Brazil's Lula signs REDATA tax break for data centers

REDATA arrives against a backdrop of U.S. communities rebuffing data centers and political pressure to curtail construction. Brazil is positioning itself as an alternative: its electricity costs less than half what it does in the U.S., and it generates nearly 87% of it from renewable sources, according to its Ministry of Mines and Energy.

The largest tech companies are already expanding there. Google plans to double its cloud infrastructure in Brazil by 2030, Amazon Web Services has spent more than $3.8 billion on data center infrastructure since 2011 and pledged another $1.8 billion through 2034, and Microsoft committed $2.7 billion to cloud and AI infrastructure over three years.

The law's conditions tie the tax benefit to local sourcing and research spending. Brazil's Ministry of Development says currently 60% of Brazilian digital data is processed abroad, and the government hopes to change that. Carlos Barrera, CEO of Atlas Renewable Energy, called the region an attractive "release valve" for U.S. capacity constraints, while researcher Ana Carolina de Assis Nunes noted Brazil wants to depend less on foreign technology yet is giving tax breaks to the same companies that dominate the industry.