Los Toldos (Argentina) | Financial Times On a remote stretch of the Patagonian steppe, at the foot of a volcano, the roar of the wind was drowned out by the hum of computer servers.
A 12 MW (megawatt) data center, covered in terracotta-colored dust and surrounded by rocky plateaus reminiscent of Jurassic Park, runs on gas that would otherwise be burned as a byproduct of nearby shale oil extraction.
"There is a huge opportunity here for data centers not to compete with human needs," said Tomás Ocampo, founder of Unblock Energy, which plans a several hundred MW facility to power artificial intelligence systems in rural Argentina.
Ocampo said he received a flood of calls from potential investors and clients in the United States after the midterm elections, when significant victories by Democrats and the approval of measures in plebiscites against data centers dropped technology stocks and fueled fears of a shutdown of the sector. Billionaire Elon Musk once again suggested building these facilities in space.
"Before we put data centers in the ocean and in space, Argentina makes a lot of sense," Ocampo said.
Argentina's president, Javier Milei, presented data centers as the basis of his plan to transform the country into an "AI hub." He forwarded a bill with tax incentives, promised not to regulate AI and allow "non-human corporations", in addition to strengthening relations with technology billionaires such as Musk and Peter Thiel. Milei has highlighted the "abundant energy" and "vast inhospitable lands" of the country, the eighth largest in the world in terms of size, with just 46 million inhabitants.
But Argentina, far behind its peers in data center capacity and thousands of miles from many of the big cities where AI end users live, faces enormous obstacles. The government's approach provoked a reaction from opponents, who accuse it of wanting to transform the country into a "laboratory" for technology companies.
Decades of economic instability and lack of investment in the electricity grid have left the country with less than 40 MW of data center capacity, far behind Chile's 400 MW. American technology giants chose Uruguay, Mexico and Brazil to install their first data centers in Latin America.
The most prominent project may have stalled. In October last year, Milei announced plans for a 500 MW data center to serve OpenAI, but there were no new developments. Sur Energy, which is leading the project, told local media in August that "the ball" was "in OpenAI's court." But an OpenAI spokesperson told the FT that the company was just "a potential buyer" and that "any eventual acquisition would depend" on Sur Energy developing the data center.
The opposition held a congressional hearing into Thiel's ties to Argentina after he bought a mansion in Buenos Aires, participated in closed-door meetings with Milei's team and acquired a stake in a local oil company. Mass protests forced Milei in August to abandon an initiative to ease restrictions on foreign land ownership.
Civil society groups claim that data centers would worsen water stress in Patagonia and generate few jobs, and that the incentive regime would limit the State's ability to intervene in the face of resource scarcity. "The benefits are really excessive," said environmental activist Oscar Soria.
Milei's dream, however, may yet become a reality, as energy companies begin to offer their shale gas production to developers. Pampa Energy stated in October that it has 800 MW of capacity in the province of Neuquén. Polish company Green Capital announced a US$3 billion data center in the province of Chubut.
The approval of the incentive regime — which has already passed through the Chamber of Deputies and is awaiting approval from the Senate — should unlock investments, said Raimundo Diaz, executive vice-president of Vistra Global Solutions, a US-based business services group. "Argentina is one of the only countries with few restrictions to implement large-capacity data centers in a short period," he said. "It's coming late to the party, but it has huge potential to catch up."
Defenders say that installing data centers in Patagonia, a region that occupies a third of Argentina, would resolve the mismatch between the country's energy wealth and its demand. Oil production has more than doubled since 2024 in Vaca Muerta, a shale formation the size of Belgium, but gas production has barely increased due to a lack of transport infrastructure. Unblock states that drilling companies waste, through burning, the equivalent of around 600 MW of potential generation and that up to 3 GW of gas remains underground due to lack of demand.
“We took the data center to where there is spare energy,” shouted Miranda Marrazzo, chief engineer at Unblock, trying to make herself heard over the noise of the servers. Germán Serrano, a former executive at state-owned YPF, argued that it would be "more efficient" "to build the data centers in Vaca Muerta and transport photons around the world than to transport energy to the data centers."
Remote sources of renewable energy are also abundant, but limited grid capacity means nearly 6 GW worth of projects await approval or face generation restrictions. The distant location will limit Argentina's role in processing that needs to occur close to end users, but developers said Patagonia is attractive for model training, which can be done remotely.
Still, the aging electrical grid is a major obstacle. In September, the government stated that new large projects, in any sector, must provide infrastructure for 80% of their electricity, in order to avoid overloading existing capacity.
Meanwhile, Soria warned that developers who see Patagonia as "empty" are making a bad calculation. "It is probably the Argentine region with the greatest history of local communities blocking projects," he added, noting that gas projects in Vaca Muerta have faced resistance from indigenous Mapuche residents.
Daniel Yankelevich, from the Fundar think tank, argued that Argentina should seek investments in which Argentine companies add value, rather than just providing land and energy, as is the case in its software and technology services sectors. "Data centers should be a means, not the end goal," he said.
