Bolivia is precious about its natural resources, none more so than lithium. It has historically been reticent to allow big foreign multinationals to participate in the development of mineral. It is a crucial component in global supply chains, fertiliser products and a critical ingredient in high-performance batteries. Bolivia contains the world’s largest deposits. However, a chronic lack of domestic technical expertise – the kind needed to develop its reserves into lucrative exports – may encourage the government to adopt a more open-minded approach toward foreign investors.
A Bolivian mining expert explained, “Populist left-leaning administrations have emphasised resource nationalism which tends to play well with the domestic audience who are often suspicious of the motivations of foreign multinationals.”
“Populist left-leaning administrations have emphasised resource nationalism which tends to play well with the domestic audience.”
Mining expert, Bolivia
It is Bolivia itself that loses from such hostility. The country’s lithium enjoys significant comparative advantage – it is made from brine found on the surface of salt flats – this matters because extraction costs are significantly lower. However, the evaporative processes required for extraction are environmentally damaging and technically complex.
Faced with such technical complexities, the administration has started to moderate its tone. Since early last year, the government has progressed the selection of a “foreign partner” to develop a direct lithium extraction project. In plain language, this means the large-scale industrialisation of lithium development and export. In December, Bolivia’s Minister of High Technologies Álvaro Arnez announced that a group of eight companies had made it through to the final round of selection, including the American Lilac Solutions, Argentina’s Tecpetrol and China’s Catl Brunp and Cmoc.
The state-owned Yacimientos del Litio Bolivianos (“YLB”) will be the local operator of the direct extraction project. The company exported almost USD 23 million of lithium products last year, mainly to neighbouring Brazil, a small amount but progress, nonetheless.
Over the last year, YLB has built a potassium chloride plant and the company is building a lithium carbonate plant in the salt flats of Uyuni where the company claims there are some 21 million tons of lithium. Arnez said that in selecting Bolivia’s strategic partner for the lithium industry, the government will consider overall costs, technological advantages and environmental credentials.
Bolivia’s President Luis Arce recently announced an investment of more than USD 800 million in plants of lithium hydroxide and cathode materials which will make manufacturing high-power batteries markedly more efficient. It is a sign that the administration is looking to reassure markets worried that lithium exploration and development plans had stalled after former president Evo Morales was ousted from power in 2019. At the time, the government had signed preliminary contracts with Chinese and German companies.
Bolivia’s populist political class has been closely attuned to the grievances of local communities who say investment rarely translates into employment opportunities and improved living conditions. The mining expert said, “Local communities have long-rejected the central government’s authority to negotiate with foreign companies and this includes mineral extraction. Despite years of promises, large-scale production has yet to begin in large part because of local political dynamics.”
“Local communities have long-rejected the central government’s authority to negotiate with foreign companies and this includes mineral extraction.”
Mining expert, Bolivia
As Bolivia seeks to consolidate its position as a key player in global battery supply chains, the expectation of significant windfall will entice the administration to pursue a more business-friendly approach.