Bolivia’s Lithium for Electric Vehicles: Another Opportunity Lost

The following was written by Dr. David Mares, Baker Institute Scholar for Latin American Energy Studies

The market for lithium has significant potential but is uncertain. Between 2000 and 2008 worldwide demand for lithium grew annually by 6%, and demand for lithium in battery applications grew by 22.1% per year. Bolivia appears to have a privileged place in the evolving lithium market; many call it the “Saudi Arabia of lithium.” The Bolivian government behaves as if it has significant market power, insisting on non-negotiable terms that would not only give it the bulk of the rents associated with lithium extraction, but also its transformation into lithium carbonate and battery production. In moments of great fantasy, the government even talked of complete dominance over the production chain by fabricating electric vehicles (EVs) themselves in Bolivia.

Multiple issues must be resolved before Bolivian production, still ten to fifteen years down the road by some estimates, could enter the market, particularly given the quality of Bolivian lithium, the country’s lack of infrastructure, and an unstable political environment, even within the pro-Morales forces. But is Bolivia too significant a source to be left out of the market, no matter how ineffective, unstable and risky their lithium policy? Will the mining companies, automobile companies and governments see enough potential in Bolivia to invest even as they expand their other lithium investments in Chile, Argentina and elsewhere?

Bolivia’s lithium politics is a fairly extreme version of resource nationalism at work. The core idea behind a resource nationalism perspective is that the natural resources in the ground or under the sea are a ‘national patrimony” and consequently should be used for the benefit of the nation rather than for private gain. In addition, the commodity itself is believed to have an intrinsic value, not one determined by the market, and this value belongs to the nation.

Unfortunately for Bolivia, the global supply side of the emerging market for lithium suggests that Bolivia will not dominate the market. New sources are being discovered as more attention is focused on rising demand. And a critical factor in the global market is that – unlike oil and gas markets – lithium is not consumed as it works in batteries, which means consumers aren’t regularly filling up on lithium and recycling will inevitably be a major source in the future.

In a working paper of the Baker Institute’s Energy Forum, I explain why Bolivia adopted policies that are likely to keep Bolivia’s lithium potential from being met. The market will do well without Bolivia, and thus the Bolivians will lose another opportunity (the potential to be the natural gas hub of South America was squandered a few years ago) to generate sufficient export revenue to develop a country in which almost two-thirds of the population lives in poverty.