Lithium Economics

As Others Snub Bolivia’s Lithium, Will Morales’ Gamble on Germany Pay Off?

May 23, 2018

In a recent interview with Americas Quarterly, Juan Carlos Zuleta, Lithium Economics Analyst, discusses the recent decision by the Bolivian government to award German company ACI Systems the industrialization of lithium in the country.

BY FREDERICK CLAYTON

PUBLISHED: TUESDAY, MAY 22, 2018

HTTP://WWW.AMERICASQUARTERLY.ORG/CONTENT/OTHERS-SNUB-BOLIVIAS-LITHIUM-WILL-MORALES-GAMBLE-GERMANY-PAY?UTM_CONTENT=BUFFER99458&UTM_MEDIUM=SOCIAL&UTM_SOURCE=TWITTER.COM&UTM_CAMPAIGN=BUFFER

Ahead of next year's election, criticism surrounds Evo Morales' efforts to take advantage of a global energy trend.

President Evo Morales wants Bolivia to become the Saudi Arabia of lithium, setting the global price for the mineral. It could happen – the country has one of the world’s largest untapped reserves of the strategic commodity, which is required for the batteries that power cell phones, electric cars and more.

The timing is also right: As many nations pledged to outlaw diesel and gasoline-powered cars, prices for the coveted mineral skyrocketed in 2017. This gave Morales further impetus to open Bolivia’s doors to foreign investment and technology, and back away from the protectionist policies and rhetoric that characterized the start of his political career.

But as an election in 2019 approaches, concerns linger over Morales’ most recent efforts to exploit the country’s vast reserves, drawing attention to his as-yet unfulfilled ambitions for Bolivia’s lithium. Meanwhile, some observers question whether lithium mining is even feasible for Bolivia.

Such doubts are particularly relevant since Bolivia secured a $1.3 billion investment from Germany’s ACI Systems GmbH in its lithium project in April – the country’s biggest step yet toward realizing Morales’ lithium goals. In 19 months’ time, ACI Systems GmbH is scheduled to begin working with Bolivia to manufacture and market lithium batteries, generating $1 billion a year in net profits, according to Juan Carlos Montenegro, head of the state-owned company Bolivian Lithium Deposits.

Until now, a lack of expertise and market opportunities have hindered Bolivia’s venture into the lithium industry. After investing $450 million and nine years into lithium mining at its vast Uyuni salt flat, the project now produces just 10 tons of lithium a month – less than half of a percent of what Argentina and Chile each produce in the same amount of time.

A knowledgeable partner who understands the technology could help – but Morales may not have chosen the right one in Germany and ACI, said Juan Carlos Zuleta, a Bolivian lithium analyst.

“Germany is not at the leading edge of technology in many aspects,” said Zuleta, who thinks the recent deal was rushed. “I think by now most people know where the tech is. It is in the U.S. with Tesla.”

Some of his primary concerns also stem from Germany’s “negligible” production of lithium-ion batteries compared to production in the U.S. and China, and Germany’s lag in the electric vehicle market. Simon Moores, managing director of Benchmark Mineral Intelligence, echoed some of Zuleta’s concerns, pointing out that ACI has no experience with lithium.

“If (Bolivia) were serious about getting large volumes of lithium out of the ground and into EV batteries, they would get a major producer involved,” Moores told AQ. “Until then it’s more a pipe dream and less a reality.”

As of publication, Bolivia’s energy ministry had not replied to requests for an interview on the partnership, but a spokesperson for ACI Systems told AQ in a statement that “Bolivia’s intention was not to find a partner in the biggest markets, rather one that provides support along the complete value creation chain.”

The company added that they would be responsible for choosing the appropriate technology and marketing partners, as well as the training of Bolivian employees.

Ultimately, there were no bids from U.S. companies ¬– perhaps a sign that despite Morales’ more pragmatic approach to foreign investment of late, the relationship between Bolivia and the U.S. remains fractured after years of anti-U.S. rhetoric on Morales’ part.

Beyond questions of geopolitics and foreign know-how, some would-be investors doubt whether the lithium at Bolivia’s Salar de Uyuni flats can be extracted economically at all.

Waldo Perez, CEO and president of Neo Lithium, which operates in northwest Argentina, has concerns that high levels of magnesium in the Uyuni flats will make lithium production impossible.

“Everybody and his dog has tried this before,” Perez told AQ. “In the lithium tech community, we usually joke that we will print a t-shirt that says ‘I tried Uyuni too.’”

Perez shared concerns that Morales had rushed into making a deal.

“This is a waste of taxpayers’ money, on the basis of ‘we are doing something about it’,” Perez said. “Germany would be better served doing work in workable salares.”

If ACI Systems can defy expectations and produce where others dare not, then Bolivia will take its first real steps into a lucrative market in a decade when demand for lithium is expected to grow significantly in Germany and Europe.

But Morales’ ambitions also seem at odds with the amount of lithium he hopes to produce. He has outlined plans to produce 15,000 metric tons per year after 2020, still far less than Bolivia’s neighbors.

“The president said that with this production they will set the price in the world. That doesn’t make sense,” said Zuleta, the analyst. “They don’t seem to know the market.”

There are also those who argue that Morales’ partnership with Germany has expanded on an extractive economic model that continues to alienate much of the diverse indigenous population that helped bring him to power. The deal raises questions over whether and how the communities affected by increased industrialization will be involved in the project.

‘‘The government has the obligation to the local communities to say how these people will be incorporated into the project,” said Manuel Olivera, a Bolivian conservationist who has spent five years researching the effects of lithium industrialization at Salar de Uyuni. “Maybe there are positive effects, but they are saying nothing.” Many locals are wary of the development, he explained.

“Some people from the province, who have nothing to do with mining, who come from an agrarian background, they don’t like what is happening,” he said.

Bolivia’s new partner, ACI Systems, was keen to quell such anxieties and insisted in their statement to AQ that “major goals of the Bolivian government are that the use of the lithium is for the benefit of the Bolivian people and that the production will be environmentally friendly.”

Whether or not the skeptics are right, Morales may not be around to oversee the consequences of this exploration. His quest for a fourth term has provoked frustration in the country among groups that once supported him.

However, a change of leadership may help the new partnership along, said Zuleta. “If well managed, these resources could benefit the country, but maybe we need a new government,” Zuleta added. “I don’t think Morales is going to be part of the solution.”.

-- Clayton is a freelance journalist based between London and Latin America

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