According to Reuters article published on April 27, 2023, Chilean President Gabriel Boric's pitch last week to enshrine greater state control over lithium is emerging as the latest test for the resource nationalism embraced by Latin America's ascendant left but which has proven tough to implement in practice.
While the former student protest leader's proposal to give the government a majority stake in all future lithium projects faces an uncertain path in Congress, its mere introduction shook one of the mining industry's most lucrative corners.
The push from Boric, 37, also highlights the long-running regional tension between governments' hunger for control of coveted commodities and future profits versus their ongoing need for private sector capital and know-how.
"In Chile, its probably going to be the most significant case," said Carlos Pascual, top energy executive with IHS Markit, referring to other regional efforts to exert more government control over the mineral seen as key to a greener future and citing Chile's outsize role in the global metals market as the world's top producer of copper and No. 2 in lithium.
"This is seen as an opportunity to ensure direct revenues to the state just as many countries decided to make the decision to nationalize oil in a different era," he added.
Last year, Boric's fellow leftist in Mexico, President Andres Manuel Lopez Obrador, enacted a sweeping lithium nationalization and later ordered the creation of a new state-run lithium company, LitioMx, even though the country is still far from selling its first cargo of the ultra-light metal.
Lithium is in high demand for rechargeable batteries for future fleets of electric vehicles in the global transition to green energy.
Lopez Obrador, who reveres the country's landmark 1938 oil nationalization, justified his policy as its logical extension. He invoked past abuses at the hands of colonial masters and more recent corporate titans, arguing that only the government can prevent exploitation and ensure broadly-distributed benefits.
Across the world, nationalizing oil industries in particular has proved attractive as a means of cashing in on valuable raw materials and boosting development, even as competitive commodity markets often see more output and innovation.
Illustrating the challenges of starting from scratch, a Mexican official knowledgeable about government plans for mining, however played down the possibility the new state lithium miner might achieve production anytime soon, instead touting a different option.
"LitioMx could drive the value chain by importing lithium," the official told Reuters.
Asked for comment, a spokesman for Mexico's energy ministry stressed that LitioMx remains focused on finding and extracting lithium, and while future imports could be considered "it's too early for that."
Unsurprisingly, mining companies are less than ecstatic about the statist tilt of Lopez Obrador and Boric, who stressed that under his plan private miners would be able to partner with a not-yet-created state-owned producer, but only as minority stakeholders.
"It's a brave bet to ask an investor to prefer an uncertain marriage with a state company and a minority stake risking capital and technology as opposed to simply flying alone," said Armando Ortega, who chairs the executive committee of Baramin, Mexico's biggest producer of barite, a mineral used in oil drilling.
STATIST TREND
Chile and neighbors Bolivia and Argentina are believed to hold more than half of the world's extractable lithium in otherworldly salt flats that typically employ evaporation pools to concentrate the metal, though new technologies are also being developed.
The ruling socialists of Bolivia have also insisted that the state take the driver's seat in unlocking its huge but untapped reserves, although it is counting on the help of partners like Chinese battery giant CATL (300750.SZ) to do so.
Peru, a mining powerhouse best known for copper, might have pursued a similar approach to Boric to bolster its development of lithium had former President Pedro Castillo not been ousted late last year.
The leftist Castillo won a narrow victory in 2021, pledging to nationalize the ultra-light metal along with other minerals including copper, but later moderated his position, leaving the promise unfulfilled.
Ivan Merino, who was Castillo's first energy and mining minister, said in an interview on Monday that Peru is for now watching from the sidelines as the resource nationalism trend gains steam.
"It's now almost commonplace," he said. "We will see history made, but without participating in it."
That leaves the exception to the trend, Argentina, as an increasingly likely Latin American destination for new private capital for lithium.
"That's not because Argentina is doing what needs to be done, but rather because of our neighborhood's upheavals and the world's spiking demand," said Santiago Dondo, its former deputy minister for mining.
A strong pipeline of lithium projects in Argentina, the world's No. 4 producer, are already close to coming online.
Dondo said the four political parties in the main opposition coalition to outgoing leftist President Alberto Fernandez recently voted to endorse private enterprise as the sector's main motor ahead of elections later this year.
He noted that local control over mining in three key provinces in northwest Argentina managed to help thwart any moves toward lithium nationalization at the national level a couple years ago, boosting investor sentiment.
But Dondo still worries that lithium could be eclipsed by another battery technology.
"We don't know how many years we'll have this huge window of opportunity," he said. "Change in the energy transition is getting faster all the time."
