Elysangela Rabelo
Demarest Advogados, São Paulo
erabelo@demarest.com.br

Tomás Filipe Schoeller Paiva
Demarest Advogados, São Paulo
tfpaiva@demarest.com.br

Vitor Amorim
Demarest Advogados, São Paulo
vamorim@demarest.com.br

Alessandra Ungria
Demarest Advogados, São Paulo
aungria@demarest.com.br

Rebeca Cabral
Demarest Advogados, São Paulo
rcabral@demarest.com.br

Brazil’s data centre and cloud computing investments boom

Investments made in the data centre and cloud computing sectors in Latin America totalled $19.73bn in 2023.^[1] The data indicates that estimated investments of BRL 258.1bn were made solely in Brazil for the period between 2024 and 2027.^[2] In addition, the compound annual growth rate (CAGR) of data centres and cloud computing in the country is growing and it is estimated that the CAGR will be around 11 per cent by 2029.^[3]

Therefore, Brazil is by far the largest data centre and cloud computing market in Latin America, with notable potential in regard to its ability to continue attracting investments due to four key drivers, as described below.

The key drivers

The Brazilian legal framework for data centres and cloud computing services

Data centres and cloud computing are recent activities, not only in Brazil, but worldwide, which have been created to meet the demands of the digital economy, and they are part of a market that is still new and under development. In a nutshell, data centres are physical or virtual facilities that hosts computer equipment and systems, enabling the processing and storage of large volumes of data, and cloud computing is the activity that enables the hosting and execution of applications and services based on advanced cloud technology, constituting a set of computing resources that can be accessed flexibly, elastically and on-demand, with low management effort.^[4]

Due to these characteristics, the operation of data centres and cloud computing services in Brazil is considered to be an economic activity provided under a free enterprise regime from a legal perspective, which is ensured under the Constitution of the Federal Republic of Brazil.^[5] Consequently, such services, unlike telecommunication services, are not characterised as public services and/or activities subject to ex ante state intervention, resulting in a lower regulatory burden in regard to the operation of such services in the country, which helps to attract investors.

The growing demand for data centres and cloud computing services in Brazil

In addition to the favourable legal framework, Brazil foresees growing demand for receiving, storing and transferring data at high speeds, through systems with greater capacity and security, as Industry 4.0 flourishes in the country. The development and popularisation of new innovative technologies, such as artificial intelligence (AI), the Internet of Things (IoT), augmented reality (AR) and virtual reality (VR), has also been driving demand for robust digital infrastructure to support the execution of digital services, which has caught the attention of investors.

Brazil is a continental country, with more than 211 million inhabitants and 186.9 million people connected to the internet,^[6] so data consumption by new technologies has reached significant rates and has created a constant demand for digital infrastructure. Currently, internet access in Brazilian households is moving towards being universal, with 83 per cent of the country’s households connected to the internet.^[7] The daily use of internet applications and tools by millions of Brazilians results in organic incentives for the development of digital infrastructure in the national territory.

Therefore, this (already significant and growing) demand from the Brazilian market for connectivity is a natural incentive for the proliferation of data centres and cloud computing services, and attracts organic and spontaneous investments in the country.

Brazil’s natural advantages in regard to the deployment and operation of data centres and cloud computing

In addition to the growing market incentives on the demand side, Brazil also has significant competitive advantages vis-à-vis other locations in regard to serving as a hub for the deployment and operation of data centres and for investments in the sector.

According to the Brazilian Plan for Artificial Intelligence (PBIA), recently approved by the Ministry of Science, Technology and Innovation (MCTI),^[8] among Brazil’s main advantages in regard to the growth of the data centre and cloud computing sector are its clean energy matrix, natural resources (ie, water availability) and its recognised potential for cutting-edge research and its technological capacity in strategic sectors, such as agriculture, health and the environment. Also, Brazil has a relevant base of companies capable of supplying equipment for data centres and digital infrastructures, with local content.

Similarly, the study entitled a ‘Strategy for the implementation of a public policy to attract Data Centers,^[9] conducted by the MDIC and the Brazilian Agency for Industrial Development (ABDI), highlights that Brazil attracts investments in data centres and cloud computing due to its wide supply of renewable energy and the low cost of real estate and land, especially when compared to other countries.

Further, in a study on global trends in the data centre sector, the consulting firm CBRE points out that Brazilian cities, such as São Paulo and Rio de Janeiro, have strong potential to attract data centres, especially those aimed at supporting AI applications, in view of the high demand for connectivity, the solid energy supply, the proximity of corporate headquarters and the presence of highly skilled IT labour.^[10]

Brazilian public policies encouraging investments in data centres

Considering the abovementioned factors, the Brazilian government has also recognised the need to foster investments in data centres and cloud computing, so that the country can achieve network characteristics (ie, speed, capacity, coverage and latency) at levels minimally sufficient for the new uses in terms of connectivity and associated ecosystems.

The ‘Strategy for the implementation of a public policy to attract Data Centers’^[11] concluded that the digitalisation of society and the increasingly intense use of the internet have resulted in the growth in the demand for data centres, justifying a need to create public policies specifically aimed at its development and qualification. Also, the PBIA is based on Brazil’s transformation into a global data centre hub, taking advantage of its competitive benefits, especially the access to renewable energy resources and the strength of the local production chain. To this end, it is necessary to improve the coverage, quality and computing capacity of the digital infrastructure in Brazil, which requires an investment of approximately BRL 3bn in data centres between 2024 and 2028. In addition, the PBIA recognises that investment should be made in the digital and computational infrastructure needed for the development and application of AI on a large scale in the country. These complementary investments are fundamental to the success of the Brazilian action plan for AI.^[12]

In view of the importance of the development of data centres and cloud computing services, the Brazilian government has been helping to attract investments, setting the following public policies to foster innovation:

• the expansion of data centre infrastructure as one of the Fund for the Universalisation of Telecommunications Service’s (FUST) strategic goals: In September 2024, the Ministry of Communications included the expansion of data centre infrastructure as one of the strategic goals for the use of the FUST, enabling greater public investment in digital infrastructure. The financing of data centres was included in the list of FUST’s eligible projects, in order to encourage the implementation of more facilities;^[13]

• Providing a credit line for investments in data centres: In September 2024, the National Bank for Economic and Social Development (BNDES) launched a new credit line specific to investments in data centres in Brazil, with a budget of BRL 2bn. This credit line aims to meet the increasing demand for processing, storage and distribution of data in the digital environment.^[14] This investment is part of Mission 4 of the New Industry of Brazil plan, which has as an objective the aim to drive the digital transformation of Brazilian industry; and

• establishing data centres as priority infrastructure in the telecommunications sector: The Ministry of Communications has included the implementation, maintenance, recovery, adaptation and/or modernisation of data centres in the list of projects considered to be priorities in the telecommunications sector, including for the purpose of issuing incentivised and infrastructure debentures.^[15] In 2024, the Ministry approved the fundraising via incentivised infrastructure debentures by several companies operating in Brazil, with the aim of expanding investments in data centres.^[16]

What’s next?

Brazil has been enjoying a pro-investment landscape, which encourages agents to invest in the country. The government’s approach to the development of digital infrastructure has focused on incentive mechanisms, seeking to build a scenario of economic freedom driven (and maximised) by state support.

In line with this approach, the federal government has announced that it intends, in the near future, to adopt a national data centre policy, with the goal of promoting the responsible development of AI and the attraction of investments in data centres, by taking advantage of the country’s renewable energy potential.^[17] Also, the MCTI announced the intention to invest BRL 500m to finance projects that promote green data centres in Brazil. The initiative is part of PBIA’s Sustainability and Renewable Energy Program for AI, which aims to create a robust, sustainable and innovative AI ecosystem in Brazil, boosting the economy, creating jobs and placing the country at the forefront of AI development.    

Therefore, ongoing trends point to further upcoming public policies that foster, stimulate and support the full development of the data centre and cloud computing sector, favouring the natural growth of the market and representing a form of state action that does not pose risks of retraction and/or the creation of obstacles and difficulties in regard to new markets.

Thus, by taking advantage of its strategic comparative advantages to serve as an investment hub for data centres and cloud computing and aligning them with pro-investment and pro-development promotional mechanisms, it is expected that Brazil will continue to attract more investments in digital infrastructure and will become a digital leader in the near future, unlocking new business opportunities.