South America’s Lithium Triangle: Opportunities for the Biden Administration
August 17, 2021
As the impacts of climate change ripple across the globe, lithium’s importance as a strategic mineral will increase exponentially to become an essential component for the clean energy systems of the future. The creation of lithium-ion batteries in 1991 transformed electric technology by virtue of their power as rechargeable, lightweight batteries that could store large amounts of energy. In the past five years alone, demand for lithium-ion batteries has skyrocketed, with the price of lithium doubling between 2016 and 2018. This trend is expected to continue well into the future—the lithium industry is expected to grow nearly eightfold by 2027. Concomitantly, the strategic importance of lithium will grow as the world attempts to meet the increasing demand for electric vehicle batteries and clean energy. These trends indicate that control of the lithium industry could reap major benefits in the future, which will likely increase the geopolitical contention between great powers.
Latin America is the region of the world with the largest amount of lithium. Its so-called Lithium Triangle will inevitably become the nexus for the coveted mineral, which is often referred to as “white gold.” The Lithium Triangle is a lithium-rich region in the Andean southwest corner of South America, spanning the borders of Argentina, Bolivia, and Chile and forming a geographic triangle of lithium resources underneath their salt flats. Approximately 58 percent of the world’s lithium resources are found in these three countries, according to the 2021 USGS Mineral Commodity Summary.
Of the world’s 86 million tons of identified lithium resources, Bolivia possesses 21 million tons, followed by Argentina with 19.3 million tons, and Chile with 9.6 million tons. While Chile has successfully transformed the majority of its available resources into economically viable reserves available for commercial production, Argentina and Bolivia have thus far failed to do so, largely due to unfavorable investment climates and more challenging geographic conditions.
Given both the importance of lithium for the development of clean energy technologies and the vast quantity of commercially viable lithium reserves in the Lithium Triangle, the Biden administration has ample reason to collaborate with Argentina, Bolivia, and Chile in the fight against climate change. Indeed, much of the administration’s diplomatic approach to the Western Hemisphere takes place through the climate change lens. While a large part of the conversation on climate change and clean energy in Latin America centers around deforestation of the Amazon rainforest in Brazil and the ongoing environmental devastation in Venezuela (which some have called an “ecocide”), the Lithium Triangle warrants increased attention from the Biden administration because of its outsized impact on the future of green technology and the transition to cleaner sources of energy.
The Lithium Triangle
As a mineral, lithium can be found naturally either in hard rock deposits or in salt lakes (salares). It is commercially viable after it is extracted through mining. Australia, the world’s largest producer of commercial lithium, mines directly from hard rock deposits. In contrast, the Lithium Triangle countries are characterized by natural deposits of lithium found underneath the expansive salt flats in Argentina, Bolivia, and Chile. Chile’s favorable arid climate makes the process of lithium extraction and evaporation easier than in neighboring countries Argentina and Bolivia. While both the geographical context and the climate of the Lithium Triangle are important factors for the successful extraction of lithium resources, the unconducive investment climate in Argentina and Bolivia has been an even more determinant factor in the transformation of their lithium resources into commercially viable reserves.
Argentina provides the most promising case for expansion of the lithium industry as it seeks opportunities to expedite its economy recovery. It possesses the world’s second-largest identified lithium resources (behind only Bolivia), and the third-largest quantity of commercially viable lithium reserves behind only Chile and Australia. In terms of production sites, it has two commercially operational salt flats in its northwestern provinces of Jujuy and Catamarca: Salar de Olaroz and Salar del Hombre Muerto. Since 2019, many other lithium extraction mining sites have been under construction in Argentina’s vast northwestern region of salt flats. Furthermore, in an effort to stimulate investment, President Alberto Fernández reduced taxes on mineral exports this year. Argentina’s slowly improving investment climate indicates that its lithium industry can be expected to attract increased investment over the coming years.
Bolivia possesses the world’s largest identified lithium resources and is home to the world’s largest salt flat—Salar de Uyuni. Nevertheless, Bolivia has struggled to transform its lithium resources into commercially viable reserves, due in large part to the poor investment climate borne of the country’s political instability. In 2018, a privately owned German firm, ACI Systems, signed a joint lithium venture with Bolivia’s state-owned company, Yacimientos de Litio Bolivianos (YLB). However, the deal was annulled in 2019 amid Bolivia’s political turmoil and has yet to be reinstated under President Luis Arce of the Movement For Socialism (MAS) party, who promised to increase the productivity of Bolivia’s lithium industry. It remains to be seen how Arce will approach the need to make Bolivia’s lithium industry more attractive for investment than it was under his predecessor, Evo Morales.
Finally, Chile possesses the largest quantity of commercially viable lithium reserves in the world—despite having far fewer potential resources than both Bolivia and Argentina—and is the world’s second-largest commercial producer after Australia. While a favorable desert climate and access to the Pacific Ocean augur well, Chile’s lithium industry has both a longer history than other countries—lithium was discovered in its Salar de Atacama in 1962—and the support of a favorable investment climate. Two main companies control Chile’s lithium extraction industry: Albemarle, a U.S.-based company that also controls the largest lithium operations in Australia, and Sociedad Química y Minera de Chile (SQM), Chile’s largest lithium mining company.
How the Lithium Triangle Became a Strategically Important Region
While lithium will be crucial in the transition to clean energy, the particular process of lithium extraction used in the Lithium Triangle also presents several environmental issues. Mining in the salt flats occurs through a process of brine extraction, which involves a lengthy procedure of up to 18 months. Mineral-rich brine is extracted from beneath the salt flats, and subsequently, undergoes a process of evaporation to separate the lithium from other minerals. The water-intensive nature of this process is also highly concerning—it requires 500,000 gallons of water per ton of lithium extracted. In Chile’s Salar de Atacama, for instance, lithium extraction by Albemarle and SQM could induce a water sustainability crisis. The remaining water supply risks contamination from certain chemicals used in the lithium evaporation process. Agricultural activities also suffer from the water shortages and potential contamination, which, in turn, affect the local indigenous communities in the region. These issues of concern are not unique to South America; some of them are replicating themselves in lithium extraction operations in Nevada. In this context, the lithium industry must find a way to balance between the opportunities for increased lithium extraction and the environmentally suspect parts of the extraction process.
The Lithium Triangle’s emerging strategic importance, however, continues to attract the interest of significant foreign investment, as countries seek to gain a technological advantage through control of the lithium industry. Since lithium supply chains will be crucial for the future of technology and clean energy, lithium will play a role in great power competition between the United States and its competitors, principally China, in the coming years. China currently leads the world in the production of electric vehicles. In large part, this is because it has acquired 55 percent of the chemical lithium supply required for electric vehicle batteries, primarily through its early investments in the largest mining production operations in Australia.
To maintain this competitive advantage, Chinese companies are now increasing their investments in the Lithium Triangle. China’s Ganfeng Lithium, for example, is the majority stakeholder in Argentina’s Caucharí-Olaroz operation, which is set to begin production by mid-2022 and should become one of the world’s top lithium production mines. Additionally, Chinese investment in Argentina’s lithium industry may occur through its Belt and Road Initiative, which Argentina is expected to join in the near future. Similarly, in Chile, China’s Tianqi Lithium became the second-largest shareholder in SQM, Chile’s largest lithium mining company, holding 23.8 percent of shares. Chinese companies Ganfeng Lithium and Tianqi Lithium now represent two of the top three lithium mining companies in the world.
Not only has China increased its investment in the Lithium Triangle countries, but it has also strengthened its bilateral relationships through its vaccine diplomacy. Both Chile and Argentina have depended heavily on the Chinese vaccines Sinovac and Sinopharm to vaccinate their populations against Covid-19. As China furthers its influence in the Lithium Triangle countries through increased investment, but also through its aggressive vaccine diplomacy, it will likely continue its dominance of the emerging lithium industry. Confronted with such a reality, the United States should strengthen ties with the Lithium Triangle countries in a post-pandemic context, as investment is desperately needed to jumpstart regional economies buffeted by Covid-19.
Policy Recommendations for the Biden Administration
The Biden administration’s ambitious foreign policy goals on climate change and clean energy present a unique opportunity for engagement with many countries in Latin America. With the strategic importance of lithium rising as an eventual means to combat climate change, the Lithium Triangle countries can be key partners for the Biden administration’s goals at home and abroad. Domestically, if the Biden administration hopes to reach its 50 percent target reduction in carbon emissions by 2030, the lithium-ion battery’s energy storage capabilities will be necessary to transform the electricity grid by capturing excess solar and wind power in the United States.
Internationally, strong public-private partnerships with Argentina, Bolivia, and Chile could lead to increased exports of lithium from South America to the rest of the world, helping countries on a global scale reduce carbon emissions. While it might be a long shot, strategic partnerships and targeted investments in technological firms in the Lithium Triangle could also stimulate regional production of lithium-ion batteries—rather than only raw material exports—that would aim to decrease dependence on Chinese supply chains and possibly nearshore the lithium-ion battery industry in Latin America.
The United States’ historically rocky relationship with both Argentina and Bolivia—countries currently run by left-leaning governments that are often critical of the United States—presents a challenging landscape for such cooperation. If done properly, however, partnership on these issues could infuse more dynamism into several bilateral relationships in the region. With this strategic outlook, the Biden administration would benefit from increasing its attention and resources toward working fruitfully with the Lithium Triangle countries to find ways to increase investment into the region’s lithium resources.
To cooperate with Argentina, Bolivia, and Chile in the lithium industry, the Biden administration, led by Special Presidential Envoy for Climate John Kerry, could organize a clean energy forum for the top lithium-producing nations, which, in addition to the Lithium Triangle countries, would include Australia, China, and Canada. Such a forum would discuss more environmentally friendly approaches to leveraging lithium for the future of technology. Reports indicate that Argentine President Alberto Fernández is considering convening a similar summit. This collaborative effort could increase investment partnerships with Argentina, Bolivia, and Chile, as well as find solutions to common lithium extraction challenges faced by each of the lithium-producing nations. A global partnership with the Lithium Triangle countries, other key allies, and China—the world’s top emitter and most important partner for combating climate change—could move the Biden administration’s foreign policy agenda forward and provide a platform for lithium to become a critical component of the global clean energy transition. Such efforts are warranted, as Latin America is a region that has vastly underspent on green post-pandemic recovery efforts, despite the fact that the UN Intergovernmental Panel on Climate Change recently released a catastrophic report indicating greater impact on Latin America than on many other regions in terms of increased droughts, hurricanes, and weather-related disasters; melting of Andean glaciers; and threats to the region’s coastal infrastructure.
Further, to combat the environmental effects and energy-intensive nature of lithium extraction, the Biden administration should increase investment in emerging extraction technologies. Current research suggests that direct lithium extraction (DLE), a process by which lithium is extracted from brine water without the use of evaporation pools, preserves over 98 percent of the water supply used during extraction. Successful implementation of DLE technologies in the Lithium Triangle would appear to reduce externalities on the local water supply and the concomitant effects on indigenous communities. The United States would benefit from mobilizing investment into the Department of Energy’s current research on DLE technologies. Not only would DLE be useful for existing operations in Argentina, Bolivia, and Chile, but it would also demonstrate the United States’ long-term commitment to stimulating economic growth and cooperation with its Latin American partners.
Through a combination of strategic investment, targeted research, and effective diplomacy in partnership with the Lithium Triangle countries, the Biden administration could strengthen the imperative of combating climate change in its foreign policy agenda, strengthen its hand in the unfolding competition with other great powers, and furnish more clean energy opportunities in the region.
Ryan C. Berg is a senior fellow with the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. T. Andrew Sady-Kennedy is an intern with the CSIS Americas Program.
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