Braziltopia

Brazil's federal government set aside R$ 44.8 billion for individual and state-delegation congressional amendments in its 2027 budget bill, delivered to Congress on Monday (Aug. 31). The amount is R$ 4 billion above the R$ 40.8 billion in the initial proposal for 2026.Congressional amendments work like earmarks: they let Brazil's 594 deputies and senators decide where part of the federal budget goes, usually toward public works in their home states. Individual and state-delegation amendments must be executed by the executive branch, and the money is a central bargaining chip between the presidential palace and Congress, according to G1. The government controls the pace of the payments. President Luiz Inácio Lula da Silva, a critic of the mechanism, sped up releases ahead of the electoral period, Folha de S.Paulo reported.Congress tends to raise the totalThe bill leaves out commission amendments, the third category in the system. The government passed the decision to Congress, which will have to identify cuts elsewhere, such as running costs or public works, to add the money. A supplementary law caps these amendments at R$ 12.9 billion in 2027, a limit that came out of an agreement between Congress, the government and the Supreme Federal Court (STF) as the court pushed for more transparency.Recent years show the pattern. According to G1, the government's initial proposals rose from R$ 37.6 billion in 2024 to R$ 38.9 billion in 2025 and R$ 40.8 billion in 2026, while Congress inflated the approved totals to R$ 53 billion in 2025 and R$ 61 billion in 2026. For the 2026 budget law, lawmakers cut pension spending, the Pé-de-Meia student aid program and the cooking gas subsidy to enlarge the amendment pool. Lula vetoed R$ 400 million in amendments and shifted another R$ 7 billion, bringing the current total to R$ 49.9 billion, Folha reported.The growth in amendments eats into the government's discretionary spending, which is capped. Less money is left for areas such as research scholarships from CNPq and Capes, infrastructure investment, the subsidized medicine program Farmácia Popular, and environmental and labor inspections, G1 reported. The so-called PIX amendments, a subset of individual amendments, follow the rules of the STF-brokered deal. The court ruled they can stay, but must "respect criteria of transparency, traceability and correction," with prior identification of where the money goes, priority for unfinished public works and accounting to the federal audit court (TCU).What happens nextThe 2027 bill now moves through Congress. Folha reports that deputies and senators are expected to repeat the moves of past years and boost the amounts along the way. Lawmakers must approve the annual budget law by the end of the year for it to take effect on Jan. 1, 2027.

A law creating Brazil's Redata, the Special Taxation Regime for Data Center Services, took effect this week. The regime suspends federal taxes for companies that build or expand data centers in the country. Sanctioned on September 15 by President Luiz Inácio Lula da Silva, the law was approved by the Senate on September 1 after moving through Congress as bill 278/2026, according to the Finance Ministry, which frames the program as part of its low-carbon economy agenda.Brazil has about 200 data centers, and 60% of Brazilians' data is stored outside the country, according to the ministry. Artificial intelligence has raised demand for capacity and the sector's costs: according to industry estimates reported by g1, the structure of a standard AI data center costs an average of US$ 1 billion, with equipment, the most expensive part of the project, at US$ 4 billion to US$ 5 billion. "Any video we watch, when we make a Pix transaction, for example (...) it is because there is a data center like this one supporting the entire operation," Marcos Siqueira, a vice president of a data center company, told Jornal Nacional, Globo's flagship newscast. Pix is Brazil's instant payment system.How the incentives workRedata suspends, for five years, the Import Tax, the IPI (a federal excise tax on industrialized products) and PIS/Cofins contributions on purchases, in Brazil or abroad, of electronic components and information and communication technology goods. According to the trade publication Capacity, IPI rates on these products range from 5% to 30% depending on the tariff code and exceed 300% on specific items; on imported goods, PIS and Cofins add up to 11.75%. Joining the regime requires Finance Ministry approval and being current on federal taxes. The program originated in a provisional decree issued in May 2025, withdrawn from Congress in February 2026 and resubmitted as a bill with the same content, Capacity reported. The Chamber of Deputies approval projected R$ 7 billion in tax expenditures over three years."It is 26% more expensive to install a data center in Brazil than an investment of the same size in the United States. With the approval of Redata, this disadvantage falls to 17%," said Tatiana Ribeiro, executive director of the Movimento Brasil Competitivo competitiveness group, quoted by g1.Conditions and risksThe benefits come with conditions. Companies must cover their full contracted electricity demand through supply contracts or self-generation from renewable or low-emission sources such as solar, wind and hydro; meet a water efficiency standard of up to 0.05 liter of water per kWh for equipment cooling; direct at least 10% of their processing, storage and data handling supply to the domestic market; and invest in Brazil the equivalent of 2% of the value of goods bought with the tax break, including research with Brazilian universities and companies and reserved capacity for national institutions. Energy use is the main concern: a standard AI data center can consume up to 15 times more energy than a conventional center of the same size, g1 reported."We have the possibility of, by 2030, quadrupling or quintupling the installed base of data centers in Brazil," Luís Tossi, vice president of the Brazilian Data Center Association, told g1. The installed base is currently around 1 gigawatt of IT load, and between 90% and 95% of centers already built in the country use closed-circuit cooling, which consumes no water, a technology that is also the standard in new projects, he said.For operators and equipment makers, the regime cuts the capital cost of projects; for power sellers, it opens a long-term market in clean sources. On the other side are consumers of digital services, from Pix to streaming, who may gain installed capacity in the country and less dependence on servers abroad, and taxpayers, who fund the estimated R$ 7 billion in tax expenditures over three years. "Without it, development will continue, but at a slower pace," Elena Winters, vice president of international business at Elea Data Centers, told Capacity in February.