Bolivia Bets on State-Run Lithium Industry
by Emily Achtenberg
The Bolivian government will commit $900 million to develop a state-run lithium industry, according to the Strategic Plan for Lithium Industrialization unveiled by President Evo Morales on October 21. Bolivia will extract and process lithium for commercial use on its own and is prepared to finance the entire chain of production, including a battery plant on Bolivian soil by 2014.
With unexploited lithium reserves estimated by the government at 100,000 million metric tons (70% of the world's total), Bolivia can supply the world's lithium needs for the next 5,000 years, Morales told the press. "With these reserves Bolivia can guarantee a worldwide shift towards cleaner, more ecological, and non-contaminating forms of energy, at a fair, non-speculative non-monopoly price."
These promises have raised great expectations, along with many questions about Bolivia's lithium strategy--including the role and choice of foreign partners, the market for Bolivia's lithium products, and the potential environmental and political impacts of lithium development.
Lithium, the world's lightest metal, is widely used in ceramics, glass, lubricants, pharmaceuticals, and batteries for portable electronic devices. Some analysts believe that worldwide demand could triple by 2020, fueled by the emerging market for battery-powered cars.
According to government estimates, the current value of lithium carbonate and potassium chloride (the basic compounds required for commercialization) that can be extracted from Bolivia's salt flats exceeds $1.8 trillion. The Strategic Plan calls for workers at the government's pilot plant--located at the Uyuni salt flats in Southwest Potosí--to begin to realize this value starting in 2011, by processing lithium carbonate and potassium chloride for export in limited quantities. This requires a complex technology, which Bolivian scientists have reportedly developed, and the Bolivian Mining Corporation (COMIBOL, the state mining company) has recently patented. The government investment required for this phase is $17 million.
Production capacity is scheduled to ramp up starting in 2013 with the proposed development of larger industrial and chemical plants at a cost of $485 million. Full scale battery production is set to begin in 2014, with an additional government investment of $400 million.
The government has rejected proposals to exploit Bolivia's lithium reserves from at least six state and private companies, including firms from Japan, South Korea, and France--countries with substantial expertise in lithium battery and electric car technology. "All the companies, until now, just want to buy our lithium carbonate, but we need investment for industrialization of batteries," Morales said. As later explained by Luis Echazú, COMIBOL's director of lithium resources, the companies expected to be involved in all stages of lithium production, but did not guarantee the necessary financing.
What Bolivia wants, according to Morales, is a "strategic partner," to contribute technology, expertise, and potentially some capital for the battery production phase. In exchange for providing the processed materials and most or all of the financing, Bolivia will insist on majority ownership and control of any joint venture. The government may also consider an alternative "turnkey" approach, in which Bolivia would purchase a fully operational plant from a foreign company.
Are investors willing to partner with Bolivia on these terms? French companies have already turned to alternative opportunities in Argentina (which, along with Chile, is currently the world's major lithium supplier). They might still consider a joint venture for battery production, according to the French ambassador to Bolivia, provided that the lithium carbonate Bolivia produces on its own is of good enough quality. Vice President Alvaro Garcia Linera retorts that "some foreigners" have underestimated Bolivia's capacity. "What the foreign companies didn't want to give us, and wanted to control for themselves, our own engineers have discovered," he says.
One still-interested potential investor is the government of Iran. Less than a week after announcing the Strategic Plan, during an official state visit to Teheran, Morales was widely quoted by Bolivian and foreign press agencies as stating that Iran would partner with Bolivia in the industrialization of lithium as part of a far-reaching agreement for support and technology transfer to Bolivia's agricultural, mining, and industrial sectors. Later, Morales clarified that while Iran has expressed interest in a partnership, no formal commitment had yet been made.
In any case, he stated, any future role for Iran would be limited to the provision of technology for battery production and would not preclude parallel agreements between Bolivia and other countries or private partners. For the present, Iran will provide free scientific and technical research through COMIBOL's Scientific Advisory Committee, similar to past contributions made by Brazil and South Korea tailored to their future investment or market interests. On November 9, Morales announced a new research and technical-assistance agreement with Japan, suggesting that Iran may not be the only potential "strategic partner" on the horizon.
As to the market for Bolivia's lithium and related products, the short-term prospects for the sale of processed primary materials are now better defined. Both Brazil and Venezuela want Bolivia's potassium chloride for fertilizer. A Paraguayan company that makes batteries for electric buses is interested in Bolivia's lithium carbonate. The prospects for marketing lithium carbonate to Japan, South Korea, and China have improved with Bolivia's recent gaining of access to the Peruvian port of Ilo, which cuts the distance to Asian export markets by some 40%.
In relation to the longer-term market, the government appears to have settled on batteries as the goal but has not defined the type of batteries Bolivia will produce. While Morales is aiming for car batteries--the most profitable market--this is much more risky than the more established, less profitable markets for watches, cell phones, and other consumer electronics. Most analysts see little hope of selling high volumes of electric cars in Bolivia or Latin America, whereas the electronics market has considerable growth potential. What's best for global climate justice, in this case, may not be the best economic strategy for Bolivia.
In this regard, concerns continue to be raised about the potential environmental and social impacts of lithium development on the Uyuni region. The region's farming economy and sensitive desert ecosystem are highly dependent on water resources, which could be severely affected by a large-scale industrial mining project. More than 90 active mining concessions currently compete with farmers (and a growing tourist industry) for water resources already strained by a three-year drought. Transnational companies like Sumitomo, owner of the notorious San Cristóbal mine (and part of Japan's new lithium research consortium), exacerbate the situation by not paying for their water, a problem that the government has failed to remedy.
Additionally, the large quantities of toxic chemicals used to process lithium could contaminate the air, water, and soil--as has apparently occurred in Chile's Atacama salt flats. As the Democracy Center notes in its recent report on Bolivia's lithium, "In the name of providing cleaner cars to the wealthy countries of the north, Bolivia's beautiful and rare Salar could end up an environmental wasteland." The government has begun to acknowledge the problem by earmarking $30 million of its total lithium investment for the development of industrial waste-management systems and other measures to reduce environmental impacts.
The contentious issue of how competing national, departmental, and regional interests should be balanced in allocating the potential benefits of lithium development is not addressed by the Strategic Plan. Uyuni's regional peasant federation, which originally proposed the lithium project to Morales, wants to consolidate a majority of the benefits for Southwest Potosí by becoming an autonomous "strategic macroregion," as permitted by the recently adopted autonomies law. Potosí civic and union leaders, who spearheaded a 19-day mobilization last summer around a regional economic-development agenda, believe that the department as a whole is entitled to a majority of the benefits.
The government's recent proposal to allocate just 5% of next year's lithium royalties to the department, and the lack of transparency evidenced in its "double discourse" regarding Iran, have not been well received in Potosí. "We won't permit these talks to continue behind our backs, with agreements that aren't clear," says Celestino Condori, leader of Potosí's civic committee.
The civic committee is now calling for a new Potosí-based entity, which would be more accountable, to take over and expedite the lithium industrialization project. The words of another civic leader last August are beginning to gain new resonance: "The next Potosí mobilization will be in defense of lithium."
Emily Achtenberg is an urban planner and a NACLA Research Associate.