Brazil data center market growth and regulatory challenges

The Brazilian data center market is poised for significant expansion, driven by digitalization and artificial intelligence. Industry experts project annual growth exceeding 10% through 2030. However, the sector faces high operational costs, with construction in Brazil estimated to be 34% more expensive than in the United States due to a tax burden on computing equipment averaging 35%.

Legislative progress remains stalled as the REDATA bill, intended to provide tax incentives, was excluded from recent concentrated voting periods by Senate President Davi Alcolumbre. Consequently, some market players are pivoting toward the National Council of Finance Policy (Confaz) to seek ICMS tax reductions on imported equipment.

Despite these hurdles, investment interest is surging. Approximately 7.1 GW of projects, representing an estimated R$ 159 billion in investment, have submitted electricity access requests to the Ministry of Mines and Energy. To support this, BNDES has approved hundreds of millions of reais for facility expansions in Fortaleza and the development of modular structures for cloud and AI services. Experts suggest these facilities could help balance the energy grid by consuming excess solar energy.

Physical infrastructure continues to grow, with 169 identified data centers, 132 of which are operational. While São Paulo remains the primary hub, Ceará is a significant site due to submarine cable connectivity in Fortaleza. A new challenge has emerged regarding human capital: the Uptime Institute reports that 46% of operators struggle with hiring and 37% face retention issues, highlighting a critical shortage of professionals skilled in cooling, cybersecurity, and network management.