Batteries not included

With a new operating model, Bolivia dumps the Germans in favour of the Chinese to exploit its lithium reserves.

Luis Arce, President of Bolivia, recently oversaw the signing of a USD 1 billion lithium exploration contract between Yacimientos de Litio Boliviano (“YLB”), the state-owned lithium production company, and the Chinese firms Contemporary Amperex Technology Co. Limited (“CATL”), and CMOC Group Limited (“CMOC”). The deal, which will allow the country to exploit its lithium resources, has been criticised by the opposition and the local business community for its risk of “de-nationalising” the domestic lithium industry. 

Bolivia’s nascent lithium industry has had a tumultuous start: the exploitation of several sites was originally awarded to Germany’s ACI Systems in December 2018, which committed to invest USD 1.3 billion. However, after the controversial elections in October 2019, which led to the resignation of the then President Evo Morales, the Bolivian government scrapped the deal leaving the industry in limbo. 

Fast forward to the present day and President Arce reported that exports are expected to begin in the first quarter of 2025 but there was no explanation of how such a rapid process could be delivered. A former vice-minister of energy in Bolivia was surprised at the government’s change of position, “Arce announced a few weeks ago that Bolivia is entering a new phase of lithium exploitation. This announcement was made in conjunction with a Chinese consortium. Reading between the lines, it was understood that the Chinese company was going to export lithium, something that until now had been prohibited.” 

“Arce announced a few weeks ago that Bolivia is entering a new phase of lithium exploitation. This announcement was made in conjunction with a Chinese consortium. Reading between the lines, it was understood that the Chinese company was going to export lithium, something that until now had been prohibited.” 

A former vice-minister of energy, Bolivia

This announcement wasn’t just a surprise it was a complete change of operating model for the country’s lithium industry. A former Bolivian ambassador explained, “It’s a 180° turn. The Chinese company is going to own land, exploit lithium and then export it. So, after more than 15 years of trying, Bolivia has failed in its industrialisation model for lithium and will now export huge quantities of the rare earth metal in the form of carbonate and perhaps hydroxide. The shock is that this will be done by the Chinese companies which today is expressly forbidden by law; only YLB is able exploit, produce, and export the raw material.” 

The Arce administration has ambitions to expand Bolivia’s lithium industry throughout the country to accelerate the exportation value-added lithium. It was under this new national strategy that the government launched, in 2021, the tender for the projects of the Uyuni, Pastos Grandes, and Coipasa sites that were recently awarded to the CATL, its subsidiary BRUNP, and CMOC. Nonetheless, Arce affirmed that YLB will remain in full control over the extraction, transformation, and commercialisation processes, to respect the current regulatory framework.  

The former Bolivian ambassador had a more cynical perspective, “The government is desperate for dollars. And one of its bailout plans is lithium. The Social Economic Development Plan 2021-2025 states that in 2025 it will achieve revenues of US$ 3 billion. This is almost impossible to achieve. The bill that the government has in the National Assembly now (promoted by a congresswoman from Oruro), is seeking to radically change the regulatory framework because if not, it can’t be done. It seeks to liberate the 28 exclusive exploitation areas that were established by law in 2007. If this is achieved, only with the authorisation of the Mining Administrative Jurisdictional Authority (“AJAM”) will it be possible to exploit lithium.” 

The country’s regulatory framework is likely to change soon after the committee of plural economy of the Bolivian National Assembly prepared a new legislative proposal in March 2023, the details of which are unknown but will be debated in the coming months. 

What is clear, according to a technical lithium expert, is that the government is in a hurry, “The government intend to let the Chinese company use direct lithium extraction, even though there is not much information on this method. What is certain is that it is a fast process: a matter of days versus 18 months for the evaporative method.”  

In this rush to commercialise Bolivia’s lithium, which is being led by President Arce’s son, certain corners are being cut, reported the former ambassador, “It’s a new model. Zero transparency, zero respect for democratic institutions. Every company that wants something must meet with Arce’s son. Eight companies were interested initially, after seeing this application process two dropped out. Another one got discouraged because the current vice-minister told them that they had to create a subsidiary company in Bolivia but that he wanted 15% of the shares, with dividends payable in an offshore account in Panama. Such is the level of corruption. In the end, nobody knows why they chose the Chinese company. You know what I mean, nobody. There was an American company [EnergyX] that had already done tests and everything and they were disqualified because they submitted their papers 10 minutes later than the closing time. Do you really think that can happen? For million-dollar contracts.” 

“They [the government] are going to parcel out the Salar de Uyuni to several companies, without any care for the environment. They are desperate for money so they will start exporting fast to bring in foreign investment, but there will be no transparency, accountability, or certainty.”

Local activist, Bolivia

A local activist was devastated by the government’s change of lithium strategy, “The Chinese company was the winner, but it doesn’t even have a contract yet, just an agreement. The law has not been changed yet but we expect it will be and then the government will speed up the process of bringing in more companies. They are going to parcel out the Salar de Uyuni to several companies, without any care for the environment. They are desperate for money so they will start exporting fast to bring in foreign investment, but there will be no transparency, accountability, or certainty.” 

Meanwhile, international investors are watching in the hope that the development of these projects will include additional opportunities such as the provision of infrastructure construction, technological equipment, and water and waste management services, among others. 

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