President Luiz Inácio Lula da Silva signed into law on Tuesday (Sept. 15) the Redata, a special tax regime for data center services that zeroes federal levies such as PIS/Pasep, Cofins and the IPI industrial tax on equipment used to build, maintain or expand data centers in Brazil. The industry welcomed the move as a step forward for artificial intelligence infrastructure, but companies and government agencies themselves say the availability of electricity is now the main obstacle to growth.
According to G1, the bill passed the Senate on Sept. 1 and replaces a provisional decree issued in September 2025 that expired in February without ever reaching a vote in Congress. It was introduced by then congressman José Guimarães of the Workers' Party (PT), now a minister. A government estimate cited by Veja puts the tax break at 5.2 billion reais in forgone revenue in 2026, falling to about 1 billion reais over the following two years.
The incentives come with strings attached. To join the regime, companies must reserve at least 10% of their processing and storage capacity for the Brazilian market, invest at least 2% of the value of equipment bought under the program in research and development, and secure their electricity supply through purchase contracts or self generation. The law is a bet on the economy and on digital sovereignty: data from telecoms regulator Anatel cited by Veja show that about 60% of Brazil's digital workload is processed abroad, and a Finance Ministry estimate says processing data in Brazil can be up to 30% more expensive than overseas.
The power bottleneck
Thiago Prado, head of the EPE, the federal energy planning office, told Folha de S.Paulo that data centers have filed grid access requests totaling more than 56 gigawatts, the equivalent of one fifth of the country's installed generation capacity. He believes many of those requests will never materialize, and the EPE is talking with investors to gauge how far along each project really is before proposing transmission expansions. Timing is the core problem: in Brazil a transmission line takes about five years to build, while a large data center goes up in about three years. If a consumer of that scale drops off the grid abruptly, it can cause disturbances and raise the risk of regional blackouts.
Installed capacity today is concentrated in the Southeast. According to Rogério Gachet, CEO of fiber network operator Eletronet, 96% of Brazil's data center capacity sits in that region, and areas with available power and land are starting to be considered as alternatives. The Redata itself earmarks funds for industrial and technology development programs with special attention to the North, Northeast and Center-West regions. Axia Energia, Eletronet's controlling company, welcomed the new law, but its vice president for technology and innovation, Juliano Dantas, told Folha: "But we still have to advance on other aspects, such as energy regulation in general".
Global demand and environmental rules
"The bottleneck is no longer in applications, it is in energy", said Marcio Aguiar, Nvidia's director for Latin America. Flávio Loução, a partner at consultancy Deloitte cited by Folha, estimates that data centers worldwide will consume 565 TWh in 2026, up 26% from 2025, reaching 702 TWh in 2027, with AI servers accounting for more than half of that volume. With a mostly renewable power matrix and cheap energy, Brazil shares with Chile the position of most attractive South American destination for such investments, according to Loução, with the added advantage of having no earthquakes. The law also raises environmental demands: companies must publish reports on their water efficiency and on the energy sources used by their facilities. What remains to be regulated is what will count as low carbon energy, including the debate over natural gas, and how emissions offsets will work. "We still have no closed position on compensation", said Ceron, executive secretary of the Finance Ministry, quoted by G1.