Brazil readying national datacenter plan to boost industry appeal

Brazil is finalizing a plan to accelerate the expansion of the datacenter sector, streamline regulation and facilitate the attraction of investments, which is expected to be presented in the first quarter.

That is according to Affonso Nina, executive president of Brazilian ICT association Brasscom, which has actively participated in discussions with authorities on the issue.

“Brazil is already lagging behind. We've been urging the government regarding the need to announce a plan to attract these investments for the long term. This plan should be released in the first quarter,” Nina told BNamericas.

“This is already the limit for Brazil not to fall further behind in this race. Other countries are moving fast and every day there's news of other nations announcing investments.”

In Latin America, Mexico and Chile – the second and third largest regional datacenter markets after Brazil – launched their own national datacenter plans last year.

In Brazil, discussions of such a policy have been taking place in a more structured manner since at least 2023. According to Nina, the topic became central when Luiz Inácio Lula da Silva took office in January 2023. Despite this, a policy for the sector has not yet been announced.

Brasscom's dialogue with the government has taken place mainly via the ministries of development, industry and commerce (MDIC); communications; science, technology and innovation; and economy, as well as development bank BNDES.

Brasscom has also been working with datacenter association ABDC, many of whose members are also represented by Brasscom, said Nina.

Anatel

The topic has also been increasingly addressed by telecoms regulator Anatel.

In an online seminar on digital convergence and regulation, Anatel brought together representatives from ministries and the industry to discuss ways to incentivize the datacenter sector, among other topics. 

The debate included representatives from Elea Data Centers and Huawei, as well as Igor Marchesini, special adviser to the finance ministry.

Marchesini said that 60% of Brazil's digital load runs through datacenters located outside the country. “Brazil today cannot even meet its own internal demand for datacenters,” he said.

“I would venture to say that, apart from a few public services that have more specific regulation, almost nothing in Brazil can function end-to-end if we get disconnected from the datacenters in Virginia [in the US]. We can't do [instant payment service] PIX, we can't open a record in [national health service] SUS, we can't board a plane,” added Marchesini. 

Virginia is the world's largest datacenter hub, housing around 600 sites, most of which are owned by big techs. It is estimated that Brazil hosts around 180 large datacenters.

Marchesini said that it is currently 60% more expensive to hire a datacenter service in Brazil than in Virginia. 

"The rational decision for any economic agent is to run in Brazil only what requires very low latency; the rest runs abroad," he said.

The government is considering different scenarios to reduce these costs.

The main one is to bring forward the effects of the tax reform for the sector, whose implementation is expected to take effect only from 2027.

According to Marchesini, datacenters will already see reduced capex burdens due to the tax reform, but these effects need to be fast-tracked to ensure Brazil doesn’t miss the investment opportunity window.

Brasscom's Nina pointed in the same direction, saying "there is a race and Brazil has a great opportunity and some competitive and comparative advantages. But to use Formula 1 language, we've already lost the pole position. Soon we'll have to start from the pits."