-Analysis-
Lithium is the new mineral of the future, for its utility in sectors ranging from energy reactors to the millions of electric cars set to dominate the mobility market. Some call it: “white gold,” and it has in turn boosted the global standing of producer countries, notably in Latin America, and given them a privileged negotiating seat with industrial powers keen to assure their lithium supplies.
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Bolivia is one country with abundant supplies and possibly the world’s biggest deposit in the Uyuni salt flat or Salar de Uyuni in the department of Potosí. Its reserves last July were estimated at around 23 million tons.
The country’s socialist government, headed by President Luis Arce, has made it clear that he prefers to do business with countries opposed to the United States and its allies, notably China and Russia. Arce hopes these trading partners will provide it with cash and innovative technologies for the extraction and production facilities it needs to become a mass-scale lithium supplier.
In mid-December 2023, Bolivia signed an agreement with Russia’s Uranium One Group to build the first semi-industrial, Direct Lithium Extraction (DLE) plant. The firm is slated to invest $450 million over time to exploit Uyuni.
Karla Calderón, head of YLB, Bolivia’s state lithium firm, is optimistic the project will be finished over three phases, and eventually produce 14,000 tons annually of battery-grade lithium carbonate.
As Patricia Vásquez, a journalist and sector researcher at the Wilson Center, notes: “Governments generally lack the know-how and sufficient technology to exploit this resource.”
A national asset
In mid-January, YLB signed another agreement to install a second, pilot DLE plant at Uyuni, with the backing of the Chinese consortium CBC. Calderón and President Arce say the projects are part of the country’s industrialization drive, while CBC’s rep in Bolivia, Ginghua Zhou, said his firm was the right partner here, given the six million or more vehicles already running on its lithium batteries.
Arce wants it to fuel an economic bonanza like Evo Morales’ gas boom.
The Arce government wants lithium to become a national and developmental asset, says Jorge Antonio Chávez, an Asia specialist and lecturer at Peru’s San Ignacio de Loyola University. Lithium, he says, has become more important as revenues from natural gas have dropped, and Arce wants it to fuel an economic bonanza like the gas boom that lasted from 2006 to 2019, under his predecessor, also a socialist, Evo Morales.
Vásquez says the Russian and Chinese deals were not entirely transparent, and DLE plants were not yet a tried-and-tested technology. “While direct lithium extraction is faster and uses less water, globally it has yet to be developed on a commercial scale,” she says.
State predominance in the sector
While Bolivia favors foreign investments in lithium, the sector is not freely competitive as in neighboring Argentina. The state is a partner at all stages of the production chain, as happens with oil and gas in energy producing countries. The former head of the country’s central bank, José Gabriel Espinoza, calls this a key factor in deterring foreign investors.
Espinoza told América Economía that Bolivia is above all looking for partners that lend money to build plants and perhaps operate them. “But they absolutely do not want partners to share the risks. So there is no investment and effectively, they’re loans.”
He fears this may be another “failed bid” to simply squeeze money from a resource as the state did with gas. With hydrocarbons, the sector’s maturity allows states to obtain considerable revenues, but this was not yet the case with lithium.
The lithium industry in Bolivia, in its current phase, requires “a lot of investment in exploitation technology,” Espinoza says, and the Arce government’s nationalistic premise “is creating serious disincentives in developing the sector.”
The Socialist government will ultimately fan unrealistic expectations among Bolivians by touting lithium as a new manna, and Espinoza believes social movements in the region of Potosí could mount protests if they fail to see benefits similar to those gas has yielded in other regions.
Bolivia should not become entirely dependent on Russian and Chinese firms and shut out the West.
Existing pressures on the private sector aside, landlocked Bolivia also lacks the infrastructures needed to take lithium to Pacific or Atlantic ports on a competitive scale. Lithium exploitation will also need a legal framework. “We don’t know each actor’s responsibilities regarding water supplies for example,” says Espinoza, “nor do we have an agreement with that region, as Potosí has been historically a highly restive region and jealous of its resources.”
Chinese and Bolivian codependency
The Chinese regime’s interest in Bolivian lithium is no accident. Asia specialist Chávez says it needs energy far beyond its present consumption of oil, even if it is itself the world’s third biggest producer of lithium. Bolivia is an attractive trading partner, especially as it shares China’s multipolar perspectives on running the world.
Yet, Chávez warns, Bolivia should not become entirely dependent on Russian and Chinese firms and shut out the West. Its precarious economy, forex shortages, rising public debt and higher risk rating should all prompt greater pragmatism.
Regarding foreign currency, the Bolivian government is open to trade using the yuan. Its Economy minister, Marcelo Montenegro, recently announced the state is envisaging letting a “large Chinese investment bank” operate here, to facilitate transactions alongside Bolivia’s state-owned Banco Unión.
This, says José Gabriel Espinoza, suggested both lack of transparency and of an overall plan on hard currency reserves. The state might exchange gold from its international reserves for yuans, Espinoza says, but at a “very high political cost for the government. Because commercial banks have no business dealings or ties with Chinese banks, which means they could not access the yuans.”
The government’s lithium gamble may be a bid to lift the economy ahead of general elections scheduled for 2025. Morales has accused Arce, who was once his finance minister, of betraying Socialist ideals.
