Tech Giants Look to Argentine Patagonia for Massive Data Centers

BUENOS AIRES, Sept 7 (Reuters) - Argentina's windswept Patagonia is drawing growing investor interest as a possible home for mega data centers, with the region's cool temperatures, renewable energy, shale gas and vast empty terrain proving attractive.

Around the world, hyperscalers—major tech companies building server farms—are racing to expand but regularly encounter obstacles from anti-data-center campaigns. In Argentina, projects that are still at an early stage are moving forward with little public notice. Since locals have not yet felt the effects of large data centers, the country has seen no backlash comparable to the U.S., where critics say the facilities burden power grids, damage the environment, and raise household utility bills. Supporters counter that data centers are essential to the AI boom, generate substantial local tax revenue, and can be made more sustainable.

Patagonia, at the southern tip of South America, is known for jagged peaks, desert scenery, and enormous glaciers. In Argentina's Neuquen province, which lies in that region, Pampa Energia, a major electricity generator, is pushing for a data center beside its Loma de la Lata thermal power plant. The project would use up to 500 megawatts from the nearby Vaca Muerta, one of the world's largest shale gas formations, according to Ruben Turienzo, the company's commercial director for electricity.

Mapuche Indigenous families live in the rural area and have historically been at odds with energy companies. Pampa began studying the plan, which was not previously reported, after receiving inquiries at the start of this year about possible data center projects.

"We started to see that there was somewhat firmer interest," Turienzo said.

Milei's Reforms Attract Investors

Argentina is receiving fresh attention as its macroeconomy steadies after years of high inflation. Under President Javier Milei, who assumed office in December 2023, the country has secured major oil and mining investment through the RIGI incentive regime, which offers tax breaks and regulatory stability, while also strengthening links with Washington.

"Two years ago, nobody would talk about Argentina," said Steve Sasse, vice president for Latin America at datacenterHawk, a Texas-based market intelligence firm.

OpenAI announced last October that it would partner with Argentine company Sur Energy on a clean-energy-powered data center with a potential investment of up to $25 billion and capacity of up to 500 MW. In July, Argentina's communications agency said it plans to create a second fiber-optic cable landing station to make Patagonia more conducive to data centers.

Argentina currently hosts only small data centers, mostly in Buenos Aires, leaving it behind its neighbors. Amazon.com is moving forward with a mega data center in Chile, while Alphabet's Google is building one in Uruguay. In May, Paraguay announced plans for a data center supported by Taiwan.

"Everyone is searching for power, and that's why international developers are looking at Argentina," said Hadassa Lutz, co-founder of Cloud2Ground, a U.S. advisory firm for data centers. "But saying you have power is not enough."

Some investors may hold off until Argentina's 2027 presidential election and are monitoring Milei's proposed Super RIGI, another legislative framework with deeper tax cuts.

"If that uncertainty clears and there is a bankable option in Argentina, investors will take the risk," said Lutz.

Pampa Energia is quoting energy prices to interested parties and aims to reach initial agreements by the end of 2026, Turienzo said. Investors are first seeking a smaller pilot of 20 MW to 40 MW before scaling up. Building the electric infrastructure for 500 MW would cost nearly $900 million, according to him.

Neuquen's cold climate cuts cooling expenses and provides access to both hydroelectric power and Vaca Muerta gas, said Ruben Etcheverry, secretary of the province's development council.

"What we imagine is a data center cluster or ecosystem, where once the first facility is built it will clear away preconceptions and risks," he said.

Etcheverry has received inquiries from parties including FlexDomes, a U.S.-based green data center company seeking investors for a Neuquen data center. The first phase, involving 120 MW of IT load, would cost $1.4 billion and use Vaca Muerta energy, said Gabriel Obrador, who represents the firm in Argentina.

In southern Chubut province, Poland's Green Capital said in July it is planning a data center whose first stage would reach 300 MW and cost $3 billion, with the possibility of ultimately scaling to 3,000 MW, according to Marta Zlotkowska, its head of international development and data centers. It is currently leasing around 501 square miles (1,298 square km) of land south of the city of Trelew to develop wind and solar farms—the project is meant to avoid relying on the national grid—but still needs investors and plans to apply for an investment regime in 2027.

In Buenos Aires province, companies are also looking at sites. Pampa Energia has agreed to provide 30 MW for the first stage of a data center in the free trade zone of Bahia Blanca, a city known for its wind power. Pablo Amarelle, general manager of the zone's concessionaire, said the company has begun building an IT park and expects final investment agreements by late 2026.

Hyperscalers that are leasing space are considering expansion, exploring "possibilities that were previously unworkable," said Ariel Graizer, president of the Argentina Internet Chamber.

Infrastructure Challenges

Despite Patagonia's energy resources and climate advantages, infrastructure and connectivity remain significant obstacles.

"It's not a product waiting for a buyer—someone has to actually build it," said Lutz, the consultant.

Experts caution against treating announcements as equivalent to confirmed projects.

"There is interest, and there are many players, but the project needs to get underway," said Gustavo Castagnino, director of corporate affairs at Genneia, Argentina's leading renewable energy company.

Luis Schilling, Latin America co-chair for iMasons, a U.S. nonprofit linking digital infrastructure professionals, has postponed three times a trip for companies to tour sites in Patagonia. It is now scheduled for February.

"They would be more comfortable if Milei were re-elected," he said.

Indeed, Milei has worked to court Big Tech.

In May 2024, he traveled to Silicon Valley for meetings with Apple's then-CEO Tim Cook, as well as OpenAI's Sam Altman, Google's Sundar Pichai, and Meta's Mark Zuckerberg, pressing them to invest, including in Patagonia. According to an August regulatory filing, billionaire investor Peter Thiel bought a 1% stake in Vista Energy, a leading oil producer in Vaca Muerta.

Argentina "wasn't really on the map before," said Martin Varsavsky, an Argentine who has founded five unicorns, or startups worth more than $1 billion. "It was like planting the Argentine flag, saying, 'Here lies a country with abundant energy and excellent conditions for investment.'"

Altman made the OpenAI project public 17 months later. Sur Energy co-founder Emiliano Kargieman and OpenAI did not respond to Reuters requests for interviews. In August, Kargieman told Bloomberg Linea that he was working with Neuquen province to identify a site, and that "the ball is in OpenAI's court right now to sign the definitive contract and launch the project."

He said he did not know if Argentina's upcoming election was a factor: "That's a question for OpenAI."