Data centers are being built in Argentina's Patagonia, a region characterized by its windswept landscape.

Investors looking for mega data centers are increasingly interested in Argentina's Patagonia. They're attracted by its cool temperatures, renewable energies, shale-gas and vast stretches of empty land.

While tech giants, known as hyperscalers, race around the world to?build servers farms and face roadblocks due to anti-data center campaigns; projects in Argentina's initial stages are being developed without much attention from the public. Argentines are not yet affected by the large data centers. Therefore, there is no backlash against them as there would be in the U.S. where critics claim that they increase utility bills, damage the environment, and strain local power grids. The facilities are said to be essential for the AI boom, they generate significant local tax revenue and can even be made more sustainable.

Patagonia is located at the southernmost tip of South America. It's known for its massive glaciers, jagged mountains, and desert landscapes. Pampa Energia, a major electricity generator in Argentina's Patagonia province of Neuquen is pushing to build a data centre near its Loma de la Lata Thermal Power Plant. Ruben Turienzo said that the data center would use up to 500 Megawatts of power from the nearby Vaca Muerta formation, which is one of the largest shale-gas formations in the world.

Mapuche Indigenous communities live in rural areas and have historically had conflicts with energy companies. Pampa began to study the project that was unreported before, after it received inquiries about possible data center projects at the start of this year.

Turienzo said, "We began to detect an interest that was firmer."

MILEI'S RESOLUTIONS ATTRACT INVESTORS

Attention is focused on Argentina as the macroeconomy has stabilized in a historically high-inflation country. The RIGI incentive system, introduced by President Javier Milei in December 2023 and providing tax breaks, regulatory stability and regulatory stability while strengthening ties to Washington, has helped Argentina attract major oil and mine investments.

Steve Sasse is the vice president of Latin?America for datacenterHawk in Texas, a market intelligence firm.

OpenAI announced in October last year that it would be partnering with the local company Sur Energy to build a data centre powered by clean energy, costing up $25 billion and with a maximum capacity of 500 MW. Argentina's communication agency announced in July that it would create a second landing station for fiber-optic cables to make Patagonia more friendly to data centers.

Argentina has now only a few small data centers located in Buenos Aires. It is behind its neighbours. Amazon.com has begun construction of a massive data center in Chile while Alphabet-owned Google is building one in Uruguay. Paraguay announced plans in May for a new data center, with support from Taiwan.

Hadassa Lutz is the co-founder and CEO of Cloud2Ground a U.S. data center advisory firm. She said, "Everyone wants power. That's why international developers look at Argentina." "But just saying that you have power does not suffice."

Some investors are waiting for Argentina's presidential election in 2027 and watching Milei's proposed Super RIGI - another legislative framework that offers larger tax reductions.

Investors will take on the risk if this uncertainty is resolved and we have a viable option for Argentina.

PATAGONIA LURE

Turienzo said that Pampa Energia quotes energy prices to interested parties, and aims to achieve initial agreements by 2026. Investors want to start with a pilot project of 20 MW-40 MW before they expand. He said that the electric infrastructure needed to support 500 MW would be almost $900,000,000.

Ruben Etcheverry is the secretary of the provincial development council. He said that Neuquen has a climate which lowers cooling costs, and also provides access to hydroelectric energy and Vaca Muerta natural gas.

He said: "We envision a cluster of data centers or an ecosystem where, once the first facility has been established, it will dispel preconceptions about risks and hazards."

Etcheverry received inquiries from FlexDomes, an American green data center firm looking for investors to build a Neuquen-based data center. Gabriel Obrador represents the company in Argentina. The first phase for 120 MW would cost $1.4B and use Vaca Muerta Energy.

Marta Zlotkowska is the head of data centers and international development at Poland's Green Capital. She said that the company plans to build a data centre in Chubut in southern Poland. The first phase of the project will cost $3 billion. Ultimately, the center could reach 3,000 megawatts, she added. The company is leasing land in the south of Trelew, about 1,298 square kilometers (about 501 square miles), to build solar and wind farms. This project will avoid the use of the national grid. However, it needs investors and wants to apply for a special investment regime by 2027.

Companies are also scouring the province of Buenos Aires for sites. Pampa Energia agreed to 'provide 30 MW in the first phase of a datacenter in a city known for its wind energy, Bahia Blanca. Pablo Amarelle said that the concessionaire of the free trade zone has "begun construction on an IT park" and is expecting final investment agreements by late 2026.

Ariel Graizer is the president of Argentina Internet Chamber. He said that hyperscalers who are leasing space, are exploring "possibilities which were previously infeasible".

CHALLENGES IN INFRASTRUCTURE

Patagonia is blessed with energy resources and an ideal climate. However, the infrastructure and connectivity are still obstacles.

Lutz, a consultant, said that the product is not looking for a customer. Someone has to create it.

Experts warn against confusing announcements with projects.

There is interest and there are many players but the project must get underway," said Gustavo Castagnino. He is director of corporate affairs for Genneia. This company, Argentina's largest renewable energy provider, has a large number of interested parties.

Luis Schilling has rescheduled three times a company tour of Patagonia sites. He is the Latin America co-chair at iMasons. The trip is now scheduled for February.

He said that if Milei were re-elected, people would feel more at ease.

Milei has been working to attract Big Tech.

In May 2024 he visited Silicon Valley and met with Apple's former-CEO Tim Cook as well as chief executives Sam Altman from OpenAI, Sundar?Pichai from Google, and Mark Zuckerberg, Meta Platforms, to encourage investment in Patagonia. According to a regulatory filing in August, billionaire investor Peter Thiel purchased a 1% share in Vista Energy, a major oil producer in Vaca Muerta.

Martin Varsavsky is an Argentine who founded five startups worth more than $1 billion. "Argentina was not really on the map before," he said. "It was as if we planted the Argentine Flag, letting people know that this is a country full of energy and with excellent investment conditions."

Altman announced OpenAI 17 months after he first proposed it. Sur Energy cofounder Emiliano Kargieman, and OpenAI have not responded to requests for interviews. Kargieman said to Bloomberg Linea in August that he is working with Neuquen Province to identify a location and "the ball's now in OpenAI’s court to sign the final contract and launch this project."

He didn't know if Argentina’s upcoming elections were a factor. "It's an OpenAI question."

(source: Reuters)