Bolivia’s Lithium Isn’t The New Oil

The recent ouster of Bolivian President Evo Morales has sparked plenty of theories, especially on the left. One of the most prominent has been the idea that the military’s intervention is a coup intended to ensure U.S. control of a critical global resource: lithium.

That’s part of a tradition that sees U.S. foreign policy as being essentially about controlling natural wealth by any means necessary—one rooted in real American practices, from the deployment of U.S. Marines in defense of the United Fruit Company’s interests in Central America to President Donald Trump’s repeated orders to troops to protect oil, not Kurds, in Syria. But in this instance, the idea, heavily touted in the online left-wing media and by the occasional politician, is fundamentally mistaken.

Lithium is critical to batteries, clean energy, and electric cars—is lithium the new oil?

Lithium is undoubtedly important to the future economy, because it’s one of the key components in lithium ion batteries that power everything from laptops to many electric cars. U.S. strategists have been interested in it since the 1960s for just these reasons. And it’s only going to become more important as electric vehicles increasingly replace traditional cars. The lithium industry is currently trying to figure out just how it will supply roughly twice as much high-end lithium for batteries by 2025: Low prices currently have discouraged investment, which points to a possible supply shortfall in the near future—making any country with a lot of lithium potentially appealing.

“There’s a lot of misunderstanding, there’s this idea that lithium is rare and critical. It is critical. It is not rare by any stretch of the imagination.”

But there are limits to the comparison between lithium and oil, said Chris Berry, the founder of House Mountain Partners, an independent metals analyst. “There’s a lot of misunderstanding, there’s this idea that lithium is rare and critical. It is critical. It is not rare by any stretch of the imagination,” he said. And there are other differences from oil.

“What is challenging is producing battery-grade lithium at scale—that’s more a scientific and chemical challenge than just finding this stuff and digging it out of the ground,” Berry said.

So does exploding global demand for lithium explain the upheaval in Bolivia?

The notion that Evo Morales was an obstacle to the exploitation of Bolivia’s lithium potential, and that his ouster in some way is meant to open the door for multinationals to tap Bolivia’s mineral wealth, is upside down. For more than a decade, Morales talked of turning Bolivia into a lithium powerhouse and made the full-scale development of the country’s mineral resources a staple of his economic vision. While Morales spoke of using these resources to benefit all Bolivians, deals that would bring the benefits he claimed never really materialized.

The Morales government in recent years signed two contracts totaling over $3 billion for lithium development, with a Chinese firm and a German company. The cancellation of the contract with the German firm in early November, about a week before Morales resigned as president, sparked speculation in some quarters that he was the chief obstacle to exploiting Bolivia’s lithium. In reality, Morales was responding to weeks of protest by locals in the Potosí region (where the Germans hoped to set up their facilities), because many in the region felt they would see few or any economic benefits from the deal, which offered favorable royalty terms to the German firm—which, incidentally, was not a powerful multinational but a 20-person firm with no experience mining lithium.

The factors that led to Morales’s ouster, meanwhile, have been in play for long before the end of the deal—and so far there has been no indication that the next government will restore the German contract, or that the Chinese firm won’t run into the same problems with locals. Chinese-led initiatives, from the Myitsone Dam in Myanmar to mining in Mongolia, have just as poor a record of respecting local needs as Western-based multinationals do.

I read that China controls global lithium production, which is why the United States wanted to frustrate it.

China dominates the production of lithium-ion batteries, for the same reason it rules so many other areas of manufacturing: moderately cheap, well-educated labor mixed with extensive infrastructure, combined with major government investment in electric vehicles. That’s an issue U.S. strategists have raised in the last few years, but the problem isn’t a lack of supply of lithium itself; China sources most of its lithium from Australia and Chile, rather than domestic mining.

But doesn’t Bolivia have world-class supplies of lithium?

Yes—and no. On paper, Bolivia has probably more potential lithium resources in the ground than any other country. The U.S. Geological Survey is more than doubling its estimates of Bolivia’s lithium resources in an upcoming report —from about 9 million tons in its February estimate to about 21 million tons, or roughly 30 percent of global resources—and detailed surveys have only been conducted in some areas of the country. That means Bolivia could have even more lithium in the ground.

But there is a huge difference between having mineral resources in the ground and turning those into economically viable mineral reserves. “Resources” refers to minerals in the ground; “reserves” are resources that can be mined or otherwise extracted at a reasonable cost. That means only a fraction of a country’s resources can ever be considered economically viable reserves, let alone commercially competitive.

“Bolivia when it comes down to it is going to have more than its neighbors, but the question is whether they can extract it economically,” said Brian Jaskula, a mineral commodity specialist with the U.S. Geological Survey. “Having reserves doesn’t mean you are going to become a successful producer.”

Hang on—Bolivia’s lithium resources are geologically part of the same South American triangle that includes huge lithium operations in nearby Chile and Argentina. How hard could it be for Bolivia to match those countries?

Very, it turns out. Chile and Argentina have far higher-quality reserves of lithium and more favorable climatic conditions for the type of lithium mining carried out in South America. That means they are much, much more appealing as a source of lithium than Bolivia is, at least with current technology. They’re also both allies of the United States, as is Australia, the other major lithium producer. In other words, there’s no need for Washington to resort to shady means to ensure a questionable source for something it already has a plentiful supply of.

It’s true that the Morales government, which famously expropriated a number of foreign energy firms when it first took office, was seen as an obstacle by many foreign investors. But that was the least of many problems for anybody looking to make a profit from Bolivia’s lithium.

To extract lithium from the salty brine, mining companies let it evaporate in the sun. That’s fairly easy to do in Argentina and quite easy to do in the high, arid plateau in Chile. In Bolivia, in contrast, the main lithium formations are on lower, wetter ground. That means that evaporation takes a lot longer than in any of its neighbors—which adds greatly to the cost of production.

Bolivia faces two other obstacles. Its salt flats have low concentrations of lithium, which means it takes more investment to get the same amount of mineral out of the ground.

A bigger problem is the extremely high concentration of magnesium—about 20 times as much as in Argentina, and three times as much as in Chile. Current technology requires miners to get rid of magnesium salts by using lime, but that adds to the cost of extraction. Bolivia’s magnesium concentrations are about double the maximum acceptable for cost-competitive extraction, with no easy fix in sight. Bolivia’s poor infrastructure compared to its neighbors also makes operations even more expensive.

“Bolivia has been a no-go zone for a long time from a lithium investor perspective,” Berry said. Once lithium prices recover to a more natural level from today’s depressed prices, producers like those in Australia that get lithium from old-fashioned hard-rock mining will be much more competitive even than they are today. “Hard rock generates good returns, so investors don’t need to go into Bolivia,” he said.