of Brazilian digital data currently processed abroad.
However, challenges remain. Brazil will need more transmission lines to connect large data centers to the grid, and there is uncertainty over whether electric bills will rise. Additionally, while opposition to data centers is less politically united in Brazil than in the U.S., some resistance has emerged, including concerns over environmental impact and consultation with Indigenous communities. Despite these hurdles, Brazil’s combination of low-cost power, tax incentives, and growing demand makes it an attractive alternative for hyperscalers facing U.S. capacity constraints.