Are There Prospects for a South American Lithium Alliance?

A regional lithium cooperation between Chile, Bolivia and Argentina has become possible amid a period of political harmony appears among the three governments. The three countries constitute the so called lithium triangle, where more than half of world’s lithium reserves reside. As the world moves towards energy transition, the demand for battery metal grows, which prompts the three nations to cooperate on maximizing the benefits. The lines of discussion are currently focused on knowledge sharing on geological, regulatory and scientific aspects. Mexico, which discovered deposits in its Sonora state, is also willing to join the potential alliance.

Argentinian President Fernandez and his Chilean counterpart Boric have taken the first steps by launching the Binational Working Group on Lithium and Salt Flats during the recent Summit of the Americas, held in the United States in early June. In addition, Argentina has been conducting discussions with Bolivia’s state-owned lithium company, Yacimientos de Litio Bolivianos, while Mexico, with its sector at a more nascent stage of development, is also in communications with Bolivia.

The regional dialogues show the increased urgency towards the energy transition and opportunities that come with it.

Chilean government is looking to develop a new institutional framework for lithium production, with a view to strengthen the role of the state and respect the communities living near salt flats. The government also aims to establish a state lithium company as promised by Boric during his presidential campaign. The company would be vertically integrated and cover activities from exploration to manufacturing, but the state needs to learn how to do those.

Chile and Argentina’s Binational Working Group already made its first meeting in June with a focus on scientific-technical cooperation. The second meeting will take place in August. The group works to identify common issues to generate learning. In the medium term, the possible benefits of the relationship could be to achieve a better understanding of appropriate royalties, the environmental issue and the generation of value around lithium.

The three lithium triangle nations are at very different stages in terms of their legal structures, production history and scientific development for lithium production.

Moreover, their current lithium output is well below the potential of the estimated available resource. In 2020, Argentina was estimated to account for about 8% of global production, while Chile was responsible for 22%, with two large projects in operation in each case. Bolivia does not yet have industrial-scale production of lithium compounds.

There are also differences in regulatory framework. In Argentina, production is geared towards promoting the attraction of private investment. In contrast, lithium has specific rules in Chile, where the state is mostly the owner of the concessions, but private companies also have an important role through the signing of tenders. In Bolivia, lithium is also a strategic resource and the state controls the ownership, access, exploitation, extraction and production of the mineral.

Since there are differences at starting points, an OPEC style alliance is considered highly unlikely. OPEC is made up of 13 countries that together account for more than 80% of the world’s petroleum reserves.

The share of Argentina, Bolivia and Chile’s lithium production fell when compared to ten years ago, as other countries have advanced much faster in exploration.

Although there have recently been several investment announcements in Argentina, two projects have started operations so far: one run by the US company Livent, in the Salar del Hombre Muerto in Catamarca province; and another by Sales de Jujuy in the Salar de Olaroz, in neighbouring Jujuy province, managed by the Australian company Orocobre, associated with Japan’s Toyota and the provincial company JEMSE. Both are in the process of expansion. In the near future, the Minera Exar project, owned by Canada’s Lithium Americas and China’s Ganfeng Lithium, with a minority stake held by JEMSE, is expected to come online in the Cauchari-Olaroz salt flat, also in Jujuy.

In Argentina, control over primary production and the salt flats is in the hands of private companies, with the participation of the provinces and the national government through the collection of taxes and royalties. Because of that, Argentina could be the country that hinders greater regional cooperation, as the basis for coordination is public state and social control of lithium reserves and primary production.

While Argentinian government does not aim to have direct control over lithium, it aims to develop domestic presence in the value chain, in accordance with the national industrial tradition and a strong degree of scientific development at the laboratory level, in which Bolivia has some experience.

Bolivia already has a laboratory-scale battery plant, but market-scale production requires the supply of other metals such as nickel, manganese and cobalt. That could be where integration with other countries in the region occurs. While competition in the global battery market is beyond the region’s reach in the short term, one possible destination for local manufacturing could be energy storage projects for rural communities that are not connected to the national electricity grid.

The other Latin American country emerging as a potential player in the lithium market is Mexico, where President López Obrador’s government recently took a step towards lithium nationalization. While the state aims to exercise greater sovereignty over the salt flats, it has neither the technology nor the financing to develop lithium projects.

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