: Anita Pouchard Serra/Bloomberg.
Latin America and the Caribbean have gone through several different cycles with commodities—elevating the region’s importance in the global economy and shaping the region’s socioeconomic development. King sugar is synonymous with the Caribbean as is gold, silver, and, later, tin with Bolivia. In the twenty-first century, lithium, a soft, silvery-white alkali metal, is on the rise. It is regarded as one of the so-called “clean metals,” central to the great energy transition of the twenty-first century, the shift from fossil fuels to renewables. Without lithium, the world of long-life batteries, electric vehicles (EVs), and non-fossil fuel power plants is not a possibility. As the world looks for an energy revolution, Latin America’s lithium triangle—Argentina, Bolivia, and Chile—is estimated to hold close to 60 percent of global lithium reserves.
Latin America and the Caribbean is one of the most dynamic regions for mining in the world—with Australian, Chinese, European, Japanese, Russian, and U.S. companies actively engaged alongside highly competitive local companies. Metals exports play a major role in economies across the region including in Brazil, Chile, Guyana, Mexico, Peru, and Suriname. Latin American governments are keenly aware of the value of such exports, extracting their share of revenues to help fuel economic growth, generate employment, and improve socio-economic conditions. The challenge, however, is finding the right balance between making use of foreign capital and expertise to develop natural resources and maintaining control over those resources. Argentina, Bolivia and Chile are now contending with this very question when it comes to lithium, seen by some as the key to a new “El Dorado” and others as a potential repeat of foreign exploitation.
Chile’s lithium industry is the most mature and developed in the Lithium Triangle. Under Chilean law, lithium is considered a strategic resource and the government does not allow concessions, allowing “only the state, state-owned companies, or private companies operation under partnerships with the Chilean Production Development Corporation (CORFO) to develop the mineral.” Under this regime, only two companies—SQM and Albemarle (a U.S.-based mining company)—have been granted licenses for lithium production.
However, Chile’s industry appears to have stalled—with no new mines opening in the past 30 years. This comes as Chile faces a host of challenges, including resistance from local communities—which object to the intense use of water in a desert region—and a series of scandals, some of which involved SQM and Albemarle. Another issue for Chile’s lithium sector is that the new leftist government of President Gabriel Boric is determined to establish a state lithium company, which will work with private companies and balance mining needs with those of the local communities and the ecosystem. While earlier calls for nationalization were sidelined, the creation of a state lithium company is expected to be a time-consuming process—involving finding partners, exploration, consultation, and eventually building the needed facilities. Chile’s challenge is to clarify its lithium mining policy, a task that requires balancing the government’s concerns over the environment and indigenous rights with the need to generate economic growth and diversify away from the country’s heavy dependence on copper.
While Chile is struggling to develop its lithium policy, Argentina is the most open to foreign investment in the development of its industry, benefiting from a more pragmatic approach marked by a relatively light regulatory role from the state and low taxes. In this sense, Argentina has adopted a different approach from Chile. It does not regard lithium as a strategic mineral to be controlled by the state, but instead Argentina’s legal system allows companies to explore and produce lithium through concessions they own in perpetuity if they meet specified investment rules and regulations. This policy has allowed Argentina to attract foreign companies, including China’s Ganfeng Lithium and Zijin Mining, Canada’s Lithium Americas, and the UK’s Rio Tinto Group.
Argentina is also one of the few countries experimenting with a new technology, direct lithium extraction (DLE). DLE could transform the industry beyond the method that currently dominates the industry, a simple two-year-long evaporation process to separate lithium from the salty brines, which evaporates large amounts of water. The DLE process could recover twice as much lithium and return much of the salt water to its aquifer. While the process is still experimental, it could lead to a revolution in lithium mining.
However, not everyone in Argentina is happy about the country’s growing lithium mining industry—with concerns regarding environmental pollution and an unequal distribution of wealth from lithium sales. Some have even argued that the influx of foreign lithium mining companies could be “neocolonialism dressed up as a green revolution.”
Bolivia is a different story from either Argentina or Chile. It sits on the world’s largest reserves with little to show in terms of exports. Foreign investment is regarded with considerable suspicion due to the country’s historical legacy of mining, which was generally shaped by brutal working conditions, corruption, and boom-bust commodity cycles.
Under Bolivian President Evo Morales (2006-2019), Bolivia made efforts to launch the lithium sector, but the country was generally perceived as non-investor friendly, especially to Western companies. However, over time it has become gradually understood that lithium could provide a new export—though the preference was to establish a state-owned lithium-to-battery production matrix that would take the Andean country beyond its traditional role as an extractor of raw materials.
Under Morales, Bolivia negotiated two joint venture deals, one with Germany’s ACI Systems for the production of lithium hydroxide and to build a factory for electric car batteries and another with China’s Xinjiang TBEA to produce lithium from two salt flats. In 2019, however, protests demanding higher royalties and better repayment conditions for the country from the two companies erupted. Morales canceled the contract with ACI Systems. The 2019-2020 period of political instability left lithium policy drifting.
However, conditions are changing in Bolivia. President Luis Arce, elected in 2020, is signaling that he wants his country to become “the world capital of lithium” and to supply 40 percent of global lithium by 2030. To achieve this, the government has been negotiating with a handful of companies, including Russia’s Uranium One, Chinese battery maker CATL, U.S. start-up Lilac Solutions (backed by German automaker BMW and Bill Gates’ Breakthrough Energy Ventures), and three other Chinese firms (including Xinjiang TBEA, whose earlier deal appears to have quietly faded). The potential exists for Bolivia to become Arce’s lithium capital of the world. The challenge is reaching a national consensus as to whether focusing on attracting and managing foreign direct investment is the correct path for the country. Thus far, Bolivia’s aspirations have been just that, aspirations. More needs to be done to make lithium or battery exports a reality.
Lithium offers both risks and rewards for the lithium triangle countries. Thus far, they have each taken a different track toward lithium development. Argentina has the greatest momentum, tapping both foreign expertise and capital. Chile’s industry continues to play a major role in global markets, but its policy path remains unclear. As for Bolivia, it has the most promise for control over the production process—including battery manufacturing—but its statist model is delivering only meager results. One thing Argentina, Bolivia, and Chile share—the global economy is again knocking on their doors, a development that is only going to increase as the great energy transition gains further momentum. With that comes a growing urgency to decide how to play the game or to participate at all—particularly as the geopolitics related to energy shift into gear.
Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings, Research Fellow at Global Americans, and Founding Member of the Caribbean Policy Consortium. His latest book, The New Cold War, China and the Caribbean, was recently published by Palgrave Macmillan.