The Chamber of Deputies' approval of Redata could boost data center installations in Brazil, but the electricity distribution infrastructure poses a major hurdle. Sector executives note that, despite abundant generated energy, grid connections are delayed, particularly in the Southeast. Companies like Ascenty are optimistic about fiscal incentives to attract big techs.
The Chamber of Deputies approved Redata in the early hours of Wednesday (25), a fiscal incentive program for companies investing in data centers in Brazil. The text provides exemptions and discounts on equipment purchases for data storage structures, but it still requires Senate approval.
Data centers house machines that process data for cloud services and artificial intelligence (AI). AI ones are larger, require cutting-edge technology, and consume significant energy. Brazil is considered a candidate hotspot for such centers due to available renewable energy, space, and labor, according to sector executives.
However, connectivity to the electricity grid is the main bottleneck. "The distribution line [of electricity] is the big bottleneck today. We generate more energy than we consume, but we don't distribute it," states Marcos Siqueira, Chief Revenue Officer (CRO) of Ascenty, a Brazilian company specializing in data center construction. Companies must request high-power connections from distributors, facing long queues, especially in the Southeast.
Ascenty already has spaces in São Paulo connected to the grid, but new projects encounter delays. Siqueira expects major contracts in the first quarter of this year and believes Redata will accelerate decisions by big techs unsure about investing in the country, providing momentum to ongoing projects.
Success hinges on attracting international companies, as no Brazilian firm has comparable investment capacity, Siqueira assesses. In a recent example, Microsoft announced on February 11 the opening of two AI and cloud data centers in São Paulo, without disclosing locations for security reasons. The company pledged R$ 14.7 billion for expansion in Brazil in 2024 and to train 5 million Brazilians in AI by 2027.
