Bolivia’s on lithium

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Somewhere below the salt plains in this picture is seventy percent of the world’s known lithium resource. Lithium is the world’s lightest metal. You’ll find it in the battery for your ipod, cellphone and laptop. It is also the basis for batteries for hybrid and electric cars which could be in hot demand in the coming decades. The recent discovery of Bolivia’s deposits have led some to call it the “Saudi Arabia of Lithium“.

This isn’t at all the first time that massive natural resources have been discovered in Bolivia. There’s been silver and guano and yet Bolivia hasn’t got rich. In fact it is the poorest country in South America. We’ve written before, in the context of Venezuela, about the ‘resource curse’ – the economic idea, and reasoning behind resource rich countries staying poor. In Bolivia’s case there’s an added colonial dimension: resources were pillaged and sent back to Spain.

Current Bolivian President Evo Morales is all over this. He’s determined that average Bolivians profit from its lithium resource and not fall prey to any neo-colonialism. He wants the processing of the lithium done in Bolivia right through to battery stage, so the country gets itself higher up the value chain. And he wants it done by government companies. He’s also claimed that Bolivia will end up producing hybrid cars itself, though that’s probably mostly aspirational. A pilot plant for lithium processing was set up near Uyuni last year.

Morales’ thinking is laudable in a lot of ways, but making lithium mining work for Bolivia is a massive ask because:

  • Success involves hitting a moving target. No one really knows how big the electric car market will be, and when it will peak. Bolivia looks set to take a big gamble on it.
  • Lithium processing is complicated. Bolivia has no experience in doing it, and lacks the highly educated workforce that could get to grips with it quickly. Instead Bolivia is looking to partner with another country, likely China, and it isn’t clear how they feel about Bolivia getting up the value chain…
  • Processing lithium requires lots of water, something that, funnily enough, isn’t common in a salt plain or surrounding deserts. Water would need to be taken from indigenous communities who, you know, need it.
  • There are serious environmental concerns about ripping up the Salar de Uyuni, the world’s largest slat flats and home to some of the most dramatic landscapes we’ve ever seen.
  • And here’s maybe the biggest problem: corruption tends to concentrate around big point sources of wealth. There’s rent seeking and nepotism and inefficiency. That’s a big part of the resource curse after all.

For Bolivia to pull itself up by lithium bootstraps it’ll have to thread a pretty difficult needle. But good luck to it – it’s hard to argue with a poor country hoping to get richer while decreasing global carbon emissions.

5 thoughts on “Bolivia’s on lithium

    1. That’s a very fair question, Miles (and thanks for reading, I’m guessing you’re the reader in Greece?). I think Morales is kind of on the right track. Mining lithium does seem to be a huge opportunity for Bolivia, and good for the planet too. But here’s what I’d do differently:

      1. Go for more processing in Bolivia, sure. But start out producing existing products like cellphone batteries rather than going straight to the cutting edge with electric cars…
      2. Not be so afraid if private sector or foreign involvement. I’m thinking of things like allowing foreign companies to mine, but requiring Bolivian employment and taking a good chunk of royalties. Public private partnerships also have a lot of merit. The private sector should be harnessed, not feared.
      3. This is probably the really crucial one: I’d take all the money govt earned from the mining and put it in a sovereign wealth fund which invests the money and is managed outside the political process. Interest earned is spent on things that are good for Bolivians but the capital is maintained. That’s what Norway has done with its oil wealth, and it is one of very few (maybe the only) countries to overcome the resource curse effectively.

      1. In a perfect world you are basically exactly right. Problem is …… look at almost every African country.

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