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Lula signs Redata law with water cap

2 min read

10:53UTC

President Lula signed Lei 15.504 on 15 September, turning Brazil's Redata data-centre tax break into law with no veto message and the Senate's water condition in Article 11-B.

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IndustryAssessed

Key takeaway

Brazil's new data-centre tax break carries a binding annual water limit for every claimant.

President Lula signed Lei 15.504 on 15 September, creating Redata, the data-centre tax regime Brazil's Senate passed on 1 September⁠¹. The law suspends import duty, two federal revenue contributions and the industrial products tax on qualifying cloud and artificial intelligence (AI) builds. The Treasury estimates the cost at about 5.2bn reais in 2026, falling to about 1bn reais a year after.

The signed text carries no veto message. Its water condition sits in Article 11-B, item IV, which the law inserts into Brazil's 2005 tax statute, Lei 11.196: 0.05 litres per kWh, checked every year⁠². The Senate's cap now binds every Redata claimant.

Because the limit rides on the tax break rather than on a planning consent, it reaches only developers who claim the suspensions, and it stays with them for as long as they keep the benefit. In the same week, Brazil's grid authorities published a connection authorisation for an AI campus in Rio Grande do Sul planned by Scala Data Centers, the kind of build the regime is written for.

Deep Analysis

In plain English

Brazil's president Lula signed a new law giving tax breaks to companies building data centres and AI computing facilities. It is designed to attract investment Brazil has been losing to countries such as Chile and the United States. The law also keeps a strict limit on how much water data centres can use for cooling, a rule some in the industry wanted softened. Lula signed the bill without removing or changing that water rule, which Brazil's Senate had written into the law before it reached his desk.

Deep Analysis

Root Causes

Redata exists because Brazil is competing for the same hyperscale capital as Chile, the United States and Gulf states, all of which already offer duty relief on imported servers; without matching incentives, officials feared projects like Scala's AI City would site capacity abroad despite Brazil's cheap hydro and wind power.

The water cap survived intact because Brazil's Senate, not the executive, wrote it into the bill during the PL 278/2026 process, and a presidential veto of a single clause would have reopened the whole bill to fresh negotiation in an election-adjacent Congress, a political cost Lula's government judged not worth the industry goodwill it would buy.

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: Singapore's 2019 pause on new data-centre approvals, lifted only in 2022 once a Green Data Centre standard tied approval to a hard PUE ceiling, shows a government efficiency number can survive industry pressure to soften it once the underlying ban is lifted.

Counter-parallel: Singapore wrote its ceiling into administrative standards it could revise; Brazil has written its 0.05 litre-per-kilowatt-hour cap into the text of a law passed by Congress, which needs a further act of Congress, not a regulator's pen, to change.

Consensus view: Brazil's Congress designed Redata's tax breaks on imported servers and construction inputs to compete directly with the incentives data-centre developers already use in Chile and the United States; Lula signing without a veto message on the water clause signals the government prioritised passing the incentive over industry lobbying to soften the water limit.

Counter-view: The counter-case is that a fixed 0.05 litre-per-kilowatt-hour limit, set in statute rather than adjustable regulation, locks in a number that cooling technology may make obsolete within a few years, in either direction.

Key tension: Whether writing a hard water number into primary legislation, rather than delegating it to a regulator as most jurisdictions have, becomes a model other Redata-hopeful states copy or a cautionary tale about legislating a fast-moving technical limit.

Sources:Presidencia da Republica (Casa Civil)·DataCenterDynamics

Mentions:Lula →Lei 15.504 →Redata →Brazil →Singapore →Chile →United States →Rio Grande do Sul →Senado Federal →Scala Data Centers →Scala AI City →

First Reported In

Update #15 · Texas freezes data-centre permits

Presidencia da Republica (Casa Civil)· 24 Sept 2026

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Causes and effects

Caused by

Brazil ties tax break to water cap

The Senate-passed data-centre tax bill became the signed Lei 15.504.

Occurred 1 Sept 2026

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This Event

Lula signs Redata law with water cap

Every company claiming Redata's tax suspensions must now meet a water limit of 0.05 litres per kWh, checked every year, under Article 11-B.

Led to

Brazil links Scala Data Centers' AI City

Redata's tax relief and Scala's cleared grid connection landed in the same week, both easing Brazil's build-out.

Occurred 10 Sept 2026

Read story →

Different Perspectives

Chilean data-centre developers

Seven projects, one linked to Google, asked SEA this month for rulings that they fall outside full environmental review; four declared diesel-storage volumes just under the review-triggering tonnage, mirroring the mechanism Alto Jahuel used in July. The clustering suggests the threshold is being engineered, not sized to need.

An Coimisiun Pleanala

Ireland's planning appeals body refused the €1.5bn Killala data centre on 17 September, overturning Mayo County Council's 2025 grant for lack of a fixed grid-connection agreement and no corporate renewable power-purchase agreement. The ruling makes matched-power evidence, not planning consent alone, the deciding factor.

Housing Assembly and Foxglove

The two groups' 6 August appeal, filed through the Legal Resources Centre, kept Cape Town's approval of Equinix's data centre suspended through this window over missing water, emissions, noise and diesel-generator data. Deputy Mayor Eddie Andrews confirmed on 20-21 September that the suspension holds.

Brazil (President Lula, signing Redata)

Lula signed Lei 15.504 on 15 September, creating the Redata tax programme and keeping the Senate's water cap with no veto, while Aneel authorised Scala's AI City to join the national grid from January 2028. Brazil is recruiting capacity other markets are now turning away.

Aragon regional government (Eva Valle)

Aragon's economy chief Eva Valle said on 11 September that Spain's draft decree, requiring 80% hourly-matched renewables via a 10-year power-purchase agreement, is unmeetable by any project and threatens Blackstone, Azora and Microsoft builds already under way. Aragon holds 3,600 MW of granted grid access against 108 MW built.

Texas Governor Greg Abbott

Abbott ordered TCEQ on 21 September to halt every pending data-centre permit until projects pay their own way and complete ERCOT and Texas Water Development Board audits. Texas built the country's most permissive data-centre market; freezing it signals even that market has hit its grid limit.