One of my correspondents on matters in Chile asked about the English language media reports of Chile’s president Boric nationalizing the lithium in the country. I indicated that as of [April 2023] this had not yet taken place. I later added some additional comments that I sent along which our faithful readers may be interested in (and possibly already know).
Though there are dozens of salares (salt flats) in CL that potentially could produce some raw lithium materials, only one is currently being worked: the Salar de Atacama – which is huge. It’s reportedly the largest salar in Chile and third largest in the world. Supposedly it contains about 90 percent of Chile’s lithium reserves. There are two private companies currently working lithium extraction there, and Boric is evidently planning to kill the goose that lays the golden eggs.
Boric is reportedly sending a plan for a “National Lithium Company” — that is, a state-controlled agency. That plan is going to be sent to the national congress, though there is no certainty that it will be approved and there is already opposition seen.
One probable reason for Boric’s pushing this nationalization is that one of the leading members of one of the two current private companies doing lithium extraction in that salar… is the son-in-law of former president Pinochet.
Those two companies pay the national treasury some US$5 billion a year.
Chile is said to be currently the world’s second largest producer of raw lithium material, second to Australia. Once (if) Argentina begins full development of its enormous lithium capacity, Chile is expected to fall to third place. Though as always, Argentina is dubious, but since the country desperately needs dollars, something may come together, particularly if Milei becomes president (unlikely at this point).
Boric is playing all the old Allende material to support the plan.
The media here are reporting that any private company that wishes to extract lithium will have to “associate with the State” through the state agencies Codelco, and Empresa Nacional de Minería (these control the mining of copper). In addition, the list of “impact assessment” members that were identified make this Boric plan look as though it is intended to be impossible to achieve economically feasible agreement to actually do any production. One of the players already on record to halt the work is the “indigenous community” that doesn’t even live in the area of the salars but is using its theoretical rights to water in the region to make demands.
Among the supposed benefits of this move is the possibility of producing added-value products such as Batteries, and there have been several comments on Chile’s lack of technical expertise such as this one. The source can be found here.
The above Relatedness Vs Country Complexity graphic purports to show worldwide potential export capabilities for manufactured products, in this case lithium batteries.
“Relatedness” attempts to quantify a country’s experience within that activity. If a country already has a thriving electrochemical industry, it stands a better chance of succeeding as the underpinnings are already in place.
“Complexity”, is associated with higher levels of income, economic growth potential, lower income inequality, and lower emissions.
Not mentioned is the presence of a significant number of
technically skilled and motivated workers, something that Chile doesn’t possess. Neither does it have a fair or straightforward regulatory legal framework.
The trend would indicate that more “complex” nations are more likely to successfully produce finished products. As opposed to the much lower-added-value of extractive processes, which is mostly what Chile (and Australia) do.
And to cap it all, Chile is chronically energy-poor, which is why Madeco no longer produces copper tubing in Chile, and why Ceramica Cordillera left Chile. And as economist Sebastian Edwards mentioned recently, Chile’s physical isolation from the rest of the world (or at least from the parts that matter) is still a logistics handicap.
“It probably makes Australian hardrock more valuable, because you are in a much more stable regulatory environment compared to Chile. Sure, there might be small increases in royalties payments from time to time, but we don’t generally nationalise assets.”
I’m quite sure this new venture will employ many buddies of the government. It sounds like they’re really late on the whole lithium bandwagon anyways. Supposedly, new technologies like sodium are going to be commercially viable in the mid-term and are much cheaper.
There is no question that the demand for these lithium compounds will remain high for a good period of time and Chile has not been late in getting into the game, being the world’s second largest supplier. Competing technologies currently are up against enormous lithium inertia.
The issue is that Boric is playing to his few remaining far-left supporters, the Allendists and some others, and in doing so is proposing a measure that will drive investors away from the country and not just in the area of mining, while creating such a large body of actors hostile to the idea of such mining that any sort of productivity could well come to a halt if the nationalization proposal were to take effect.
“Hay países que están tomando decisiones que están ahuyentando inversionistas que están buscando países con enorme potencial, y esa ventana que se ha abierto es la que queremos aprovechar”, dijo el ministro de Economía y Finanzas peruano, Álex Contreras.
Daniel Jiménez, who spent 28 years at SQM, said: “If it was my money, I would go and explore Argentina, Brazil and Africa. You’ll get ripped off in Chile.” Jiménez is now a consultant and independent director for Galan Lithium, an Argentine project.
Reg Spencer, analyst at Canaccord Genuity, said: “The Chileans have shot themselves in the foot. While the policy opens up opportunities for more development, it’s going to have the opposite effect because of the uncertainty.
Pacheco, the President of Codelco, is the same guy who, as Bachelet’s energy minister, promised a golden alternative-energy future for Chile back in 2016…
Update on the “nationalization of lithium” subject - and the way that Argentina is going about taking the regional lead away from Chile…
Credit to the Buenos Aires Herald, which in turn cites its source at Ambito.
Bearing in mind the history of Argentine expropriation of foreign investment, the comment on “no state intervention” in their lithium extraction should have some sort of caveat like “sort of not a lot of state intervention” and “at least for the time being.”
DW predicts that Argentina will overtake Chile as largest regional lithium producer in 2035. Article in Spanish
Secretary of State Blinken is the most senior Biden administration official to visit Argentina since Milei won office last year promising “shock therapy” for the economy through austerity measures.
“The work that’s being done to stabilize the economy is absolutely vital,” Blinken said at a news conference, calling his meeting with Milei earlier in the day “incredibly positive.”
The U.S. was exploring investment opportunities in critical minerals, especially lithium, through its International Development Finance Corporation and a new Minerals Security Partnership, said Blinken, adding Washington wants U.S. companies to remain Argentina’s partner of choice.
Back in Nov (2023) there was an EMOL news piece that a US lithium organization was finding Argentina more attractive than Chile for lithium investment.
Other countries are seeing normally unstable Argentina as the better place to go for lithium. Now Israel:
India
The Boric government and Chilean poor governance in general are going to give Argentina the edge.
