Brazil’s Ceará state considering free trade zone to attract datacenters, AI industry

Ceará state in northeast Brazil is considering developing a new export processing zone, known as ZPE, to attract artificial intelligence, technology and datacenter companies to the Fortaleza region, governor Elmano de Freitas told journalists on Thursday.

"We're still in the discussion phase between the different government departments. But for us, it's already clear that it should be a hub for technology and artificial intelligence," De Freitas said during a ceremony marking the beginning of works of V.tal’s Mega Lobster datacenter.

Under Brazilian legislation, ZPEs are geographic areas that offer exclusive tax, administrative and FX benefits to companies that produce goods mostly for the international market.

They are free trade areas that allow the import, storage, handling, manufacturing or reconfiguration of goods and their re-export.

Ceará currently has a ZPE in the Pecém industrial complex, about 60km from capital Fortaleza.

The main idea behind the new ZPE is to offer conditions to attract AI training and inference datacenters, among other more “robust” structures.

BASKET OF BENEFITS

The ZPE format is seen as the most feasible under a basket of tax and legal incentives that is being discussed by local authorities to boost the state’s competitiveness in the field and attract new tech projects to the Fortaleza area.

“We have different options on this, but it's a top priority and we're in a hurry. We want to catch this train while it's passing by,” João Salmito Filho, economic development secretary for Ceará state, told BNamericas regarding the AI opportunities.

“We're also looking into whether it's possible to extend the ZPE from Pecém to here [Fortaleza]. Perhaps that would be a better and faster path. This will be discussed with the VP and the minister [of industry and development, Geraldo] Alckmin,” he added.

Alckmin was due to visit Fortaleza on Thursday night and Salmito said he expected to discuss the issue with the VP.

ADVANTAGES AND BOTTLENECKS

Ceará, and Fortaleza in particular, is already relatively well-positioned in the data segment.

Its abundant and solar and wind energy generation – critical for power-hungry datacenters – are a big advantage. State capital Fortaleza is also the best connected city in the Americas, having 17 submarine cables landing on its shores.

Fortaleza is also already home to colocation, edge and hyperscale datacenters, with projects developed by Ascenty, Hostweb, Scala and TelCables, among others.

However, the state needs to overcome bottlenecks quickly to advance in the digital race and compete for more strategic and/or larger-scale projects with other regions of the country, namely São Paulo and Rio.

These include the shortage of a skilled engineering and tech workforce, its distance from regions hosting the production of equipment and components needed for datacenter projects, and the costs of importing machinery, such as servers and processors.

Salmito said that the tax reform approved in 2022 allows states to create or reinforce ZPEs. Other state-specific tax regimes, on the other hand, would not be allowed by Brazil's legislation to simplify the tax regime.

Negotiations for the ZPE will be carried out with the Ceará legislative assembly and then with the federal government, which also has its own plan to attract datacenters.

The aim is to advance the talks so that a policy can be implemented before 2026, Salmito said.