Courtesy of The Economist, an article on Bolivia’s lithium potential:

The salar de uyuni a salt flat in southern Bolivia, is so vast and so white you can see it from the moon. It spans 10,000 km {+2} (4,000 square miles), roughly the area of Kosovo. The top layer consists of salt hexagons, thick enough to withstand the weight of Jeeps and igloo-like buildings made of blocks of salt. Underneath, a layer of brine holds the world’s largest deposits of lithium, a light and volatile metal used in batteries for smartphones, computers and electric vehicles.

Such staples of modernity are scarce in the countryside around the Salar. Río Grande, a dusty village founded by quinoa farmers and llama herders, sits near its southern edge, 25km from a pilot plant for lithium carbonate (a processed form of the metal) that opened in 2013. Over the past decade, the village’s 2,000 or so residents have invested in lorries to serve the plant and built simple hotels for workers they expect to flock to the area any day now.

But although Chile has been extracting lithium since the 1980s and Argentina is set to rival its production by the end of the decade, Bolivia’s pilot plant will produce just 600 tonnes of lithium carbonate this year, generating less than $5m in sales (see chart). By contrast Chile and Argentina are expected to produce 134,000 and 36,000 tonnes this year, respectively. “We’re still waiting for the boom,” says Corina Alí Lupa, a union leader in Río Grande.

Still dreaming

Indeed, after years of unmet targets and cancelled deals, lithium experts nearly gave up on Bolivia. But recent pledges by carmakers such as General Motors and Ford, along with countries such as Britain and South Korea, to increase production of electric vehicles have led to a new scramble for the minerals used to make them, says Simon Moores of Benchmark Mineral Intelligence, a consultancy.

Demand for lithium doubled between 2015 and 2020 to around 360,000 tonnes per year. Benchmark predicts it will soon outstrip supply by some 240,000 tonnes. The lithium market is highly speculative; past predictions of shortages have proven wrong, in part because people were slow to start buying electric cars. But the idea that sooner or later plug-in wheels will go mainstream has led to renewed interest in Bolivia. It has 21m tonnes of resources, according to the us Geological Survey. If it could extract more of them, it would noticeably increase the global supply.

It helps that, after nearly two years of political instability and an economic crisis, Bolivia has had a more business-friendly president since 2020. Luis Arce, a former finance minister, has signalled that he may be more open than his predecessors were to letting foreign firms dig for minerals in exchange for their know-how, financing and access to global markets.

During his campaign, Mr Arce hired Benchmark to help him develop a lithium plan. In April the government called for bids to help it develop a new technology called “direct lithium extraction” (dle). In July it announced that nine companies would begin pilot tests in the Salar. All this could help the country turn a corner in its quest to industrialise lithium.

In many ways, extracting lithium in Bolivia is harder than in other countries. As in Argentina and Chile, Bolivia uses solar evaporation to extract the metal. The process consists of digging a series of huge pools, the biggest of which has a surface area of 30 hectares. As the lithium-rich brine is transferred from one pool to the next, evaporation helps isolate different salts. But according to Renan Soruco, a chemist at the Tomás Frías Autonomous University in Potosí, “every brine is unique.” And Bolivian brine has proved especially tricky thanks to its high level of magnesium (around 17 parts to every one of lithium, compared with 4:1 in Chile’s purer brine). Bolivia’s rainy season also slows down evaporation. The Uyuni plant is able to extract only 15-20% of the lithium in its brine, says David Rocha, the plant’s director. Chile’s efficiency rate is around 40%.

 

But a bigger problem is political. In Chile two multinationals, sqm and Albemarle, hold licences to extract lithium. Argentina’s 24 provinces are free to grant concessions (although only three have lithium projects); the latest went to Uranium One, a subsidiary of Russia’s state nuclear company. Bolivia, by contrast, is still dominated by Yacimientos de Litio Bolivianos (ylb), the state lithium company, which controls all of the extraction and processing at the Salar.

Protectionism in Bolivia, always strong, grew more so under Evo Morales, a socialist who was president from 2006 to 2019. Soon after Mr Morales took office, he renegotiated natural-gas contracts with foreign firms and instructed Mr Arce, then his finance minister, to design an economic policy to redistribute profits. A new constitution in 2009 expanded state control over natural resources. The previous year, a plan to industrialise lithium mandated that the state oversee 100% of extraction, with foreign partners allowed in only at later stages.

Another problem is that some of the deals Mr Morales was willing to strike with foreign firms have been unpopular with activists. In 2018 the government hired Maison Engineering and cmec, two Chinese firms, to build an industrial-size lithium carbonate plant with a capacity to produce 15,000 tonnes each year. It also signed a deal with aci Systems, a German firm, for a joint venture to manufacture lithium hydroxide (another compound used in batteries) from the brine left over after the evaporation process. Bolivia would control 51% of the company. aci also agreed to help build an industrial-scale battery plant.

Some aspects of the contract struck many as unfair. It was to last 70 years, a long time for technology that is still experimental. Bolivia had preferential rights to just 17% of the lithium hydroxide produced. All sales in Europe would be handled by the joint firm, which meant that ylb could not negotiate its own deals and, if it failed to provide enough residual brine, aci could sell some of its lithium carbonate. Activists in Potosí, the region in which the Salar salt flat is located, demanded higher royalties. “The government was deceiving the population,” says Marco Pumari, who carried out a week-long hunger strike in October 2019 against the deal. (The deal with aci was eventually cancelled.)

 

Mr Morales was ousted in November 2019, after country-wide protests against an election perceived to be fraudulent. Lithium extraction was neglected under the inexperienced interim government of President Jeanine Áñez, while covid-19 imposed further delays on production. The ylb has had six presidents in the past two years. Juan Carlos Zuleta, a Bolivian lithium expert, was fired three weeks after getting the top job in 2020 because of protests by Río Grande residents, who believed rumours that his consulting work for the Chilean government meant that he was acting for Chile. “A country that is constantly in conflict can’t develop,” he sighs.

It looks like the future

This chequered past is visible in the present. At the ylb plant on a recent weekday at dawn, the smell of eggs wafted out of a turquoise pool, a sign of evaporating sulphates. Only 96 of 160 pools are currently in use; some are under repair, while others are empty due to a shortage of industrial-sized pumps for brine. Eight years after it opened, the lithium-carbonate pilot plant is still artisanal: one step requires a worker to pinch white powder between his fingers to test its consistency; another consists of two people rotating a huge metal tin of near-final product in front of a heater.

“We’re still stumbling a bit,” admits Mr Rocha, the director. He says he is under “a lot of pressure” to open the industrial-sized plant next year. It currently consists of little more than a steel shell. Experts warn that moving from small-scale to industrial production will require the development of new processes and the purchase of new machines. According to Benchmark, lithium factories take seven years on average to reach full capacity.

A lot of hope is riding on the tender for dle. This method is quicker than solar evaporation and less water-intensive. That should make it more palatable to the people around the Salar, whose farms are already suffering from climate change. Franklin Molina Ortiz, the minister for energy, says that in the short term, Bolivia will pursue a hybrid strategy that will use both the evaporation plant and new dle methods. But some are sceptical of a government plan, published earlier this year, that says the country will produce some 81,000 tonnes of lithium by 2025, 90% of which will come from dle, a relatively untested technology. “This is impossible,” says Mr Zuleta.

Yet only a decade ago people thought it unlikely that electric cars would become popular, notes Thea Riofrancos, a political scientist who focuses on resource extraction at Providence College in Rhode Island. Demand for lithium is now so strong that Bolivia could make a big business out of extracting it, even if it puts nationalism before efficiency.

 

Industrial-scale battery production is much harder to imagine, for reasons largely beyond the government’s control. Bolivia is landlocked and has terrible roads. It would have to import many components and exporting the batteries would be costly, even hazardous. A better option, though currently far-fetched, would be for South America to develop regional electric-vehicle supply chains, which might perhaps include Bolivian batteries.

Much will depend on demand in the medium term. Benchmark does not expect large quantities of Bolivian lithium to hit markets until at least 2030, when dle will be better developed.

Convincing Bolivia’s powerful campesino (peasant farmer) groups and unions to back a project also remains a challenge. Earlier this month mayors from around the Salar travelled to Germany to meet private companies interested in Bolivian lithium. This pleased residents of Río Grande, but irritated civic leaders in Potosí, who say they have been excluded from the government’s lithium plans.

It would help if a new law were drafted to regulate the lithium industry, possibly with some public consultation. This might set out rules for foreign involvement in extraction, which is currently banned, and change the royalty structure.

Ms Alí, the union leader, reckons that local mistrust of foreign investors is waning. Most residents support Mr Arce, she thinks. They hope that ramped-up production at the plant will boost infrastructure. Eventually, perhaps, a local university will open with degrees in science and technology, that will in turn lead to more skilled jobs. For now, she admits, these are dreams. “But we haven’t given up hope.”