US Backs Massive AI Data Center Powered by Itaipu Dam—But in Paraguay

American technology companies looking for the massive amounts of electricity required to power artificial intelligence are bypassing Brazil’s complex regulatory environment. Instead, they are heading directly to its smaller neighbor, Paraguay, to tap into the world's most abundant source of clean energy.

On October 22, 2026, Denver-based cloud infrastructure provider Crusoe announced a strategic partnership with Paraguayan developer Araico to build a massive AI cloud computing campus. The facility will sit adjacent to the Itaipu Hydroelectric Dam, a colossal 14,000-megawatt plant co-owned by Brazil and Paraguay. The initial phase of the project is scheduled to go online in mid-2027 with 106 megawatts of capacity, with long-term options to scale up to 280 megawatts to serve US and Latin American cloud clients.

The deal was finalized during a trade delegation led by US Deputy Secretary of State Christopher Landau. While the Itaipu Dam is a binational entity split equally between Brazil and Paraguay under a 1973 treaty, the US State Department’s announcement did not focus on Brazil. Brazilian directors at the dam confirmed they had no participation in the negotiations, which were handled entirely by the Paraguayan side of the joint venture.

Bypassing Brazil's Tax Hurdles

The move highlights a growing frustration among technology investors regarding the country's slow pace in enacting tax incentives for digital infrastructure. While the Brazilian Congress recently approved the "Redata" framework to support data centers, local industry leaders warn that bureaucratic delays and high state-level taxes are costing the country its competitive edge. Marcos Peigo, CEO of Scala Data Centers, noted that Paraguay has the potential to reach 1 gigawatt of data center capacity before Brazil if local tax exemptions are not quickly implemented.

Under the Itaipu Treaty, Paraguay is entitled to 50% of the dam's electricity but historically exports its excess supply back to Brazil at low, fixed rates. By selling this power directly to American AI developers "behind the meter" at the substation, Paraguay can capture significantly higher margins. The US government described the Crusoe-Araico partnership as potentially "one of the largest private investments in Paraguay's history".

Broadening US Interests in the Region

The AI data center is part of a broader diplomatic push by the United States to secure critical resources and digital supply chains in South America. Concurrently, US-listed Uranium Energy Corp, which holds extensive exploration concessions in central Paraguay alongside its primary mining assets in the United States and Canada, announced a $12 million investment to develop its uranium concessions in the country.

The US and Paraguayan governments also initiated negotiations for a civil nuclear cooperation agreement under Section 123 of the US Atomic Energy Act, paving the way for future technology exports. While Brazil remains the dominant destination for Latin American venture capital, Paraguay’s aggressive push to monetize its cheap, 100% renewable energy is reshuffling the regional tech landscape.