Brazilian President Luiz Inácio Lula da Silva said on Saturday that his government will not allow the electricity produced in Brazil to go only to feeding data centers. Speaking at a campaign event in the southern state of Santa Catarina, two weeks before the first round of Brazil's presidential election, he said companies that want to operate in the country will have to build their own power plants to supply their processing centers.
Defending Redata, a tax incentive regime he signed into law on Tuesday, Lula put expected investment at around R$ 500 billion and said Brazil has everything it takes to become a major hub for the industry because of its abundant renewable energy. "We will not let the energy we produce go only to the data centers. Whoever wants to come here will have to invest in building renewable energy," he said, in remarks distributed by the Estado news agency. In the same speech he mentioned the new Critical Minerals Law and said Brazil has mapped only 30% of its territory, yet already holds the world's second largest rare earth reserves, behind China.
The law signed at the presidential palace is more flexible than the campaign framing, though. It lets companies secure their power through supply contracts or their own generation. Firms that join the regime must also reserve at least 10% of their processing and storage capacity for the Brazilian market and invest a minimum of 2% of the value of equipment bought under the benefit in research and development. In return, four federal taxes on equipment purchases are suspended for up to five years. By the government's own math, the tax break will cost R$ 5.2 billion this year and fall to about R$ 1 billion in each of the next two fiscal years.
An unresolved definition of "low emission"
The program's biggest energy question remains open. A Senate amendment replaced the requirement for "clean" or "renewable" sources with "renewable or low emission" ones, wording that could open the door to natural gas. Sources at the Ministry of Mines and Energy say gas will certainly be included; at the Finance Ministry, a source who helped design the policy told the news agency Eixos that officials will "fight to the end to block gas." States in the Northeast, such as Pernambuco and Sergipe, and gas distributors push for its inclusion, while the wind power and battery storage industries lobby against it, fearing they will lose ground to the new demand.
An interministerial directive will set the technical parameters. Options under discussion include excluding gas, accepting it fully, or allowing it with conditions such as carbon credits, biomethane and carbon capture and storage. "This is a debate under way inside the government to work out the reach of the low carbon definition," said Rafael Dubeux, a special advisor to the finance minister.
A global race for power
The scramble for electricity to run artificial intelligence is global. The government's economic team calculates that most data and AI applications consumed in Brazil are still processed abroad, and Finance Minister Dario Durigan presents Redata as a way to bring that flow home. A 2025 survey by CNI, Brazil's national industry confederation, listed data centers alongside critical minerals, satellites and energy among the sectors where US investors wanted to expand in Brazil, a move tied to the reworking of supply chains to reduce dependence on China. On the environmental side, companies that join the regime will have to publish reports on water use and energy sources, the very issue environmental groups raise when they criticize the spread of facilities that run around the clock and need constant cooling.