Oracle has the check ready to invest in AI in Brazil, but there's a hurdle in the way.

Barcelona - The American technology giant Oracle is ready to increase investments in Brazil and direct part of the company's US$500 billion Stargate program, which is intended for investments in the expansion of artificial intelligence (AI) data centers. But the company sees a clear obstacle in the country: the lack of a more favorable regulatory and tax environment.

The most striking example is the uncertainty surrounding the approval of the Special Tax Regime for Data Centers ( Redata ) by the federal government. The program aims to stimulate the installation of data centers in the country through exemptions from federal taxes and the purchase of machinery and equipment.

It is estimated that the tax waiver will reach R$ 5.2 billion this year and approximately R$ 1 billion in each of the following two years. The expectation is that this could guarantee investments of at least R$ 1 trillion in Brazil by 2030. And it is this benefit that Oracle is eyeing.

The provisional measure that instituted the change expired on February 25th, without being voted on in the Senate. In an attempt to maintain some of the progress already made, the Chamber of Deputies approved a bill guaranteeing the creation of the Redata program, while preserving the benefits. However, there is still no deadline for the bill to be considered by the senators.

Without this clear progress, Oracle will reassess how the expansion of its own data centers in Brazil will proceed. It won't necessarily cut off funding entirely, but the flow of resources will be reduced.

“We bring equipment to Brazil every month and we know the cost of that. When it’s approved, the company will be able to accelerate investments. We can’t continue with the risk of losing part of this data processing to other regions,” says Alex Colcher, senior vice president of Oracle Latin America, in an interview with NeoFeed at the Mobile World Congress ( MWC ).

Today, there are six data centers in Brazil using Oracle's cloud system: two public (in São Paulo and Vinhedo), two with private clients, and two operated by NeSuite, an Oracle company.

“Oracle has data centers in Colombia, Mexico, and other Latin American countries. And it’s easier to install there than in Brazil. The country hasn’t lost ground yet, but there is a risk. Argentina is already talking about sovereign AI. We haven’t reached that level yet,” says Colcher.

The issue is that, in the executive's view, the slow pace of Redata approval is not the only barrier preventing Brazil, which is already relevant to Oracle, from growing its share of global revenue.

“The most significant obstacle in the country is precisely the cost of doing business in Brazil. It's the political, economic, regulatory, and fiscal environment. And this better environment needs to be created. Telecommunications operators have a leading role in this discussion to change this scenario,” says Colcher.

While the volume of resources is not increasing in Brazil, Oracle has been accelerating AI development partnerships. Last month, the company announced a partnership with Claro to create its own AI model, integrated into the network of the chip giant Nvidia.

With this, the telecommunications company will be able to develop LLMs in a similar format to that used by ChatGPT, from OpenAI. “In practice, this has elevated the partnership to a level beyond simply being a supplier. They will sell solutions that we help build. It ends up becoming an important channel for us to scale our service,” says the executive.

In December, the company signed a five-year contract with TIM to accelerate the telecommunications company's digital transformation process. Recently, TIM announced the acquisition of V8.Tech [for R$140 million, with the possibility of reaching R$280 million]. The new company is already a partner of Oracle in services.

“We’ve become AI development partners, where we create internal solutions together. TIM will be able to capture internal benefits and, if all goes well, encapsulate all of that in market products,” he says.

“Recently, TIM announced the purchase of V8.Tech [for R$ 140 million, with the possibility of reaching R$ 280 million], which is already a major Oracle partner,” says Colcher.

The two contracts are the only public ones in the telecommunications segment, but Colcher stated that Oracle currently works with all major telephone operators in Latin America (including Brazil) and that new contracts are underway.

In the financial system, Oracle partners with Caixa and the Federal Data Processing Service (Serpro). The company is responsible for operating the PIX system for the financial institution run by the federal government.

“We also have room to move forward with private banks. Telecommunications and finance are key areas for Oracle in Brazil. Each bank is developing its own architecture,” he says.

Despite the regulatory and tax challenges, the executive states that Oracle sees Brazil as one of its main growth hubs for AI in the world. The most expensive example of this is the company's innovation center in São Paulo, the only one in Latin America, which will celebrate its first anniversary at the end of March.

“Brazil serves as a testing ground for many of the innovations that the company is currently developing. The country is seen as an innovation hub. The space created in São Paulo was a consequence of this,” says Colcher.

The R$40 million investment for the implementation of the Brazilian innovation center, in a 700 square meter (m²) space, was made directly by Oracle global. There are only three other centers of this type in the world: the United States, the United Kingdom, and Australia.

“We bring our open AI infrastructure to our partners. And today, for telecommunications companies, this is very important. The future of these companies, in B2B, is to have vertical solutions through AI. We have a very mature relationship with Brazilian telecom companies,” says the Oracle executive.

Over the past 12 months, Oracle's shares on the NYSE have depreciated by 5.6%. In the last month, however, they have risen by 11.6%. The company is valued at US$438 billion.

The journalist traveled to Barcelona at the invitation of Vivo.