Compared to other global locations, Brazil ranks very low in terms of suitability for setting-up data centers. Countries such as China, India and Russia are ranked higher than Brazil High tax rates, increasing energy costs and lack of data security policies is a deterrent for companies to set-up data centers in Brazil Reasons such as customer connect and availability of low cost skilled talent is expected to establish Brazil as a key hub for data center activities in Latin America To access the complete whitepaper, Please send us mail at info@talentneuron.com

1. This report is solely for the use of Talent Neuron clients and Talent Neuron Subscribers. No part of it may be circulated, quoted, or
reproduced for distribution outside the client organization without prior written approval from Talent Neuron.
Brazil Datacenter Market – Operating Costs
and Data Security Policies
June 2013

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3. Summary
 Brazil is one of the emerging locations for data centers. This is driven by the rapidly growing internet consumer base,
better telecommunication infrastructure and availability of low cost skilled talent
 Sao Paulo is the 1st choice for MNCs to establish data centers in Brazil. Over 80% of the data centers in Brazil are
based in Sao Paulo. MNCs with multiple data centers in Brazil have at least 1 data center in Sao Paulo. The city has
over 24,000 sq.mt. of rack space and over 2,000 people with data center related skills
Presence of IT Companies:
 HP, IBM and Terremark have data center operations in Brazil for over a decade. These companies have more than one
data center in the country. Key services provided from data centers in Brazil include Mainframe and Open Source
Technologies, Infrastructure Support, Disaster Recovery Management and Cloud Services
 Other MNCs present : Capgemini-EMC, Tivit, Dell, Amazon
Presence of Online Companies:
 Top online companies such as Google, Yahoo, Facebook, Twitter and LinkedIn have not set up data centers in Brazil.
Google is setting up its first Latin American data center in Chile. This is expected to be operational by the end of 2013
 Amazon Web Services is the only online company to set-up a data center in São Paulo in 2011.
Key Challenges faced in Data Center Set-Up:
 High Energy Costs: Energy or Electrical cost in Brazil is about 60% higher than that the US.
 Inadequate Data Security Policies: Data security concerns are higher in Brazil due to the lack of interoperability,
portability and data security policies and standards in the country. Brazilian legislation also lacks a Trans-Border
convention given the absence of general and sector-specific rules. The introduction of Brazil Data Protection Draft,
2011 is expected to alleviate most of the data security concerns in the coming years
 High Tax Rates: Compared to other global locations the cost of setting up a data center in Brazil is higher; Taxes
account for about 25% of the total set-up costs
3

4. Government Initiatives for the Computer Products and the IT Industry
Moderate incentives are provided by the government to companies setting up data centers in
Brazil
*
In February 2013, the electricity rates which were 16¢ per KwH in August 2012
were reduced by close to 30 percent for enterprises which has helped to
reduce data center operating costs in the country
The Brazilian government reduced import duty on telecommunications and
computer products from 16% to 14% which will reduce new data center set
up costs. However it must be noted that import taxes on routers were
increased by 4% to 20%.
Source: Talent Neuron Web Crawling and Analysis
Energy Costs
Import Taxes
Government authorities in cities like Campinas and Porto Alegre in Brazil
reduced property taxes by 30 to 50% or leased out space at a subsidized rate
which will help reduce cost for setting up data centers in these locations
Property Taxes
In 2012, the Inspection Operating tax on M2M equipment was reduced from
50% to 33% which will reduce operating costs of all M2M equipment used in
data centers
Inspection Operating
Taxes
This is a summary report.
For more information , Please contact us at
info@talentneuron.com
5

5. Compared to other global locations the cost of setting up a data center in Brazil is
higher; Taxes account for about 25% of the total costs
Note: Tier III data centers are data centers with dual powered IT equipment and have multiple independent distribution paths serving the IT equipment
Source: Talent Neuron Analysis
0% 20% 40% 60% 80% 100% 120% 140% 160%
US
Columbia
Mexico
Argentina
Chile
Brazil
Total Data Center Cost
• Due to high import taxes in Brazil, cost of data center equipment accounts for almost 40 percent of the total data center
set-up cost
Building a Tier III Data Center - Cost Comparison
155%
125%
125%
115%
110%
100%
Tax Component
35 ~ 40%
13 ~ 18%
15 ~ 20%
20 ~ 25%
25 ~ 30%
12 ~ 16%
6

6. Operating data centers in Brazil
Brazil accounts for an estimated 10 percent of global renewable energy
Power Supply
• Data centers in Brazil are run utilizing redundant power drawn from generally two
separate independent transmission lines supplied by utility companies
Power Backup
Cooling Solutions
• Power backup is generally handled by Uninterruptible Power Supply (UPS) systems
and redundant Diesel Generators
• Most of the data center operators in Brazil keep reserve diesel to run the
generators for more than 2 days at a stretch in case of any major electricity power
failure
• Cooling is mostly handled by air condensation chillers and water cool pumps.
However, chillers and compressors increases energy costs
• Thus new data centers in Brazil are using free cooling techniques rather than
chillers and compressors . The following free cooling techniques are mostly used in
Brazil:
• Air-side cooling : Data center circulates outside air which is cooled by
passing is through a series of filters or heat exchangers
• Water side cooling: Data center circulates outside air which is cooled by
passing is through cooling towers containing water or glycol
• Free cooling techniques however are not very effective in Brazil as in some parts of
the year Brazil’s hot climate and water supply shortages compel data center
operators to opt for chillers and compressors
Source: Talent Neuron Analysis
7

7. The new Brazilian Data Protection Draft (DPD), 2011 follows the current trend of several
countries, European Union included, by adopting a data breach notification regime (1/2)
Source: Talent Neuron Analysis; Brazil Data Protection Law - Report
Data Security Issues prior to
Brazil DPD
Post introduction of Brazil
DPD,2011
• Prior to the introduction of the Brazil
DPD*, Brazil had a minimal data protection
framework.
• Companies found it difficult in processing
personal data. Firm data processing legal
basis were missing, which companies could
refer to.
• Due to legal uncertainties many
technology companies gave-up investing in
Brazil.
• Judiciary lacked experience in addressing
issues such as data disclosures and data
privacy on internet
• Companies were liable only when
damages occur because of personal
information they were storing
• Even if there was a security breach and
personal data, such as credit card numbers
and passwords, were leaked or lost, a
business was only liable to the extent of
the damages resulting from the misuse of
that information.
As per the bill a Data Protection Authority is to be established that would release a list of
all recommendation measures.
All companies, private or public, would have to follow its recommendations, and be liable
for any security breach without a showing of omission or negligence.
For companies with more than 200 employees and that process personal data, there
would be a new obligation to appoint a Data Protection Officer responsible for all data
processing in the company and who would have to report directly to the Data Protection
Authority.
With the bill, the mere data breach could make the company liable without the need to
prove omission or negligence, and that can be coupled with penalties as high as the
closure of the business activity.
The bill creates a National Counsel on Protection of Personal Data
The draft bill guarantees a list of citizens’ basic rights regarding their personal data, such
as the right to:
• Access one’s data
• Correct inaccurate or wrong data and delete them
• Object to their processing
• Not be subject to purely automated decisions
• Be compensated for the misuse of one’s personal data
This is a summary report.
For more information , Please contact us at
info@talentneuron.com
8

8. The new Brazilian Data Protection Draft (DPD), 2011 follows the current trend of several
countries, European Union included, by adopting a data breach notification regime (2/2)
Data Security Issues prior to
Brazil DPD
Post introduction of Brazil
DPD,2011
• Prior to the introduction of the Brazil
DPD*, Brazil had a minimal data protection
framework.
• Companies found it difficult in processing
personal data. Firm data processing legal
basis were missing, which companies could
refer to.
• Due to legal uncertainties many
technology companies gave-up investing in
Brazil.
• Judiciary lacked experience in addressing
issues such as data disclosures and data
privacy on internet
• Companies were liable only when
damages occur because of personal
information they were storing
• Even if there was a security breach and
personal data, such as credit card numbers
and passwords, were leaked or lost, a
business was only liable to the extent of
the damages resulting from the misuse of
that information.
The bill encompasses rules and regulations on topics such as:
• Fundamental right to access the Internet
• Internet and network neutrality
• Data retention and the storage of connection logs
• Liability of Internet services providers
• Necessity of a judicial order for law enforcement authorities to obtain users’
personal data, and the removal of illicit copyrighted material
• Establishment of a minimum time to store the personal data
• The difference between a physical and an electronic document
• The possibility given to the individual to get access to his data without the
need for a lawyer
• The storage of personal data to be used for statistical purposes and the
possibility of applying this data to behavioral analysis
• The necessity of more transparent procedures, mainly on the methods used to
acquire the individual’s consent to process his personal data
This is a summary report.
For more information , Please contact us at
info@talentneuron.com
Source: Talent Neuron Analysis; Brazil Data Protection Law - Report
9

9. Availability of Skilled Labor at Low Costs as compared to US cities:
 Brazil has a larger talent pool of IT Infrastructure talent when compared to the neighboring Latin American
countries while cost of labor is lower than US. This helps in reducing data center operating costs.
 Salaries of Tier-1 cities of Brazil (São Paulo and Rio de Janeiro) are around 40-50% of US salaries. Salaries of
Tier-2 cities (Curitiba, Campinas etc.) are around 25% of US salaries*.
Technology Zones and Clusters:
 Software and Technology Parks in Brazil, offer multiple Tax and Financial Incentives to companies that are
willing to set-up their development and service centers in the parks.
E.g. Porto Digital Technology Park, Recife. According to Municipal Act, IT businesses and associated services
companies established in Porto Digital can obtain a tax reduction of up to 60% in local sales tax on services.
Growing Consumer Market within Brazil:
 Brazil is witnessing a high growth in Internet users. This increasing consumer market has lead to the
demand of cloud computing and related services which in turn is driving the growth of the Data Center
market in Brazil
Note: * Salaries of talent deployed in IT Infrastructure field is considered; ~ The incentives offered vary from one technology zone to another
Source: Primary interviews of Brazilian Software Promotion Departments, Government Organizations and Established Companies in the region
Advantages of Setting Data Centers in Brazil
10

10. High Tax Rates:
Overall Payroll and Corporate Taxes are very high in Brazil as
compared to other nations. High taxes on importing data center
equipment and energy is a major deterrent for data center
operations in Brazil.
High Energy or Electricity Costs:
Energy or Electrical cost in Brazil is over 60 percent more than
that in US. Thus operating a data center in Brazil is not very cost
effective.
Data Security Concerns:
Data security concerns are higher in Brazil due to the lack of
interoperability, portability and data security policies and
standards in the country. The introduction of Brazil Data
Protection Draft, 2011 is expected to alleviate most of the data
security concerns in the coming years
Source: Primary interviews of Brazilian Software Promotion Departments, Government Organizations and Established Companies in the region
12.50%
2%
20%
31%
15.30%
10%
12%
25%
34%
39%
0% 20% 40% 60%
India
USA (State Tax)
China
Brazil
USA (Federal
Tax)
Maximum Corporate Tax Maximum Payroll Tax
Tax Break-up across Countries
Disadvantages of Setting Data Centers in Brazil
11
This is a summary report.
For more information , Please
contact us at
info@talentneuron.com

11. * Details not disclosed by the company
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