How America plans to break China’s grip on African minerals
A new contest between the US and China is under way
Mining Indaba, Africa’s largest mining conference, is an anthropologist’s dream. There are the corporate chief executives: alpha males keen to cut big deals for big rocks. There are the engineers staffing stands in bright corporate attire, resembling darts teams on tour, and the colourful African delegations: Ghanaians draped in kente cloth or Congolese dandies with watches the size of clocks. They are offset by Chinese officials in dark suits and Saudis in white thawbs.
This year’s event, which took place in Cape Town in February, attracted America’s largest delegation ever, including officials from the White House and departments of state, commerce and energy. Its size reflects America’s hunger for the 50 “critical minerals” it deems essential to reduce carbon emissions and create green jobs in the process. Though America’s search is global, Africa, home to around 30% of the world’s mineral resources, is a crucial part of the hunt. And by pledging to do mining differently—both from how China does it now and how the West has in the past—America says it will help transform African economies. “The energy transition is an opportunity for an Africa transition,” says Amos Hochstein, Joe Biden’s envoy for all things concerning energy security.
American officials see Africa as helping to solve two problems. The first is a global shortfall in the minerals that will be needed if the world is to meet its climate goals. The International Energy Agency, an official forecaster, reckons that makers of clean-energy technologies will need 40 times more lithium, 25 times more graphite and about 20 times more nickel and cobalt by 2040 than in 2020. Demand for rare-earth elements—metals in the esoteric parts of the periodic table used in everything from wind-turbine magnets to fighter jets—may be seven times higher by the end of the next decade.
The second problem, at least for the West, is China’s outsized influence on supply chains. China refines 68% of the world’s nickel, 40% of copper, 59% of lithium and 73% of cobalt, according to a report in July by the Brookings Institution, an American think-tank. “China has had free rein for 15 years while the rest of the world was sleeping,” says Brian Menell, chief executive of TechMet, a minerals firm. Though China is less dominant in mining, where its firms compete with multinational majors, Western governments are concerned that, without additional supply, firms will struggle to feed new downstream processing facilities that officials are keen to see built in friendly countries.
America views cobalt, which is used in batteries, as a cautionary tale. In Congo, the source of about 70% of global production, Chinese entities owned or had stakes in 15 of 19 cobalt-producing mines as of 2020. America’s decision to allow a US firm to sell one of Congo’s largest copper-cobalt mines to a Chinese one in 2020 is seen in Washington as an enormous act of stupidity. It is little comfort that battery-makers are trying to use less cobalt, in part because of concerns about operating in Congo. “We cannot allow China to become an opec of one in critical minerals,” says an American official, referring to the oil cartel.
It is possible to identify three strands in America’s approach. The first is a multilateral effort involving Western allies. In June, Jose Fernandez, America’s under-secretary of state for economic growth, energy, and the environment, launched the Minerals Security Partnership, whose 13 members include all the g7 countries and the eu. Many of these countries are also looking to secure more scarce rocks. Britain launched a “critical minerals strategy” in July 2022 and later this month the European Commission will propose a Critical Raw Materials Act.
The American-led partnership is a work in progress. But the idea seems to be that member countries will support their own firms, which propose mining projects that will meet high environmental, social and governance (esg) standards. This support might include lobbying by diplomats in the country where the mine will be built, finance for the project, or help in attracting private investment to it. The partnership is not restricted to projects in Africa, but representatives from Congo, Mozambique, Namibia, Tanzania and Zambia attended a meeting to discuss it in New York last year. Convening the session, Mr Blinken highlighted a graphite mine in Mozambique, whose owner has received a loan from the American government, that ostensibly reduces the risk of conflict in the area by providing jobs to locals. Its output will be sent for processing in Louisiana.
A second strand in America’s approach involves its development agencies “de-risking” projects as they have done in, say, agriculture or the power sector. As well as the us Export-Import Bank, which offers trade-financing, there is the International Development Finance Corporation (dfc). In 2018 the Trump administration doubled the dfc’s (or rather, its predecessor’s) lending cap to $60bn and changed the rules so it can take equity stakes in firms, too. Though dfc only has one direct investment in mining at present (Mr Menell’s TechMet), it is keen to add more.
The third element is more active diplomacy in Africa. Since Mr Biden hosted more than 40 African leaders in Washington in December, several senior officials including Janet Yellen, the treasury secretary, have visited the continent. Mr Biden is expected to visit this year. America has more interests in Africa than just minerals. But it was notable that Mr Hochstein, who spent much of 2022 managing the fallout from Russia’s invasion of Ukraine on oil and gas markets, attended Indaba.
An early diplomatic success is the Lobito corridor. The idea of revamping the railway that could take copper from Congo and Zambia to Angola’s Lobito port has been mooted for decades. It would be a much quicker route than the typical journey by road to the South African port of Durban. But progress stalled until the accession of new presidents in the three relevant African countries (João Lourenço in Angola in 2017, Félix Tshisekedi in Congo in 2019 and Hakainde Hichilema in Zambia in 2021). The trio have better relations than some of their predecessors with America and with each other—and are less China-leaning. Last year a Western-led consortium beat Chinese firms to the contract to rebuild the railway. American diplomats hope it will make investment in the three countries more attractive and create a new route to processing plants outside China.
Another potential success is a memorandum of understanding signed by America, Congo and Zambia in January. America says it will help Africa’s two largest copper exporters do more than just sell the metal in its elemental state. Under it, America agreed to help the two African countries build supply chains to process their raw minerals into battery precursors for electric vehicles.
African politicians are giving the American push a cautious welcome. Situmbeko Musokotwane, Zambia’s finance minister, says he knows that Western countries cannot boss their own firms about. But “they can still be helpful by talking down the perceived risks of Africa.”
Small mining firms are responding to the West’s signals. An Australia-based executive who has sold mines to Chinese firms says he is now exploring projects in countries which are on good terms with America, such as Namibia and Zambia. “In five years the West will be really desperate. And we want to be ready,” he says.
Other small miners hope that the West’s hunger for esg-friendly mineral projects will make them more attractive investment propositions. Many cite the example of Lifezone Metals, a firm set to list in New York, that plans to extract nickel from a planned mine in Tanzania using a technique that is much less carbon-intensive than the usual method of smelting it. Last year it won the backing of bhp Group—the first significant investment in Africa by the world’s biggest miner in several years. The Tanzanian government, for its part, sees the nickel project as the start of more processing of raw materials in the country.
It is unclear, though, whether the West’s geostrategic ambitions will translate into a massive increase in investment. Capital expenditure by 20 large miners is forecast to rise by about 12% in 2023, according to Mining Technology, an industry tracker. This is below analysts’ estimates of what is required for the world to meet climate goals. Duncan Wanblad, the ceo of Anglo American, says that there are too few bankable projects in development. “I can’t get the maths right,” he sighs. Over the past 20 years “the only big capital deployment has been the Chinese ecosystem,” argues Benedikt Sobotka, the ceo of Eurasian Resources Group. Part of the problem remains perception, argues a consultant to the mining industry. When American investors “think of mining in Africa, they still think of cobalt, Congo and child labour”.
Prospecting for balderdash
“The American intention is real,” adds another executive, “but they don’t know what they’re doing.” African priorities are often not American priorities. “My worry is that half the American delegation believes their own bullshit,” says another ceo, adding: “It is not enough just to be America.”
Sameh Shenouda, the executive director of the Africa Finance Corporation, a pan-African fund based in Nigeria, welcomes renewed Western interest in African mining, but he has two worries. The first is that projects will take too long to get started because of American bureaucracy. The second is that America’s push to ally esg-friendly investing with mining would not endure under a Republican president.
American officials sometimes come across as patronising when they warn Africans against doing deals with China. “The Americans are completely clueless about what goes on in our politics,” says a former adviser to an African president. China’s success in Africa, he posits, is because their firms can get projects done in time for the next election.
Many African governments would like more American involvement in the continent but are in no rush to ditch China. “Zambia takes countries case by case”, says Paul Kabuswe, Zambia’s minister of mines. “We’re not going to say that this country is not working with us.” One reason may be that greater competition could allow African governments to strike better deals. After all, says Mr Kabuswe: “Zambia has been mining for decades and has very little to show for it.”
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Can Australia break China’s monopoly on critical minerals?
Asia’s new resource competition
Just as oil was weaponised by its suppliers in the 1970s, so China’s dominance in the supply and processing of critical minerals could prove threatening. Cobalt, graphite, lithium, nickel, the rare earths and more are called critical for good reason. They are crucial to defence, smartphones and other digital technologies. A handful are essential to wind turbines, batteries and electric vehicles. A clean-energy future is inconceivable without them.China has a near monopoly on many of these minerals. It supplies nearly 90% of processed rare-earth elements. It is by far the biggest processor of lithium. In the Indo-Pacific region, this is driving Australia, Japan, South Korea and others to seek to diversify away from China—in the process defining a new resource-based geopolitics.
Plans for new critical-mineral supply-chains are being drawn up in multilateral forums such as the Quad grouping of America, Australia, India and Japan. Resource-rich countries like Australia and Indonesia (with lots of nickel and plans for a battery industry) aim to profit from a minerals bonanza. The focus of much of the strategising, according to the National Bureau of Asian Research, a think-tank in Seattle, is on three things: “friend-shoring”, shifting supply-chain management from “just in time” to “just in case”, and ensuring spare capacity in minerals processing.
Mineral-related initiatives are coming in droves. China’s dominance, says Australia’s resources minister, Madeleine King, is a “strategic challenge”. On June 20th her government unveiled a critical-minerals strategy to address it. Australia is the biggest producer of lithium, the third-biggest producer of cobalt and fourth-biggest of rare earths—yet a processing minnow. It aims to become, by 2030, “a globally significant” producer of processed critical minerals. It can “play its part in making sure we build secure supply chains”, says Ms King.
To that end Australia is committing A$500m ($343m) to projects under its new strategy. That is in addition to an existing A$2bn fund to get early-stage critical minerals projects off the ground, among them a rare-earths refinery. This year Australia’s government blocked a Chinese entity from raising its stake in a rare-earths company on national-security grounds.
As a free-trade partner of America’s, Australia hopes to qualify for green subsidies under President Joe Biden’s Inflation Reduction Act. In April a delegation of Australian producers visited Tokyo, hoping that Japanese investment and long-term purchase contracts will do for Australia’s critical-minerals industry what they did for its now pre-eminent iron-ore and gas sectors. Last year Japan made critical minerals one of 11 strategic sectors deserving of government support. In March, Japan and America agreed to co-operate on minerals supply chains, including by countering “non-market” actors (ie, China).
South Korea, with global ambitions for electric vehicles and batteries, looks especially vulnerable to competition between America and China on this issue (and others). As part of President Yoon Suk-yeol’s commitment to “comprehensive resource-security measures”, his government earlier this year released a plan to secure critical-mineral supplies. The aim is to cut the country’s import dependence on China from 80% to 50% by 2030 and to increase its use of recycled minerals, from 2% to 20% of the total. South Korea has struck partnerships with countries including Australia, Indonesia and Kazakhstan, as well as the eu. It has joined an American-led, multi-country Minerals Security Partnership, announced last year.
Taiwan and India are also groping their ways towards adopting new critical-minerals strategies. The challenge, in nearly all cases, is China’s lock on processing, which is costly, complex and potentially environmentally hazardous to develop. Dozens of metallurgical stages are required to turn a rare earth ore into the final product. Only tiny amounts of critical minerals can be extracted from vast quantities of ore. Decades ago, China made processing central to its industrial plans, using massive subsidies and lax environmental standards. Its domination reflects that decades-long strategy.
By and large, its customers did not mind when it used its processing monopoly to drive down prices in order to deter global competitors. The risks of China’s dominance have grown, however. For Japan that became apparent in 2010, when China suspended exports of rare earths to it in reprisal for a spat over some disputed islets. Last year it threatened to withhold critical minerals from two American defence contractors, Lockheed Martin and Raytheon Technologies, in protest over America’s arms sales to Taiwan.
The pandemic caused others to wake up to the perils of a monopoly processor, by underscoring the vulnerability of supply chains generally. Russia’s invasion of Ukraine further highlighted the risks of doing business with a potential enemy. By withholding supplies of gas to European customers, Russia sought to weaponise a crucial commodity. (It is also a key exporter of nickel and palladium.)
Yet one case study shows how hard creating alternative mineral supplies can be. After Japan’s China stand-off in 2010 its government encouraged a Japanese trading house, Sojitz, to sign purchase contracts with an Australian producer, Lynas Rare Earths, while backing it with cheap loans. China fought back by flooding the market to suppress rare-earth prices. In Malaysia, political opposition grew to a new Lynas processing plant, despite the International Energy Agency giving it a clean bill of health. A Chinese propaganda group backed by the Communist Party had spread disinformation about the project. Lynas survives thanks to cheap loans from Japan, which recently advanced it a further A$200m (S136m) in investment.
Given such hurdles, and the high costs of environmentally safe processing, any new capacity will require long-term support, Ms King argues. Tiny rare-earth mining companies cannot afford the railways and other supporting infrastructure that Australia’s giant iron-ore companies run. Lynas’s chief executive, Amanda Lacaze, calls for “straight-up industry planning” to rival China’s 30 years of strategic thinking on critical minerals. Co-operation among like-minded countries will also be crucial, says John Coyne of the Australian Strategic Policy Institute in Canberra. His institute’s “Darwin dialogue” aims to enhance co-ordination between America, Australia and Japan on rare earths.
How different might critical-mineral supply chains eventually look? Mr Coyne says the goal, achieved through investment and co-operation, should be more resilience and competition and less reliance on China. There is far to go before reaching even that modest aim. China’s hold is imposing, and the costs of entry into processing steep. Even the boss of Raytheon, the world’s biggest maker of guided missiles, this week told the Financial Times that ending its reliance on Chinese supplies of critical minerals looked “impossible…We can de-risk but not decouple.”
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The green revolution will stall without Latin America’s lithium
But politicians such as Gabriel Boric, Chile’s president, want to nationalise it
Over half of the world’s lithium, a metal used in batteries for electric vehicles, can be found in Latin America. The region also has two-fifths of the world’s copper and a quarter of its nickel. Recently delegations from the United States and the European Union have flocked there partly to secure resources that will be needed in the energy transition, and to diversify their supply away from China. In March John Kerry, President Joe Biden’s climate tsar, visited the continent. German officials have scheduled at least three high-level meetings in South America this year. Ursula von der Leyen, the president of the European Commission, looks set to visit in the coming months.
But even as the outside world spies resources in Latin America, governments there are taking back control. On April 21st Gabriel Boric, Chile’s left-wing president, announced plans to create a state-owned company to produce lithium. If the legislation is passed later this year, private companies will have to form joint ventures in which the state firm has a majority stake.
Mr Boric is not alone in his penchant for green-resource nationalism. On May 1st Mexico’s Senate approved changes to the mining code which will reduce the length of concessions for private companies from 50 years to 30. Andrés Manuel López Obrador, Mexico’s populist president, also signed a decree in February to fast-track the nationalisation of the country’s lithium reserves. The governments of Argentina, Bolivia, Brazil and Chile are discussing creating a lithium opec to control global prices. In Bolivia the lithium industry is almost entirely run by the state.
Yet Latin America stands out for the speed with which countries are wielding state control. The Resource Nationalism Index, a ranking produced by Verisk Maplecroft, a consultancy, monitors royalty increases, demands for locally produced goods and expropriation of assets. In the latest ranking from this year, Mexico jumped to third place, from 98th in 2018. Argentina is in 19th place, from 41st. Chile ranks 70th, up from 89th in 2018.
Much of this is due to the fact that a wave of recently elected left-wing governments are now in power in the region. They want to do things differently from the past, when wealth from raw materials ended up abroad or lining the pockets of crony-capitalists. The new left has three goals. The first is to increase the state’s revenues and economic clout. If forecasts are right, then the green transition could be continent-changing. An imf working paper reckons that in order for the world to reach net-zero emissions by 2050, revenues for lithium, copper, cobalt and nickel producers could rise four-fold. The cumulative value of global production could be $13trn between 2021 and 2040 (see chart 1). That bonanza is about the same as the forecast value of global oil production over the same period.
Latin America controls many of these vital resources (see chart 2). Mexico is the world’s biggest producer of silver, which is used in wind turbines and solar panels. Brazil sits on roughly a fifth of the world’s known reserves of nickel, graphite, manganese and rare-earth metals, which are used in green technologies. Chile and Peru alone produce almost 40% of the world’s copper.
Chile is one of the places that is most likely to benefit from the windfall. Already mining, mostly of copper, represented 15% of gdp and 62% of its exports in 2021. Codelco, the state copper-mining company, provides over three times the tax revenue of private companies per unit of production, according to cenda, a Chilean think-tank. Mr Boric hopes the state lithium firm can do the same. Tangible signs of this jackpot are already visible. Last year sqm, one of only two companies that currently mine lithium in Chile, paid more than $5bn in revenue to the treasury, making it the country’s biggest corporate tax contributor. Chile’s lithium production quadrupled between 2009 and 2022.
Other countries can smell the money. Argentina is expecting investments in lithium worth $4.2bn, or 0.7% of gdp, over the next five years. Exports of the metal surged last year, from $200m to $700m (or from 7% of all mining exports in 2021 to 18%). Nickel production in Brazil increased by almost a tenth between 2021 and 2022. Last year Vale, a Brazilian mining firm, signed a long-term agreement to supply nickel to Tesla, the world’s biggest maker of electric vehicles, though the value of the deal was not disclosed. On April 10th Brazil’s regulator gave Sigma Lithium, a startup, approval to start mining lithium from hard rock in the state of Minas Gerais. Its project is valued at over $5bn.
A second reason why Latin America’s politicians are ramping up resource nationalism is that they hope to create more jobs and opportunities for business. Until now the region has failed to produce higher-value goods because of a poorly skilled labour force, low investment in research and development (r&d) and an unpredictable regulatory environment. Chile, Mexico, Colombia and Argentina spent an average of 0.3% of gdp on r&d in 2020 compared with 2.7% in the oecd, a club of mostly rich countries. The share of workers who receive some form of skills training is only 15% compared with 56% across the oecd.
Many politicians think natural resources should be used as inputs into local manufacturing rather than be exported as raw materials. On the same day he announced his lithium plans, Mr Boric proclaimed: “This is the best chance that we have to transition to a sustainable and developed economy. We don’t have the luxury to waste it.” Western governments are courting this desire. In January Olaf Scholz, Germany’s chancellor, said while in Buenos Aires that German companies would be “real partners” to South America, asking: “Can one not move the processing of these materials, which creates thousands of jobs, to those countries where these materials come from?”
But resource nationalism carries huge risks. Nationalisation has a bad track record in the region. Pemex, Mexico’s state oil firm, is the world’s most indebted oil company. Venezuela’s state oil giant, pdvsa, is synonymous with the country’s collapse. Petrobras, Brazil’s public oil company, was at the heart of the region’s largest corruption scandal, known as “Lava Jato”.
And state firms may lack access to the cutting-edge technology that multinational companies typically excel at. For example, LitioMx, Mexico’s new state lithium firm, is unlikely to prosper on its own. To date, Mexico has been unable to produce lithium at commercial scale, partly because its deposits are harder to extract, as they are in clay rather than brine. Digging them up will require technology, know-how and investment, which many analysts believe LitioMx lacks.
How has the wave of resource nationalism affected investment? In some places where property rights have been thrown down a mine-shaft, capital flows have dropped. Bolivia has the world’s second-largest lithium reserves, according to its government statistics. But it has yet to pump any out of the ground at scale. In 2019 the government issued a decree overturning a lithium project which involved investment worth $1.3bn by aci Systems, a German company, after local protesters demanded higher royalties.
Yet even in Bolivia some firms are prepared to face unstable policies in return for access to scarce minerals. In January Bolivia awarded a Chinese consortium a $1bn contract to develop its industry. Chinese firms are active elsewhere. On April 21st byd, a big electric-vehicle maker, announced plans to open a lithium-processing plant with Chile’s government. Gotion, a Chinese battery-producer, has promised to produce batteries in Argentina.
Often their interests go beyond minerals to other parts of the green supply chain. On April 27th China Energy, a renewable giant, promised $10bn worth of investments in renewables in Brazil, particularly in green hydrogen. Jörg Husar of the International Energy Agency reckons Latin America has the largest share of global projects to export green hydrogen.
Resource curse or purse?
For as long as appetite remains insatiable for green resources Latin America will have enough leverage to impose conditions on private firms without strangling investment flows. Yet the big question is whether its slice of the cake ends up being smaller than it might have been. Chile offers a cautionary tale. The government already plays a large role in the production of lithium, which is deemed a strategic resource. Royalties go up to 40% (compared with 3% in neighbouring Argentina), and companies are required to sell up to 25% of output locally at below-market prices to producers who promise to develop the domestic lithium value chain. As a result, Chile is losing market share. Production is forecast to grow by three-fifths by 2026. By comparison, Australia is expected to double production over the same period.
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Argentina could help the world by becoming a big lithium exporter
But can exports of the metal help sort out the country’s economic woes?
Picture a country in South America that is pro-business, is attractive to foreign capital and offers political stability for long-term investment. Most people would think of Chile. But when it comes to mining lithium, a light, salt-like metal used for batteries in electric vehicles and mobile phones, the country in question is its dysfunctional neighbour, Argentina. Better known for triple-digit inflation and railing against the imf, Argentine officials have gone on a charm offensive from Washington to London with a boosterish message: the mining sector is open for business.
The transition to green energy has made lithium one of the world’s most sought-after metals. The price of lithium carbonate (lce), the raw material used in lithium-ion batteries, soared this year from a five-year average of around $14,000 per tonne to over $80,000. According to Benchmark Mineral Intelligence, a consultancy, as sales of electric vehicles grow, demand for lce is set to increase to 2.4m tonnes in 2030, compared with around 600,000 tonnes this year. Although lithium is plentiful, supply is struggling to keep up. Worldwide ten working mines can produce battery-grade lithium, says Daisy Jennings-Gray of Benchmark. A global scramble to find cheap deposits and to build mines to meet the increase in demand has started. Argentina could benefit.
Almost two-thirds of the world’s lithium can be found in the Andean plains that straddle Argentina, Chile and Bolivia—collectively known as the “lithium triangle”. Bolivia has the world’s greatest resources, but it has failed to get production going. The state owns all lithium deposits and companies can exploit it only if they strike a deal with the public firm, Yacimientos de Litio Bolivianos. Political volatility and a lack of technical know-how have not helped. In 2016 the deputy interior minister was bludgeoned to death by miners.
Chile used to be the world’s lithium powerhouse. In 2017 it was overtaken by Australia, which became the top supplier globally. Chile now accounts for 26% of total supply. There, too, lithium deposits are owned by the state, which doles out contracts to private companies. Two firms, Albemarle and sqm, dominate the industry. In 2016 and 2018 the government renegotiated their contracts and introduced new rules that force companies to sell up to 25% of the metal at below-market prices at home in order to encourage local industry. In addition, royalties were linked to global prices, which can be volatile. Mining companies also agreed to give a portion of their earnings to development projects in the communities where they operate, in order to dampen protests by local activists and potentially create jobs. Although this is reasonable, it may have caused some investors to look across the Andes.
By contrast lithium is not considered a strategic resource in Argentina. The state plays a small role. Instead, the constitution grants the country’s 23 provinces the right to administer minerals on their land and grant concessions to firms. A law from 1993 gives tax breaks for mining firms and establishes that their ventures cannot face new taxes for a period of 30 years from the date they present a feasibility study to the federal government. Royalties are capped at 3%, compared with 7-40% in Chile.
All this has attracted capital. Some 40 lithium projects are currently in different stages of exploration, more than in any other country. JPMorgan Chase, a bank, expects Argentina to overtake Chile as the world’s second-largest producer by 2027. By 2030 Argentina could supply 16% of the world’s lithium, up from 6% in 2021 (see chart). Rio Tinto, an Anglo-Australian mining giant, acquired a lithium mine in March for $825m. posco, a South Korean firm, is investing $4bn in a lithium project.
Chinese firms are especially keen. In July Ganfeng Lithium, a Chinese mega-producer, announced plans to buy a plant for almost $1bn. Argentina’s macroeconomic mismanagement—the country has around a dozen different exchange rates and inflation is nearing 100%—puts many Western companies off. For Chinese companies, however, “the point is less financial and more strategic,” says Carlos Freytes of Fundar, an Argentine think-tank. “It’s about a geopolitical ambition. They want to guarantee supply.” Of the nine projects closest to production in Argentina, six involve Chinese companies, according to data compiled by Fundar.
Argentina’s mining laws were passed during a brief window of free-market reforms. They are difficult to change because the constitution devolves power to the provinces, which control the Senate. The governors of the three north-western provinces that host Argentina’s lithium—Salta, Catamarca, and Jujuy—are not afraid to push back against the government. When the foreign ministry said in October that it was in talks with Bolivia and Chile to create a “lithium opec” to set regional prices for the metal, the governors complained and the proposal stalled. They hope that foreign investment can help their provinces grow. The World Bank estimates that, in a best-case scenario, lithium production and processing could increase the gdp and fiscal revenue of those provinces by 10%.
Yet problems remain. Conflicts with indigenous communities who live on the land where lithium is extracted could grow. These have set back projects in Bolivia and Chile, and have shut down other mines in Argentina. A study from 2019 in Chile found that lithium mining worsened droughts in surrounding areas, which in turn angered locals. Argentina’s low royalty rates could mean that most of the profits end up in foreign pockets rather than state coffers, which might provoke a political backlash. “This is plunder, plain and simple,” says Enrique Viale, an environmental lawyer in Buenos Aires. On November 10th a law was discussed in the lower house of Congress that, if passed, could impose stricter environmental checks on wetlands, including the land on which lithium mines are built. The law was proposed a decade ago but foundered because of opposition by provinces and mining lobbies.
And Argentina’s politicians could dampen investors’ enthusiasm. The state oil company has recently branched out into lithium; the federal government could try to give it privileged access over private companies. Stricter export controls could halt production. “There is no single sector that can rescue Argentina from its morass,” points out Benjamin Gedan of the Wilson Centre, a think-tank. But in an economically dysfunctional country lithium remains, for now, a rare point of hope.
