For the EU, lithium could turn Latin America into the new Persian Gulf. But there is a risk of a “curse”
On the last weekend of March, the European Union’s (EU) High Representative for Foreign Policy, Josep Borrell, participated in the Ibero-American Summit in the Dominican Republic.
In an interview with EFE, he considered that Latin America is being “underestimated, undervalued.”
For the diplomat, the region “could be the new Persian Gulf […] in a world that is going to give up hydrocarbons to enter into sustainable energy,” in reference to the “enormous lithium reserves,” for which the countries involved “are already organizing among themselves to ally to face together the international demand that they will receive.”
The so-called Lithium Triangle, formed by Argentina, Bolivia, and Chile, corresponds to about 60% of world metal reserves used in electric car batteries.
In the context of the search for changes in the energy matrix, the three countries have great possibilities for growth in the coming decades, but the question remains.
As there was an “oil curse” – that is, many countries with large reserves became hostages of the commodity and failed to generate social and economic development for their populations – is there a risk of a “lithium curse”?
Last year, British magazine The Economist pointed out that Bolivia is already living under a “lithium curse” because it cannot exploit its large reserves and remains one of the poorest countries in the region.
“Potosí is the poorest region in Bolivia, the second poorest country in South America. More than two-thirds of the Potosinos live in houses made of mud bricks or earth.”
“When the red clay turns to mud in the rainy season, the region’s unpaved roads become impassable.”
“Its residents lack adequate health care and schools: a quarter of women still give birth at home; almost 40% of adults have only attended elementary school, and almost 20% have never been to school,” the publication pointed out.
Of the three countries in the Lithium Triangle, Bolivia is the one that exploits the resource the least.
In Chile, companies have been exploiting the reserves since the early 1980s.
In January, President Boric announced that his government intends to have a state-owned company for the sector.
In Argentina, where the provinces grant mining concessions, a total of 38 projects at various stages of development are concentrated in Jujuy, Salta, and Catamarca.
The governments of the three provinces agreed in February to implement mechanisms for companies in the sector to allocate a percentage of their production to industrialization in the country.
Meanwhile, in the Bolivian department of Potosí, residents have protested for the Chinese consortium CBC to improve social counterparts in the project to exploit the Salar de Uyuni, expected to go into operation in the coming months.
In 2019, a partnership between a Bolivian state-owned company and a German company was broken up for the same reason.
“Bolivia, of the three countries, is the most delicate link because despite having the largest reserve in the Triangle, it is the one that the least explores; it has the lowest production.”
“It has some difficulties; the cost of extraction is more expensive, there is no exit to the sea, it is a special case,” said Nora Keite Sampaio, a specialist in advanced geopolitical studies and geography professor at Mackenzie Group, in an interview to Gazeta do Povo.
A LITHIUM OPEC
The governments of Argentina, Bolivia and Chile have been discussing the possibility of creating a mechanism like the Organization of Petroleum Exporting Countries (OPEC) to control supply and prices.
“It is the only way for them to have the power to decide the value, but I understand that this is still very far from happening because the fleet of electric cars is still very small, and the cost of this product is still very high for the final consumer.”
“These countries will not have the negotiation power so soon to create an organization that will assume the role OPEC assumed [regarding oil] in the 1960s.”
“Therefore, the price will still come from who is going to buy, from the largest consumer centers,” pondered Sampaio, who highlighted the need for planning so that the “lithium curse” does not come true.
“If there isn’t a government project that manages to allocate resources to promote social gain and development, this really won’t be possible. I am not talking about nationalizing or concentrating all the resources.”
“But if a country, a people do not mobilize and participate directly, it will be held hostage by commodity exploitation projects”, warned the specialist.
“If these projects become dependent on commodities and hostages of the global market because if it is a commodity, it is quoted internationally, I don’t see a story very different from what happened in these other [petroleum producing] countries,” she added.
CHINESE PRESENCE
China, which already seeks the South American lithium market (in addition to the CBC consortium in Bolivia, the Chilean company SQM has had among its shareholders the Chinese Tianqi since 2019), must wage a dispute with the West for local resources.
“When I talked about Bolivia, the high cost of extraction, with no outlet to the sea, today China is the only country able to do lithium exploration with enough commercial advantage. The processes it finances make this cost cheaper.”
“The other countries still have very high costs,” said Sampaio.
“Olaf Scholz came here for this [the German chancellor was in South America at the beginning of the year, and lithium was one of the focuses of his visit], to try to establish partnerships, because as China has already captured a large market in several areas in South America, there is a fear of the Western countries that this will advance.”
“Lithium is just one more item in the trade war, in this context of dispute for a new world order.”
With information from EFE
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