• With the rise of renewables, Latin American lithium is increasingly important. 
• The resource could boost regional cooperation, given the right conditions. 
• International leaders’ attention has been piqued by the potential of the mineral.

Why Lithium? Why now? 

Answer: As global efforts for a green transition mount, so too does the demand for lithium. 

In September 2022, the price of lithium per tonne reached an all time high of $71,315. This surge in price is multifactorial, with the increasing cost of energy and innovation in rechargeable battery technology. However, the principal driver of the mineral’s demand is its role in the electric vehicle (EV) market. Lithium-ion batteries are vital in the production of electric transport, an industry that is growing exponentially. Naturally, the booming demand for this resource, so integral to the green transition, has a pronounced effect on international relations. As global powers seek to secure and at times dominate supply, they are increasingly interested in lithium-rich regions.   

One such region is Latin America, specifically Argentina, Chile and Bolivia. The so-called ‘Lithium Triangle’ is home to over half of the world’s deposits and conversations about extraction have become more prevalent in recent years. While these countries are in possession of an attractive resource, each is at a different stage of extraction and commercial viability is not as straightforward as it seems.  

What is the current state of the Triangle?

Answer: Regional cooperation could be lucrative, but each nation is facing its own obstacles concerning lithium. 

Argentina’s Alberto Fernandez is currently the most active the element’s development. Argentinian exports have been ramping up this year, with lithium poised to become the nation’s most important mineral. Exports for July 2022 brought in $291 million  and have grown by 30% in the last year. Fernandez reached out earlier this year to Chile’s president Gabriel Boric, deepening ties with the creation of the Binational Working Group for Lithium and Salt Flats. Since then, the group has worked to exchange logistical and scientific expertise, hoping to boost development. 

Operations in Argentina are focused on the attraction of foreign investment, a mixture of private and state-owned companies currently mine the resource. Fernandez is aware of the potential lithium has for growth and while Argentina is not the biggest producer in the region yet, Fernandez’ increased efforts are driven by potential economic gain; production could more than double by 2025 with an estimated value of $1.5billion. 

Of the three corners in this triangle, Chile is the biggest. The country has some of the largest reserves in the world yet is losing to its competitors, with output stalling due to  a lack of funding for exploration. In 2017, Australia overtook Chile as the world’s largest producer, and Argentina is forecast to take second place by 2028. Chilean legislation states that any mine owner must obtain an exploitation licence to own the mineral found in exploratoins, a concession that has not yet been granted to any private company. This, along with talks of nationalising lithium, diminishes foreign investors’ interest in its exploitation. 

Similarly, questions about the ecological impact of lithium exploitation have been raised by indigenous communities and environmental groups, adding to investors’ perception of the mineral as a liability rather than an opportunity. The legislative and environmental barriers to Chilean lithium production have resulted in slowed investment, a factor that diminishes the Boric administration’s ability to participate in meaningful regional cooperation. The reality of lithium in Chile is that it cannot be considered a priority for Boric right now, who has other issues that demand his attention, such as declining approval rates and a lack of congressional majority. 

The final nation of the triangle is Bolivia, where President Luis Arce, like Boric, is also faced with issues in regards to the mineral. The principal of these concerns is lack of infrastructure. Despite its vast quantity, Bolivian lithium remains underdeveloped. The state-owned mining company Yacimientos de Litio de Bolivia (YLB) has scheduled operations to begin in December but until then, the country’s lithium will remain far from commercially viable.

Regardless of the challenges, Arce is trying to boost production from 0.2% to 40% of global supply, but the requisite foreign investment is again restricted by legislation, and until new infrastructure is developed, that percentage remains an ambitious goal. 

Overall, this triangle is far from equilateral. The three leaders  involved are at distinct stages of their lithium trajectories, with ideas of how to proceed, but obstacles to overcome. Should Fernandez continue to boost production and Boric loosen legislative constraints, more cooperation between Argentina and Chile could occur. However, Arce remains firmly behind, just beginning to scratch the surface of Bolivian lithium. The benefit of this lithium as of now will then be the economic boost for individual producers more so than international cooperation.

Who has a stake in The Lithium Triangle? 

Answer: Lithium has sparked interest from regional neighbours and global superpowers alike. 

The geographically closest leader interested in lithium is AMLO in Mexico. In April, he nationalised reserves and created a state-run lithium mining company, hoping to cash in on demand. However, there is scepticism for the newly found deposits, with industry experts warning that production may take years (and millions of dollars) to begin. Nonetheless, the AMLO administration is keen to proceed, reaching out for  investment and sending Foreign Minister Marcelo Ebrard on tour in order to ally Mexico with lithium producers in the region. 

In Europe, Germany has been the most active in its pursuit of the mineral, lobbying across the triangle to secure its supply. In 2018, German mining company ACI Systems Alemania GmbH (ACISA) signed a deal with YLB for access to the Salar de Uyuni deposit, securing 80% of the lithium produced there for German use. The value of importing lithium from Latin America for countries like Germany is significant not only as a reduction in dependence on China, but also as a supplementation of European strategy.

Chancellor Olaf Scholz has already advocated for increased EU technology manufacturing outlined in the ‘Made in Europe 2030’ strategy. The prospective boost of Latin American lithium helps to supplement this could see the EU catch up in areas where it has ‘fallen behind’. 

Similarly, Latin American lithium presents an opportunity for the Biden administration to reduce Chinese dominance whilst progressing towards its ambitious climate goals. From 2016 to 2019, 90% of U.S. lithium imports came from Argentina and Chile. With increased development, Biden stands to profit significantly from the development of lithium in the region. With an aim to reduce emissions by 50% by 2030, lithium will be essential in transforming electricity grids to capture solar and wind power. This, coupled with other measures such as the CHIPS and Science Act, the US seeks to disrupt Chinese industrial dominance.

Meanwhile, Biden wants to reduce US trade dependence on their competitor, leaving more space for other, more aggressive, forms of posturing. 

The most significant power interested in the region’s resources however is China. As the leader in the global EV market, China has invested early on in lithium, acquiring 55% of the chemical supply. Through early investment in Australia and now with increased activity in Latin America, President Xi Jinping wants to maintain and enhance a Chinese monopoly of the EV market.

In order to achieve this, China has invested over $16B dollars in overseas mining, with an emphasis on Argentina and Chile. With Fernandez joining Beijing’s Belt and Road Initiative, investment is set to increase further. In Chile, the Chinese company Tianqi Lithium holds 23% of shares in SQM, the country’s largest mining company. 

What is the outlook? 

Answer: With Chinese influence seemingly in the lead, it is uncertain how much the Lithium Triangle has to benefit. 

For the three Latin American markets, an increased global demand for clean energy resources and the attention of heavyweight investors ramping up presents a golden economic opportunity. All have the chance to step up their significance, providing that they can all boost their production. The extent to which Boric, Fernandez and Arce will benefit is contingent on how well they can navigate their domestic challenges, lack of funding and lack of infrastructure.

Latin American governments already export several clean energy minerals, including copper and iron ore. Improving production of lithium in places where it is relatively low could make these trading relations even more lucrative for the region, especially as these minerals will be so crucial for the green transition. 

As China dominates much of the EV market supply, other superpowers like the U.S. are already heavily dependent on them for many rare earth minerals; the consolidation of Chinese influence in Latin America is a challenge for would-be competitors.

That is not to say however, that China is counting solely on Latin American resources. The distance between the lithium triangle and Beijing is a challenge and China still imports the bulk of its lithium from Australia. Similarly, Chinese importation of minerals is common in Africa, with specific attention given to Congolese copper and cobalt. Overall, there is potential for China to benefit from the minerals available in Latin America, but it is not the only option, nor the main priority for China. 

The dominance of the EV market puts China in the pole position of green transition. This posture is  favourable for creating dependency for lithium, but it equally accelerates the progress of other renewables that will prove a significant boost for China. In all of this, the countries whose resources are so vital will likely suffer; the legacy of Chinese investment in Latin America is one of damage to the environment and people. Leaders like Fernandez, who are open to Chinese investment and the BRI, may find projects unfinished, with Beijing reaping the rewards of their lithium while leaving them high and dry.