Chile’s state-owned lithium push becomes a test of extractive nationalism in Latin America 

Chilean President Gabriel Boric’s push last week to enshrine greater state control over lithium is proving to be the latest test of the resource nationalism that Latin America’s emerging left has been touting but which has struggled to gain traction in practice.

The proposal by the former leader of the student protests to give the government a majority stake in all future lithium projects faces an uncertain path through Congress.

Still, its introduction alone shook one of the mining industry’s most lucrative corners.

The 37-year-old Boric’s push also highlights long-standing regional tensions between governments’ quest to control coveted commodities and future profits and the private sector’s ongoing need for capital and expertise.

“In Chile, this will probably be the most significant case,” said Carlos Pascual, top energy expert at IHS Markit, referring to other regional efforts to exert more government control over the mineral seen as key to a greener future.

He also points to Chile’s preeminent role in the global metals market as the world’s largest producer of copper and number two in lithium.

“This is seen as an opportunity to secure direct revenue for the state, just as many countries in another era decided to nationalize oil,” he added.

Last year, Boric’s leftist counterpart in Mexico, President Andrés Manuel López Obrador, approved a comprehensive nationalization of lithium and later ordered the creation of a new state-owned lithium company, LitioMx.

However, the country is still far from selling its first cargo of the ultra-light metal.

Lithium is a coveted raw material for rechargeable batteries for future fleets of electric vehicles as part of the global shift to green energy.

López Obrador, who reveres the country’s landmark 1938 oil nationalization, justified his policy as its logical extension.

He invoked past abuses by colonial masters and more recent corporations, arguing that only the government could prevent exploitation and ensure the broad distribution of benefits.

The nationalization of the oil industry has proved an attractive means of accessing valuable raw materials and spurring development, even though more is often produced, and more innovation occurs in competitive commodity markets.

STATISTICAL TREND

Chile, neighboring Bolivia, and Argentina are believed to store more than half of the world’s recoverable lithium in unreal salt pans, where the metal is usually concentrated in evaporation ponds.

Bolivia’s ruling socialists have also insisted that the state take the lead in developing its vast but untapped reserves.

However, it counts on help from partners such as Chinese battery giant CATL.

Peru, best known for its copper deposits, could have taken a similar approach to Boric to develop its lithium reserves had former President Pedro Castillo not been ousted late last year.

Castillo, a leftist, had won a narrow victory in 2021, promising to nationalize the ultra-light metal and other minerals, including copper. However, he later softened his position and failed to make good on the promise.

In an interview Monday, Ivan Merino, Castillo’s first energy and mining minister, said that Peru is currently watching from the sidelines as the trend toward commodity nationalism gains momentum.

“It’s almost commonplace now,” he said.

“We will see history being made without participating in it.”

That leaves the exception to that trend, Argentina, as an increasingly likely Latin American destination for new private capital for lithium.

“It’s not because Argentina is doing what needs to be done, but rather because of the upheavals in our neighborhood and the rising global demand,” said Santiago Dondo, the country’s former deputy mining minister.

Argentina, the world’s fourth-largest lithium producer, already has numerous lithium projects about to come online.

Dondo explained that the four political parties in outgoing leftist President Alberto Fernandez’s main opposition coalition recently voted to support the private sector as the sector’s main driver ahead of elections this year.

He pointed out that local control of mining in three key provinces in northwestern Argentina a few years ago helped thwart any moves toward nationalizing the lithium sector at the national level, improving investor sentiment.

However, Dondo worries that another battery technology could eclipse lithium. “We don’t know how many more years we’re going to have this huge window of opportunity,” he said.

“The pace of change in the energy transition is accelerating.”

More: Chile news in English, every day from The Rio Times.