Will lithium power prosperity in South America?

Deep in the heart of South America, beneath the world’s driest desert, lie rich deposits of a vital mineral. It’s lithium — an essential component in long-lasting batteries that power every laptop, cellphone, and electric car. Last month Chile shook the lithium industry by announcing that it is nationalizing its vast reserves.

From now on, President Gabriel Boric proclaimed, only companies owned principally by the Chilean state will be allowed to exploit the country’s lithium. The stock of Albemarle Corp., an American company that now mines Chile’s “white gold,” plummeted after his announcement.

“Lithium presents us with a tremendous opportunity that we cannot miss, and we have to do it differently than we have done before,” Boric said in an address to the nation on April 20. “No more mining for the few! We must be able to share our country’s riches with all Chileans.”

Much of central Chile is in South America’s “lithium triangle,” where more than half the world’s supply lies in underground brine reservoirs. The other two countries in the triangle, Argentina and Bolivia, want to join Chile in a producers’ cartel that will keep prices high and ensure that profits from their newfound wealth will remain in South America rather than migrating north. President Luis Arce of Bolivia said it would be “a kind of lithium OPEC.”

“We must be united in the market, in a sovereign manner, with prices that benefit our economies,” he asserted.

Lithium became much more valuable after the first lithium-ion batteries went on sale in 1991. These batteries, which are lightweight, rechargeable, and able to store large amounts of energy, enabled a great technological leap. Now the technology is also giving Chile, Argentina, and Bolivia a chance for new wealth.

By geopolitical coincidence, all three countries are led by left-oriented governments that jealously guard resources. Their people harbor unpleasant memories of past US interventions. They have no such memories of China, which is one reason they have welcomed Chinese companies to invest in lithium projects. That disturbs some in Washington.

The most prominent US official warning about Chinese designs on South American lithium is not a diplomat but a military officer: General Laura Richardson, chief of the Southern Command, which puts her in charge of all US troops in Latin America.

“This region is full of resources, and I worry about the malign activity of our adversaries taking advantage of that, looking like they’re investing when they’re really extracting,” General Richardson told a Congressional hearing in March. “The ground game they have with lithium is very advanced and very aggressive.”

Some leaders of the three “lithium triangle” countries interpreted that as a warning to avoid close partnerships with China. President Arce took sharp exception.

“We don’t want our lithium to be in the Southern Command’s crosshairs,” he said. “Nor do we want it to be a reason for destabilizing democratically elected governments or for foreign harassment.”

For centuries, big powers have pressured foreign governments to allow extraction of their natural resources on favorable terms. Those that refused sometimes suffered for their defiance. In 1953, after Iran nationalized its oil industry, Britain and the United States cooperated to overthrow the Iranian government. A year later, the CIA deposed a Guatemalan government that promoted land reform at the expense of the United Fruit Company.

Chile is among the countries that have fallen victim to foreign intervention due to conflict over a valuable resource. In 1971, the Chilean government nationalized the country’s copper industry. Two years later, the CIA supported a coup in which President Salvador Allende was deposed. The copper industry, however, remained under state control. Last month, when President Boric announced the country’s new “national lithium strategy,” he said he was following Allende’s model. Even before taking office, he had warned that Chile “cannot again commit the historic mistake of privatizing resources.”

All three “lithium triangle” countries are creating state-owned corporations to oversee extraction of the mineral. They are also seeking ways to become more involved in processing it and perhaps even to produce their own lithium batteries. This leaves a reduced role for private capital, one of the means through which the United States has traditionally projected economic power. The advantage may now swing to state-owned Chinese companies. If the United States comes to believe that it is being maneuvered out of this essential market, resource conflict could ensue.

Economists predict that world demand for lithium will soar 450 percent by 2050. That prospect makes this a historic moment for three large South American countries. Lithium can change their fates. It’s hardly guaranteed, however. Many countries have found resources to be a curse. From Indonesia to Honduras to the Congo, resources have attracted predatory foreigners who loot minerals in cahoots with corrupt locals.

Chile is a stable democracy and well placed to turn its newfound wealth to good use. Argentina, with its long traditions of mismanagement and demagoguery, may have a harder time. Bolivia, the poorest of the three, will succeed or fail according to the vision of its people and political class.

The challenge facing resource-rich countries is to use their natural wealth to benefit their people while fending off greedy outsiders. That was all but impossible during the colonial era and the Cold War. Chile, Argentina, and Bolivia hope it is possible today.

Stephen Kinzer is a senior fellow at the Watson Institute for International and Public Affairs at Brown University.

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