Argentina’s Milei dreams of data centres on the Patagonian steppe

On a remote patch of Patagonian steppe at the foot of a volcano, the roaring wind was drowned out by the whirr of computer servers.

A 12MW data centre, coated in terracotta dust and framed by rocky plateaus reminiscent of Jurassic Park, runs on gas that would otherwise be burnt off as a byproduct of nearby shale oil drilling.

“There’s a huge opportunity here for data centres not to compete with human needs,” said Tomás Ocampo, founder of Unblock Energy, which is planning a facility of several hundred MW to power artificial intelligence in rural Argentina.

Ocampo said he had received a rush of calls from potential US investors and clients after Tuesday’s midterms, as sweeping Democratic victories and successful ballot measures targeting data centres sent tech stocks tumbling and raised fears of the industry stalling. Tech billionaire Elon Musk revived his suggestion of building the installations in space.

“Before we put data centres in the ocean and in space, Argentina makes a lot of sense,” Ocampo said.

Argentina’s libertarian President Javier Milei has cast data centres as the foundation of his plan to make his country an “AI hub”. Milei has advanced a bill with tax breaks for the facilities, pledged no regulation for AI and to allow “non-human corporations”, and befriended tech billionaires such as Musk and Peter Thiel.

Milei has repeatedly highlighted the “abundant energy” and “extensive, inhospitable land” of Argentina, the world’s eighth largest country by landmass, which has just 46mn people.

“We want companies . . . to see Argentina as the most competitive place in the world to set up shop,” Milei said in September.

But the country, which lags far behind its peers in data centre capacity and sits thousands of miles south of many big cities where AI’s end users live, faces enormous hurdles to achieve Milei’s ambitions.

His government’s approach has sparked pushback from opponents who accuse him of wanting to turn the country into a “laboratory” for tech companies.

The opposition has held a hearing in Congress over Thiel’s links to Argentina, after he bought a mansion in Buenos Aires, took closed-door meetings with Milei’s team and acquired a stake in a local oil company. Massive protests forced Milei to abandon a legislative effort to relax Argentina’s restrictions on foreign land ownership in August.

Civil society groups say data centres would worsen water stress in Patagonia and generate few jobs, and that the incentive scheme would severely restrict the state’s ability to intervene over concerns around resource scarcity.

“The benefits are really excessive,” said environmental activist Oscar Soria. “We should be much clearer about what companies give in return.”

Decades of economic volatility and under-investment in the electric grid have left Argentina with less than 40MW of data centre capacity, far behind Chile’s 400MW. US tech giants have opted for Uruguay, Mexico and Brazil to host their first data centres in Latin America.

Argentina’s flashiest project may have stalled. Milei last October announced plans for a 500MW data centre to serve OpenAI, but no further developments have been released.

Sur Energy, the Argentine infrastructure company leading the project, told local media in August that “the ball” was “in OpenAI’s court”. But an OpenAI spokesperson told the FT it was only “a potential offtaker” and that “any eventual purchase would depend” on Sur Energy developing the data centre.

Milei’s dream may still become reality, however, as Argentine energy companies begin pitching their shale gas production to developers. Pampa Energy said in October it has 800MW of energy capacity available in Neuquén province should a data centre want it. Polish company Green Capital has announced a $3bn data centre in the province of Chubut.

Approval of Milei’s incentive regime — which has passed the lower house and is awaiting Senate backing — should unlock investment, said Raimundo Diaz, executive vice-president at Vistra Global Solutions, a US-based business services group helping developers build data centres overseas.

“Argentina is one of the only countries with few restraints to implement large-capacity data centres in a short period of time,” he said. “It’s coming late to the party, but it has huge potential to catch up.”

Advocates say putting data centres in Patagonia, a region of mountains, steppes and forests that covers a third of Argentina, would resolve a mismatch between the nation’s energy wealth and its demand.

Oil production has more than doubled since 2024 at Vaca Muerta, a Patagonian shale field the size of Belgium. But gas output has barely increased due to a lack of transport infrastructure. Unblock says Vaca Muerta drillers waste some 600MW of potential electricity generation through flaring — where unwanted gas is burned off after being released during oil production — and up to 3GW worth of gas is being left in the ground due to lack of demand.

“We bring the data centre to where energy is overflowing,” Unblock’s head engineer Miranda Marrazzo shouted over the din of her servers.

Germán Serrano, a tech entrepreneur and former executive at state oil group YPF, argued it would be “more efficient” to “build the data centres in Vaca Muerta and transport photons around the world than to transport energy to data centres”.

Remote renewable energy sources also abound, including Patagonia’s fierce winds and year-round sun in northern regions. Limited grid capacity means almost 6GW of renewable projects are awaiting approval or face constraints on their power generation.

Argentina’s far-flung location will limit its role in powering the elements of AI that need to run on data centres close to end users. But developers said Patagonia was attractive for the energy-intensive work of training models, which can be done remotely.

Still, the country’s ageing electric grid is a major obstacle to the data centre build-out. In September, the government said new large projects in any industry must provide infrastructure for 80 per cent of their electricity to avoid overwhelming the existing capacity.

Meanwhile, Soria, the activist, warned that developers who see Patagonia as “empty” were miscalculating.

“It’s probably the Argentine region with the biggest history of local communities blocking projects,” he added, noting that Vaca Muerta gas projects have faced pushback from indigenous Mapuche residents.

Daniel Yankelevich, of think-tank Fundar, argued that Argentina should target investments where Argentine businesses add value rather than just providing land and energy, such as in its regionally large software and tech services industries.

“Data centres should be an enabler, not the endgame,” he said.