Brazil

Brazil has vast land availability and competitive real estate costs compared to other international markets, reducing initial investment costs. Brazil's energy landscape is particularly conducive to power shoring, the strategic relocation of data centers to regions with clean, safe, cheap, abundant, and reliable energy.

According to The International Trade Administration (ITA), Brazil is the largest electricity market in Latin America. The renewable energy sector accounts for 83% of the Brazilian electricity matrix, significantly higher than the global average of around 25%. This industry has continuously expanded through private investment. The use of renewable energy is especially relevant for AI data centers, known for their high energy consumption.

Brazil utilizes diversified energy sources, offering a reliable power supply for increasing AI computing demand. Hydroelectric power has been the leading energy source for decades due to abundant powerful rivers. It is complemented by significant investments in wind, biomass, and solar energy. Brazil's green energy capabilities can greatly reduce data centers' carbon footprint, and its geographical diversity of energy sources mitigates risks from localized disruptions, ensuring continuous and reliable operations.

Approximately 750 MW of power capacity is used by data centers in Brazil, with Barueri and Campinas becoming mini data center cities. Other areas have less than 100 MW of capacity. The current trend is to build data centers near large cities with stable power sources, as many rural areas have limited power access. There is considerable growth potential in rural areas with sufficient infrastructure investment. As data centers expand, they must secure energy and address grid connection and transmission needs.

Brazil's abundant water resources offer a distinct advantage for cooling, a critical factor for data center viability and efficiency. These resources provide a sustainable and cost-effective cooling solution, significantly reducing operational costs and environmental impact compared to traditional air conditioning. Utilizing these resources without compromising environmental integrity is sustainable long-term.

Beyond its natural resources, Brazil's strategic geopolitical position is also attractive for data center installations. As the largest economy in South America, Brazil is an important market of over 580 million people. The data center market in Brazil is expected to be $5.63 billion in 2025 and show an annual growth rate (CAGR 2025-2029) of 5.82%. Demand is driven by rapid digitalization across industries. With over 7,000 km of coastline, Brazil has direct access to major submarine cable systems connecting North and South America, Africa, and Europe. The average fixed Internet speed increased by 17.1% year-over-year, reaching 14.27 Mbps, comparable to developed nations. Well-developed telecommunications infrastructure and ongoing investments enhance its appeal as a data center hub.

Brazil's large population is also a source of talent. The "Brasil Mais Digital" program is an online education program for capacity building in the ICT sector, with ICT companies contributing content and opportunities for young professionals.

Brazil has introduced laws and regulations to promote the AI data center industry. A new legal framework for AI, the AI bill, was approved by the Senate in December 2024 and moved to the Chamber of Deputies for a vote. The bill aims to establish operational guidelines and requirements, protect human rights, and provide penalties for non-compliance. It takes a risk-based approach to AI-related activities, with stricter rules for high-risk systems and requirements for fairness, transparency, and understandability.

The National Telecommunications Agency (Anatel) is the primary regulatory authority for Brazil's telecommunications industry, responsible for designing and improving sectoral regulatory instruments. Anatel has studied the data center market to understand AI, machine learning, and cybersecurity interactions and their contribution to energy efficiency and sustainability strategies. The Ministry of Development, Industry, Commerce and Services also conducted a study on the data center industry to inform public policies for attracting data centers, highlighting tax burden, energy cost, lack of qualified labor, and legal/regulatory uncertainty as critical factors. In early 2024, the Brazilian government announced a new AI strategy, committing R$23 billion over four years to promote AI research and development.

The "Lei de Informática" (Informatics Law 8248/91, amended) is an industrial policy instrument stimulating competitiveness and technical capacity of ICT goods/services providers in Brazil. Companies investing at least 5% of annual revenue in ICT R&D receive tax benefits. Originally, tax incentives were to be gradually reduced from 2025 to 2029: 80% IPI reduction until 2024 (75% in 2025-2026, 70% from 2027-2029) for products with Basic Production Process (PPB); 100% IPI reduction until 2024 (95% in 2025-2026, 90% from 2027-2029) for products with PPB developed in the country; ICMS reduction in some states; and suspension of IPI and ICMS on imports in some states.

In September 2024, the government amended the "Lei de Informática" (Law 14968/24), extending all 2024 rules until 2029, ensuring stability and predictability. For companies headquartered in the North, Northeast, and Central-West, the financial credit limit for national technology products increased from 13.65% to 17%. For companies in the South and Southeast, it increased from 13.65% to 15%. These incentives stimulate manufacturing plants, human resource hiring, and ICT consumption in Brazil.

In conclusion, investor-friendly policies, diversified energy sources, and abundant water resources have solidified Brazil as a leading destination for data center investments in South America.