Sources say that Brazil will offer tax incentives to attract data center investment.

Four sources with knowledge of the matter said that the Brazilian Finance Minister Fernando Haddad is planning to start a trip this week to Silicon Valley with a plan designed to attract data centers into his country through the exemption of federal taxes on technology investments.

Haddad's visit to California includes a breakfast on May 6 with tech executives in Palo Alto. He will promote Brazil as an infrastructure hub that is sustainable, using the abundant renewable energy available.

According to two sources who asked to remain anonymous to discuss private plans, the Finance Ministry estimates that the new policy will unlock around 2 trillion reais (352 billion dollars) in investment over the next 10 years, including spillovers into construction, telecoms, and AI-related service.

The Finance Ministry has not responded to a comment request.

Sources said that the same plan would benefit the data center investment planned by ByteDance - the Chinese parent of TikTok - as well. The executive order will need congressional approval before it can be made permanent.

Two sources confirmed that the policy will exempt import duties, import taxes, PIS, Cofins and other federal taxes on IT capital expenditures.

One of the experts said that hardware depreciation is the biggest cost, due to Brazil's complicated and expensive tax system.

The measure will not exempt non-IT investments such as construction. The policy will, therefore, be expected to produce fiscal gains, which are expected to support the Brazilian federal budget, and not strain it, starting next year.

The plan is designed to take advantage of Brazil's diplomatic openness in order to attract foreign investment amid rising trade tensions around the world, such as U.S. Tariffs and tensions between China and the United States.

"We don't pick fights. "We're friends to everyone." "That means Brazil can serve all of the world without major obstacles," said one source.

The landmark tax reform that was approved by President Luiz inacio Lula last year allows for capital expenditure exemptions, but these are only set to come into effect after 2033.

This new measure, spearheaded by the Ministries of Development and Finance, is designed to accelerate these benefits in order to encourage green data centers investments.

For projects to qualify, they must meet sustainability criteria. This includes using 100% renewable energies. Projects will also be required to set aside a large portion of their capacity for domestic consumption, even if it is intended for export. They will also have to contribute to an AI fund that supports Brazil's ecosystem.

(source: Reuters)