While Americans turn against data centers, Brazil offers tax breaks and cheap power, representing a potential ‘release valve’ for U.S. constraints

While Americans are increasingly turning against data centers, Brazil is offering tax breaks and cheap power, potentially acting as a release valve for U.S. constraints. The country is already a top AI market and is making the buildout easier for tech giants. OpenAI states that Brazil sends 215 million messages to ChatGPT per day, making it the company's third-largest market for weekly users, behind the U.S. and India.

Google plans to double its cloud infrastructure in the country by 2030, and Amazon Web Services has invested over $3.8 billion in data center infrastructure since 2011, with an additional $1.8 billion pledged. Microsoft has committed $2.7 billion to cloud and AI infrastructure over three years. Local demand, not American companies moving operations abroad, has driven much of Latin America's data center growth.

However, Carlos Barrera, CEO of Atlas Renewable Energy, believes this could change, as Brazil's growing AI market could attract more hyperscalers. Brazil's electricity supply, which is nearly 87% renewable, and its rapid growth of wind and solar power, have also led to a surplus, making it a major draw for tech companies. However, the country's cheap electricity could become more expensive, as local transmission lines may need to be built to connect large data centers to the grid.

Additionally, Brazil's tax code presents an obstacle, with high federal import taxes making building big data centers more expensive compared to other countries in the region. To address this, President Luiz Inácio Lula da Silva signed a law on September 15 cutting taxes on qualifying data center equipment, known as REDATA. This legislation aims to improve Brazil's data sovereignty, ensuring more computing capacity is offered to Brazilian customers and invested in local research and development.