Lithium nationalism takes hold in the region with the most resources

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(Bloomberg) – Politicians in Latin America, a region that accounts for more than half of the world’s lithium resources, seek to increase the role of the state in an industry that is crucial to turning the world away from fossil fuels.

In Argentina, state energy companies are entering the lithium business as authorities make a bid to develop downstream industries. In Chile, a top presidential candidate wants to do something similar just as the nation drafts a new constitution that could lead to stricter regulations for mining companies. In Mexico, the government is studying the possibility of nationalizing lithium prospects.

It is true that no one in power is talking about expropriating production assets, and much of the anti-investment discourse in Chile comes from opposition groups. Yet by exacerbating inequalities and exposing supply chain vulnerabilities, the pandemic is fueling a resource nationalism that could lead to less favorable conditions for producers, just as they are looking to grow to take advantage of the nascent ion battery boom. lithium.

“The reliability of the resources and the country is something that the battery and auto companies look at,” said BTG analyst Pactual César Pérez-Novoa. “So it’s a risk.”

Argentine state oil driller YPF SA confirmed this month that it will explore for lithium and participate in the tender for battery production through a new unit, a strategy similar to the one it used to diversify into renewable energy.

President Alberto Fernández is revitalizing another state energy company, Ieasa, after the previous government tried to privatize many of its assets. Ieasa has said it will incorporate lithium into its business strategy, without giving further details.

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Lithium-producing countries have had little success in adding value to their commodity industries due to their distance from demand centers and, at times, the adverse business environment. In the case of Bolivia, the requirements to invest in downstream have been one of the barriers to extracting lithium from the deposits.

Argentina hopes to have close ties with China, its creditor of last resort, to open the door to the dream of local battery and electric vehicle plants. Argentine authorities have been in talks with Gotion High-Tech Co. and Ganfeng Lithium Co.

A bill drafted last year by Argentine lawmakers from the ruling Frente de Todos party that seeks to declare lithium a “strategic resource” is adding fuel to the fire. However, the bill is not currently under consideration, a party spokeswoman said.

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