Brazil emerges as a data center hub amid U.S. Opposition

Brazil is a major consumer of AI technology, with users sending approximately 215 million messages to ChatGPT daily, making it the third-largest market for OpenAI after the U.S. and India. This demand has prompted tech giants to invest heavily in the country’s infrastructure. Google plans to double its cloud infrastructure in Brazil by 2030 and recently partnered with the Brazilian Football Confederation to integrate its Gemini AI across national teams. Amazon Web Services has invested over $3.8 billion since 2011 and committed another $1.8 billion through 2034, while Microsoft has pledged $2.7 billion for cloud and AI infrastructure over three years.

While initial growth was primarily driven by local demand, Carlos Barrera, CEO of Atlas Renewable Energy, believes Brazil could become a “release valve” for U.S. data center limitations. With a population of roughly 214 million and an area exceeding the contiguous 48 U.S. states, Brazil presents a compelling location for hyperscalers.

A significant advantage is Brazil’s electricity costs, which are less than half those in the U.S., and its reliance on renewable energy sources, generating nearly 87% of its power from renewables. However, expanding the grid to accommodate these data centers may lead to higher electricity prices, a point of contention among government officials.

To further incentivize investment, President Luiz Inácio Lula da Silva signed a law on September 15th reducing import taxes on data center equipment. This move contrasts with proposals in the U.S. to tax data centers. “If Brazil wanted to be a player in the data center space, it had to do this tax law change,” stated Christopher Torto, CEO of Ascenty.

The new legislation, REDATA, aims to foster local AI development and reduce Brazil’s reliance on foreign services, which currently handles 60% of the country’s digital data. Companies benefiting from the tax breaks must offer at least 10% of their services to Brazilian customers and invest 2% of the equipment value in local research and development.

Despite the positive outlook, Brazil hasn’t been entirely immune to data center opposition. Recently, Brazilian federal prosecutors challenged a TikTok-linked data center project, demanding environmental impact assessments and Indigenous consultation. While resistance isn’t as unified as in the U.S., Ana Carolina de Assis Nunes, a researcher at Data & Society, notes that foreign investment still holds prestige in parts of Brazil.

“It felt like we were part of something big because we lived close to that company,” Nunes recalled, reflecting on her childhood near a Unilever factory.