Lithium, highly sought after for the manufacture of electric batteries, finds 65% of its global resources in Latin America, in the “lithium triangle”, in Bolivia, Chile and Argentina. However, these countries are still struggling to benefit from it. Our correspondents on the spot describe the reasons.
In Argentina, in an unstable political and economic context, the government is betting big on this white gold, which could help improve the situation. However, investors are still waiting for the country to stabilize to be reassured. As for Bolivia, which has the largest lithium resources in the world, the desire to exploit this metal in a sovereign way has been disappointed and the government is changing its strategy.
In Argentina, President Milei seeks to gain momentum to develop the sector
In Argentina, the arguments to attract investors are based mainly on the enormous potential of its natural resources. Argentina has 20% of the world’s reserves with 3 million tons of lithium. The current deposits are located in the northwest of the country. Lithium is mined here and then exported mainly to Asia, the United States or Canada. In addition, costs are relatively low due to the evaporation extraction method. A much cheaper method than the traditional method of stone extraction such as in Australia.
For Javier Milei, we must not stick to the extraction of raw materials, but move towards industrialization, with the manufacture of components or batteries to generate added value. But for that you need money. That’s why Milei makes more trips abroad to meet with potential interested parties. The best example would be Elon Musk, the multibillionaire of Tesla, one of the leaders in the construction of electric cars, with whom Milei met in Texas last April.
In order to offer investors favorable conditions, the government presented a bill on economic deregulation, called the “Law of Basics”, which includes a special chapter on investments of more than 200 million dollars. The text in particular proposes a reduction of income taxes, greater freedom of imports and the end of monetary controls on investment. The project has already been approved by deputies and must be discussed next week in the Senate.
Resistance to lithium exploitation and production projects comes mainly from environmentalists. In the north of the country, for example, the courts have recently suspended mining for non-compliance with environmental standards. To extract the lithium, a dam was built, which generates drought in the area, which affects the inhabitants and the ecosystem. Investors, for their part, are cautious first, because of the lack of infrastructure in the north-west of the country and because despite the efforts of the ultra-liberal president to convey to the world a message of future economic prosperity, the results of his economic plan remain. uncertain Argentina is today a country that offers neither predictability, nor competitiveness, nor fiscal stability.
In Bolivia, the model of a large national company is running out
In Bolivia, since 2008 and the launch of the project around this metal, the idea of the different governments was simple: from the extraction of lithium to the production of batteries, everything would be done by a Bolivian public company. The goal was to benefit Bolivia and the population from lithium revenues, rather than entrusting the extraction of this resource to foreign multinationals.
But last year Bolivia already signed agreements with two Chinese companies and a Russian company to come exploit lithium. And last week, 21 foreign companies were authorized to work on Bolivian soil. The main reason for such a turnaround is the lack of economic results of the project. For example, in 2022, Bolivia exported $38 million worth of lithium carbonate. That is 17 times less than Argentina and 200 times less than neighboring Chile. In 2016, the Bolivian vice president stated that “By 2020, Bolivia will be the Saudi Arabia of lithium marketing”. The Andean country is still very far from it.
With the imminent arrival of these international companies, the State partially recognizes the failure of this 100% Bolivian strategy. Gonzalo Mondaca, a researcher specialized in lithium extraction in Bolivia, highlights the following observation: “The Bolivian state no longer has enough money and realized that developing its own knowledge and technology would take decades, so it needs international players who invest money.”
Bolivia therefore intends to adopt a model of private exploitation similar to Chile and Argentina, although with certain differences. First, the Bolivian state claims that international companies will have to respect conditions that will preserve Bolivia’s sovereignty over lithium – although it is currently unclear what those conditions are. Then, the Bolivian public company responsible for lithium continues to operate and implement projects. This is perhaps the biggest difference with Argentina and Chile, as there is no state-owned lithium company in these two countries.
With the arrival of these international companies, the researcher reminds us that we must remain patient before lithium production takes off in Bolivia. These companies come to research and explore. It will be several more years before they exploit Bolivian lithium on an industrial scale.