production in Argentina and Bolivia needs foreign investment to ramp up

Lithium, extremely sought after for manufacturing electric batteries, finds 65% of the world’s resources in Latin America, in the “lithium triangle”, in Bolivia, Chile and Argentina. However, these countries still struggle to benefit from it. Our correspondents on site describe the reasons.

In Argentina, in an unstable political and economic context, the government is betting big on this white gold which could help redress 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 manner has been disappointed and the government is changing strategy.

In Argentina, President Milei seeks to gain momentum to develop the sector

In Argentina, the arguments for attracting investors are based primarily on the enormous potential of its natural resources. Argentina has 20% of the world’s reserves with 3 million tonnes of lithium. Current deposits are found in the northwest of the country. This is where lithium is mined and then exported mainly to Asia, the United States or Canada. Furthermore, costs are relatively low due to the evaporative extraction method. A much cheaper method than the traditional method of rock extraction as in Australia for example.

For Javier Milei, we must not stick to the extraction of raw materials, but move towards industrialization, with the manufacturing of components or batteries to generate added value. But for that you need money. This is why Milei is making more trips abroad to meet with potential interested parties. The best example would be Elon Musk, the multibillionaire owner of Tesla, one of the leaders in the construction of electric cars, with whom Milei met in Texas last April.

To offer investors favorable conditions, the government tabled an economic deregulation bill, called the “Bases Law”, which includes a special chapter on investments of more than 200 million dollars. The text notably proposes a reduction in income taxes, greater freedom of imports and the end of monetary control on investment. The project has already been approved by deputies and must be debated 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 just suspended mining activity for non-compliance with environmental standards. To extract the lithium, a dam was built, generating drought in the area, which affects the inhabitants and the ecosystem. Investors, for their part, are cautious firstly, because of the lack of infrastructure in the northwest of the country and because despite the efforts of the ultraliberal president to transmit to the world a message of future economic prosperity, the results of its economic plan remains uncertain. Argentina is a country today that offers neither predictability, nor competitiveness, nor fiscal stability.

In Bolivia, the model of a large national company is running out of steam

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 carried out by a Bolivian public company. The objective 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 had already signed agreements with two Chinese companies and a Russian company to come and 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 from the project. For example, in 2022, Bolivia exported $38 million worth of lithium carbonate. This is 17 times less than Argentina and 200 times less than neighboring Chile. In 2016, the Bolivian vice president declared 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 partly recognizes the failure of this 100% Bolivian strategy. Gonzalo Mondaca, researcher specializing in lithium extraction in Bolivia, highlights the following observation: “The Bolivian state no longer has enough money and has 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 private exploitation model similar to Chile and Argentina, although with certain differences. First, the Bolivian state claims that international companies will have to respect conditions that will maintain Bolivia’s sovereignty over lithium – although at the moment it is unclear what those conditions are. Then, the Bolivian public company responsible for lithium continues to operate and carry out 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 in Bolivia takes off. These companies come in to do research and exploration. It will still be several years before they exploit Bolivian lithium on an industrial scale.