Latin America’s White Gold: a Risky Opportunity

By Gustavo A Maranges on September 18, 2022

Lithium field in Bolivia

Lithium is one of the most highly valued metals today and one of the most promising in the future. Its use in the energy sector, in the communications and military industries, has made it the focus of attention of the world powers and the monopolies who lust for it.

Today, as it was 500 years ago, Latin America is once again at the center of a dispute over a valuable mineral. In the past, it was gold and silver and today lithium is the region’s new mineral up for exploitation. However, it is an opportunity that is not free of dangers and threats, ranging from environmental risks to the sovereignty and political stability of the countries in the region where it resides.

Although lithium has been produced commercially since the 1920s, world production has tripled in the last 12 years. Meanwhile, the price has increased almost five fold in two years, reaching almost half a million dollars per ton of lithium carbonate. The main cause of this spike is the increase in the manufacture of electronic components and batteries, where the metal is essential.

While a cell phone requires only one gram of lithium, a car demands 6 kilograms. If we analyze this data in the context of the energy transition that the planet is undergoing, it is possible to conclude that lithium will become the new oil.

According to the International Energy Organization (IEA), by 2040, the demand for lithium will grow 42 times. This will make the supply deficit grow from 430 tons currently to 1.8 million tons by 2030. In other words, having a secure and stable lithium supply is a matter of national security for countries such as the United States and China, which controls most of the world’s production, to such an extent that it is traded in yuan on the international market.

Once again, it seems that Latin America is in a good position to take advantage of the context to accelerate its economic development. Five countries in the region, namely Bolivia, Argentina, Chile, Brazil, and Mexico, account for 67% of the world’s certified lithium reserves. This implies great economic potential if it is controlled and mined by for the benefit of these countries and the region. Bolivia is the country with the largest reserves in the world (21 million tons), while Chile currently produces 22% of the world’s lithium. Meanwhile, Argentina is taking its first steps in lithium production, although it does not have a proper legal framework to take full advantage of the fact that it has the fourth largest reserves (18.3 million tons) in the world.

Mexico and Bolivia nationalized the deposits and created state-owned companies to control the entire industrial process, from research to building value-added chains. However, the scarcity of resources and technology poses a challenge to exploit these natural resources. This reality has led Chile to depend entirely on private companies to produce the mineral. One of President Boric’s campaign promises was to create a state-owned company to produce lithium, but so far, he has not taken a single step in that direction.

This level of concentration of reserves in the region opens up many possibilities. Some speak of a possible “lithium OPEC”, but the proposal seems very distant due to the major differences among the national regulatory frameworks in each state. At the moment, there are no common positions on the matter, which is a problem for the creation of a presumed regional cartel.

The United States, the great power in the hemisphere, is concerned about its lithium supply chain and especially about the fact that Chinese companies are the largest producers. According to a Harvard Kennedy School master’s study, by 2030, China will control 80% of the lithium production chain. The same study states that Argentine reserves are the most recommendable due to the existing deregulation and the low penetration of this market by other companies.

In this complex scenario, Latin America resources are highly strategic. Therefore, statements such as those made by the US Ambassador to Argentina Marc Stanley are not random. According to the diplomat, “the United States wants to have a relationship with Argentina to make it a leader in Latin America. It intends to help with infrastructure, food, energy, and lithium.” This goes hand and hand with the buildup of the US military’s presence in Southern Argentina

On the other hand, there is the example of Bolivia, which, just before the coup d’état against Evo Morales in 2019, was about to sign a mega agreement for lithium production with a German company. At that time, protests exploded in Potosi, one of the regions with the biggest productive potential for lithium in the country, and ended with the coup d’état and the paralysis of the agreement.

History is rich in examples of how far the imperialists are willing to go to dominate the natural resources of Latin America and there is plenty of evidence that points toward lithium being next major struggle.

The only way that the value of lithium can be used for the environmental and social benefits of the countries who have it, is if it is not in the hands of corporations and banks of the North who have no interest in anything other than the inherent profit in this white gold.

Source: Resumen Latinoamericano