Lithium is the new "Eldorado" in the Andes


Ivan Alvarado / Reuters

The world needs this soft metal more than ever, South America knows it and cautiously welcomes the neo-conquistadors.

Five hundred years ago, Europeans traveled deep into South America in search of a gold-rich city. Today's Eldorado is where the Chinese, Europeans and Americans are now rushing in search of contracts for one of the most valuable metals of the 21st century: lithium.

So to the "Andean Triangle" – Peru, Bolivia and Colombia, enriched by cocaine production and trafficking – a new "Lithium Triangle" was added, promising big profits.

"The Lithium Triangle" is a lithium-rich region in the Andean southwest corner of South America, encompassing the borders of Argentina, Bolivia and Chile and forming a geographic triangle of lithium resources beneath their salt flats. It accounts for 63% of the planet's lithium reserves.

The U.S. Geological Survey (USGS) estimates that of the world's total of 86 million tons of explored lithium, Bolivia contains 21 million tons, Argentina 19.3 million and Chile 9.6 million. To these we can add Peru and Mexico, which have another three million tons, but they do not make weather.

Scientists and experts prefer to compare the dramatically increased role of lithium in this century to the "oil of the 20th century," rather than to a dangerous drug. And not participating in the lithium business is akin to the world business community refusing to develop Middle Eastern oil.

And while oil is called "black gold," lithium is called "white gold," not so much because of its silver-white hue, but because of its market value. According to the "World Lithium Market Report 2023," the global market for the metal will grow from $6.2 billion in 2022 to $7.25 billion in 2023 to $13.85 billion in 2027 at an average annual growth rate of 17.5%.

This metal is key to the production of batteries, components in the nuclear industry, space and transport industries, pharmacology, and even nuclear power. Lithium is essential for the production of aluminum semi-finished products, electronics, and laser technology; it is needed for smelting and alloying aluminum, increasing the plasticity, strength, and recovery of metals.

Energy analysts predict that by 2040 every second car sold in the world will be electric. So Tesla is no longer an "oddball" electric car manufacturer. Today, almost 40 automakers around the world make electric cars. And General Motors, Mercedes, BMW, Jaguar, and Volkswagen are all planning to switch to electric cars by 2035. To meet the demand, they need lithium batteries, a lot of lithium batteries.

"The lithium boom» is good news for South America. Argentina and Chile together produced nearly 30 percent of the world's lithium in 2021.

Chile's lithium industry is the most mature and developed, considered a strategic resource, and the government does not allow concessions, allowing "only the state, public companies or private companies to work in partnership with the Chilean Production Development Corporation (CORFO) to develop the minerals."

Chile's lithium production quadrupled between 2009 and 2022, and on February 1, 2023, Chile took the first step toward nationalizing some of the world's largest copper and lithium mines, and on April 21 Gabriel Boric, president of left-wing Chile, announced plans to create a state-owned lithium production company. And already on May 7 he paid the price for this by losing a referendum on the future constitution to the right-wing forces that control the Chilean economy.

While Chile is struggling to develop its lithium policy, Argentina is the most open to foreign investment in the industry, benefiting from a more pragmatic approach characterized by a relatively light government regulatory role and low taxes.

Argentina does not consider lithium to be a strategic metal under state control, but instead Argentina's legal system allows companies to explore and produce lithium through perpetual concessions they own under investment rules and regulations.

This policy allowed Argentina to attract foreign companies, including China's Ganfeng Lithium and Zijin Mining, Canada's Lithium Americas, Britain's Rio Tinto Group, and Russia's Uranium One Holding N. V. (part of Rosatom).

Bolivia differs from Argentina and Chile in having the largest reserves in the world, but seems in no hurry to become a major player and still has little to offer. The lithium deposits are almost entirely in the hands of the state. Foreign investment here is viewed with great suspicion because of the country's historical mining heritage, which has generally been shaped by political instability, brutal labor exploitation, corruption and commodity boom-and-bust cycles.

Now this is changing. President Luis Arce, elected in 2020, wants his country to become the "lithium capital of the world" and provide 40 percent of the world's supply of "white gold" by 2030. To achieve this, the government is negotiating with several companies, including Russia's Uranium One (part of Rosatom), Chinese battery maker CATL, and U.S. startup Lilac Solutions (backed by German automaker BMW and Bill Gates' Breakthrough Energy Ventures).

Demand, as we know, not only determines supply, but also causes conflicts. Today, Australian, Chinese, European, Japanese, Russian and American companies are active in the region, along with highly competitive local companies.

First and foremost, the lithium race has directly affected the interests of the United States and China, both countries seem determined to win the lithium war in the fight for new energy sources.

Chinese chemical companies now account for 80% of all global lithium battery raw material production, and 101 of the 136 lithium battery plants are located in China. China is rapidly buying up stakes in lithium mining facilities in Australia and South America.

"The high-capacity [lithium] battery market may be one of the most important to our country's interests," said U.S. National Security Adviser Jake Sullivan and National Economic Council Director Brian Deese. The Biden administration appointed Special Presidential Envoy on Climate John Kerry to coordinate cooperation with Argentina, Bolivia and Chile in the lithium industry. However, his work in this field is complicated by the fact that these countries are ruled by leftist governments that have "gringo-idiosyncrasies" and are not inclined to follow the U.S. lead.

A sense of social justice fuels the plans of new Latin American politicians who hope to ease conflicts. Since 2000, according to the research project "Environmental Justice Atlas" of the Autonomous University of Barcelona, more than a third of all clashes related to extractive projects around the world have occurred in South America. This is what the leftist rulers of the "Lithium Triangle" intend to avoid.

They have already thought about and are considering creating a "lithium OPEC." The group would emulate similar schemes, such as the Organization of Petroleum Exporting Countries, in terms of coordinating production flows, pricing and advanced technology. Argentina, Chile, and Bolivia are counting on the support of the Community of Latin American and Caribbean States, CELAC, for the decision.

In the 21st century, it has become obvious that the global economy is now knocking on the doors of Argentina, Bolivia and Chile through lithium, and this knocking will only intensify as the "Great Energy Transition" (not to be confused with "green energy" wind turbines) gathers momentum. Moreover, the military-political struggle for a "place under the sun" is growing along with it.

The "neo-conquistador of South America's white gold" has already appeared. This is Tesla electric car magnate Elon Musk, extremely interested in the vertical integration of lithium mining with the production of electric batteries and cars based on the Chinese model.

For years he tried to get his hands on Bolivia's pristine lithium reserves. However, he was hindered by the then president of that country, Evo Morales, who did not have much faith in Musk's promises to "industrialize with dignity and sovereignty" Bolivian lithium. In 2020 Morales was overthrown in a coup d’état.

When a Twitter user accused Musk of complicity in the coup, the Tesla tycoon replied, "We'll take whoever we want! Get over it." (He later deleted the tweet.)

Now Musk and his company intend to build a Tesla plant in Brazil that will "feed" on lithium from Bolivia. And Musk is not alone in this. Neo-conquistadores are boarding electric cars in search of a lithium El Dorado.