I recently had the opportunity to present the Association for Competitive Technology’s (ACT’s) research on the hidden costs of AI regulation at a discussion hosted by Lawgorithm to an audience focused on the future of AI governance in Brazil. Drawing from our report The Hidden Cost of AI Regulations: A Survey of EU, UK, and U.S. Companies, I talked about what happens when well-intentioned rules outpace the innovation they’re meant to govern, and why Brazil’s policymakers should be paying close attention as they shape their own policy frameworks for AI and other emerging technologies.

During the discussion, I shared independent survey findings, conducted by TechnoMetrica Market Intelligence, covering more than 1,000 tech micro, small, and medium-sized enterprises across the EU, UK, and the United States. The findings are striking.

Only 50 percent of EU and UK tech startups actively use AI, compared to nearly 65 percent in the United States, and full workflow integration stands at just 32 percent in Europe versus 45 percent in the U.S. Regulation is the likely primary driver of this gap;

  • Six in 10 EU/UK tech firms report delayed access to frontier AI models,
  • Nearly 60 percent of developers report regulation-driven launch delays, and
  • More than one in three have been forced to strip out or downgrade product features just to comply.

These policy-based concerns are translating into real financial losses, with EU and UK tech firms losing an estimated R$584,000 to R$2.0 million per firm annually from regulatory delays, while U.S. firms operating in a more flexible, outcomes-based regulatory environment realize greater cost savings, invest more aggressively, and embed AI more deeply into their businesses.

The lesson for Brazil is not that AI should go unregulated per se, but that how you regulate matters enormously. The EU’s ex-ante approach, which means regulating before outcomes are known through conformity assessments, blanket compliance obligations, and platform restrictions like the Digital Markets Act (DMA), has created structural bottlenecks that disproportionately burden the smallest firms, resulting in reduced innovation and competitiveness on a global scale. With about two years of experience under our belts, any objective analysis must conclude that countries adopting EU-style frameworks to address emerging technologies will see the same results. Brazil has a genuine opportunity to chart a different course that prioritizes proportional compliance, ensures timely access to frontier AI tools, and embraces regulatory sandboxes that let policymakers learn from real-world deployment before locking in permanent rules. Notably, Brazil’s existing, technology-neutral competition and consumer protection laws likely already provide a means to handle these issues, begging the question of whether new technology-specific laws are needed.

I encourage anyone following or involved in Brazil’s AI policy conversation to give my presentation (and the thought-provoking discussion that followed) a listen, and to read the full report at actonline.org/the-hidden-cost-of-ai-regulations. The question facing Brazil is whether it will regulate in a way that accelerates the country’s capacity to benefit from AI, or instead hold AI back. The choices being made right now will define the competitive landscape for a generation.