As communities across the United States say "no" to data center construction, political pressure is driving efforts to limit the expansion of such projects. However, thousands of miles away, South America's largest country has already become an important AI market and is making construction easier.

According to the data from OpenAI, Brazilians send 215 million messages to ChatGPT every day, making Brazil the third-largest market for this chatbot company in terms of weekly active users, behind only the United States and India.

Google stated that driven by growing demand, the company plans to double the scale of its cloud infrastructure in Brazil by 2030. In March this year, Google also signed a sponsorship agreement with the Brazilian Football Federation, integrating Gemini into the systems for the Brazilian men's, women's, and youth football teams.

Other tech giants are also investing. Since 2011, Amazon Web Services has invested over $3.8 billion in data center infrastructure in Brazil and has pledged to invest another $1.8 billion by 2034; Microsoft, on the other hand, has committed to investing $2.7 billion in cloud and AI infrastructure over three years.

The main driving force behind the growth of data centers in Latin America is local demand, rather than American companies moving their operations overseas. However, Atlas Renewable Energy CEO Carlos Barrera believes that this situation may change.

"We indeed believe that this region is actually an attractive 'pressure relief valve' that can alleviate some of the capacity constraints you are seeing in the United States at present," he said.

Brazil has a population of nearly 214 million, spread over a territory larger than the 48 states of the United States combined, making it a country worth targeting for large-scale cloud service providers.

Brazil's power supply is also a major attraction, and the cost is less than half that of the United States. According to a report from the Brazilian Ministry of Mining and Energy, nearly 87% of the country's electricity comes from renewable sources, and the rapid growth of wind and solar energy has also led to a surplus in electricity production.

The person in charge of data center consulting firm Metro Colo Advisory, James Mercer, stated to Fortune: "The rebound in the United States is not about driving ultra-large cloud service providers out of the country, but rather pushing them towards where electricity first appeared."

However, the cost of cheap electricity in Brazil may also increase. Barrera indicates that Brazil needs more transmission lines to connect large data centers to the power grid, and there are also disagreements among government officials regarding whether electricity prices will rise.

Another obstacle to growth in Brazil AI is the tax law. High federal import taxes make it more expensive to build large data centers than in other countries in the region.

To address this issue, Brazilian President Luiz Inácio Lula da Silva signed a law on September 15th that provides tax incentives for data center equipment that meets certain criteria. This stands in contrast to proposals by some U.S. legislators to levy taxes on the electricity consumption and output of data centers.

Ascenty CEO Christopher Torto stated to Fortune: "If Brazil wants to become a player in the data center industry, it must carry out this tax reform." Ascenty is the largest data display and connectivity service provider in Latin America.

Data Sovereignty

The Lula government hopes that this tax incentive will attract more computing power to Brazil, thereby helping domestic companies develop AI products and reduce their dependence on foreign services. According to data from the Brazilian Ministry of Development, currently 60% of Brazil's digital data is processed overseas.

According to this legislation named REDATA, companies are required to provide at least 10% of their qualified computing power services to Brazilian customers and must invest 2% of the value of the tax-exempt equipment in local R&D in Brazil.

Brazilian anthropologists and researchers from the data centers of non-profit policy organizations Data and Society, namely Ana Carolina, de, and Assis Nunes, stated to Fortune: "This is to enhance Brazil's data sovereignty, so that we will not be too dependent on foreign services, especially during Trump's administration."

Nunes pointed out that Brazil hopes to reduce its dependence on foreign technology, yet it is providing tax incentives to companies that also dominate the industry.

Torto acknowledges that it is unlikely for Brazil to cultivate its own Google or Microsoft. However, having data centers in Brazil itself could potentially improve latency and keep more data within the country.

He said, "It's not just about the models or the data centers themselves; in the long run, the truly larger investments are all that revolves around them."

Rebound Risk

Although Brazil has not yet seen a rebound in data centers on the same scale as that in the United States, some resistance has emerged. Just a few days before REDATA became law, Brazilian federal prosecutors filed a lawsuit regarding a data center project related to TikTok. They hope that an environmental impact study will be conducted and the opinions of indigenous Anac people will be sought before the data center begins operations.

Nunes indicates that Brazil's opposition to data centers is not as politically unified as in the United States, where data centers are criticized by both the left and the right. She said that foreign investment still carries a positive connotation in some regions of Brazil, especially among those who see it as an opportunity to integrate into the global economy.

She said, "For those who are marginalized and excluded from the global system, it's like, 'Oh, Google is coming here, that's great!'

Nunes grew up in Goiânia, in central Brazil, near a Unilever factory that produces ketchup. She recalls that her mother was proud to have established a connection with a global company, although some were concerned that the factory would deplete local resources.

She said, "Since we live very close to that company, we feel like we are part of some big endeavor."