In southwestern Bolivia, high in the Andes, near a mountain which, though now largely mined out, in its day provided vast amounts of silver for the Spanish empire, sits the city of Potosí. In northern Chile’s Atacama desert are the ruins of nineteenth-century company towns where the nitrate which provided Europe with both gunpowder and fertilizer was once mined.

These areas, together with adjacent regions in Argentina, may see a new natural resource boom, this time for lithium, the metal key to the production of batteries that can store electricity for extended periods, which will be of vital importance as the world grapples with climate change and looks to move away from the internal combustion engine for transportation.

The Next Big Mining Play?

These parts of Chile, Bolivia, and Argentina—together known as the lithium triangle—are uniquely endowed with this mineral. However, a range of complications makes the future of South American lithium uncertain. It may be that lithium provides a sustained boost to these countries’ development. Or it may only provide a short-lived boom, leaving poverty and a degraded landscape in its wake. Or, the lithium triangle may be bypassed as other regions definitively pull ahead of it. Much will depend upon the policies that the three countries adopt.

Rising global prices have sparked a frenzy of investor interest. Websites tout lithium mining firms, some already with operations, some highlighting unworked concessions, and some boasting innovative yet untested technologies. Some miners boast of connections with major firms such as Germany’s Volkswagen AG or South Korean steel giant POSCO while others are shoestring operations. Tip sheets promote investments, egged on by comments such as Elon Musk’s statement that the sector was “a license to print money.”

Lithium is found throughout the world, although usually in low concentrations which are uneconomic to mine. The triangle, however, has large salt flats, (dried-up lakes) where underground water mixes with mineral deposits into a brine which can be pumped out and dried in large open-air ponds which take advantage of the region’s low humidity and high altitude. The resulting material is then shipped to plants (many in China) to be used in battery production.

While salt flats exist elsewhere, such as in Tibet, where China extracts lithium, the main current alternative to the lithium triangle is Australia, where lithium is extracted directly from rock through conventional open-pit mining. And indeed, Australia, long a welcoming location for mining investment, overtook Chile in 2017 as the top lithium producer. But production from salt flats’ brine provides better profit margins than hard rock mining, making the triangle the more attractive prospect for mining investment at present.

Bolivia—Big Plans, but No Mines Yet

Each of the triangle’s three countries has adopted its own path to respond to global lithium demand. Bolivia’s has been the least successful to date, despite the fact that its vast Uyuni salt flat gives Bolivia the largest overall lithium reserves in the world. But Uyuni has its own complications. Its brine includes other minerals such as magnesium which must be removed in processing, which adds to the cost. Also, it is at a lower altitude and in a more humid area than the Argentine or Chilean salt flats, requiring lengthier periods for the lithium-rich brine to evaporate, again adding to costs.

Nonetheless, sheer size makes Uyuni an interesting prospect. However, the nationalist policies in effect during the presidency of Evo Morales (2006-2019) and current president Luis Arce (2020-present) have impeded development. (During the brief presidency of conservative Jeanine Añez (2019-20) who took office after Morales’ forced resignation amidst allegations of electoral fraud, there was little movement regarding lithium; despite this, Morales’ supporters have claimed without evidence that his removal had been the result of U.S. machinations to gain control of lithium.)

Under Morales and Arce, Bolivia’s policies have zigzagged. The initial position was that lithium should be mined by a state corporation which should also process it through to batteries. Several hundred million dollars have been invested in plants for initial processing despite the fact no lithium is yet being mined. Seeking to jump-start mining, Morales then entered a joint venture with a small German firm. 

In the face of local objections and criticism that the firm had received too generous terms, the deal was subsequently annulled. The current president, Arce, is now working with a consultancy with the aim of attracting investment on better terms, while maintaining Bolivia’s desire to maximize its participation in downstream processing. Six bidders for concessions are being considered and announcements are supposed to be made in December. But based on the history of lithium in Bolivia, there is room for some skepticism as to whether the government can ever get to “Yes.”

Chile—A Long Mining History, But Messy Politics

Chile is the largest of the triangle’s lithium producers, and mining has ramped up after decades of small-scale lithium production for medical and other purposes. Chile has an extensive mining history and is the world’s largest copper producer with multinational mining firms present in addition to state giant CODELCO. Its legal regime is generally favorable for investors although royalties to the state have increased in recent years.

Lithium is mined in the Atacama salt flat in far northern Chile by two firms, U.S-based Albemarle and SQM, a Chilean firm whose roots date back to the nitrate boom. Their production allowed Chile to become the world’s largest lithium producer until Australia’s hard rock mining overtook it. Both companies have received permission to expand their operations and are well-situated to benefit from increasing demand. However, no other firms have received concessions, and the industry faces some clouds on the horizon.

Long considered a stable environment for investment during three decades of centrist governments, in 2019 Chile saw a “social explosion” of extensive street protests marked by violence that ultimately led to the convocation of a constitutional convention in 2022 which was dominated by leftist activists. The convention considered a proposal for the complete nationalization of Chile’s mining sector. Although it was omitted from the final draft, strong provisions on environment and water rights clearly presented challenges for the mining sector, including lithium. However, the draft constitution was eventually rejected as too radical by the Chilean people in a referendum; whether there will be a new convention and what mandate it will have is yet to be determined.

This year also saw the election of leftist Gabriel Boric to the presidency. During his campaign, he called for the creation of a state lithium mining enterprise. It was unclear what its relation would be with existing private operators or whether there would be room for others in the future. But with his government’s attention focused on major pension and health reforms, mining legislation does not seem to be at the top of his agenda. However, tax reform is being negotiated with Chile’s Congress and the mining sector may face still higher tax rates and royalty payments. 

The Boric government is attracted to the concept of regional integration, and a senior Chilean trade official has called for a joint industrial policy with Bolivia and Argentina regarding lithium. It is unclear whether this idea, which could further slow down the process of developing the resource, will gain any traction. Also, the environment is a top priority for the Boric administration, which has signed the region-wide Escazú treaty which mandates public participation in matters affecting the environment. And some big copper mining projects have failed to receive permission to go forward, all of which adds to investor concern regarding the mining sector broadly.

Argentina—A Surprising Option

Paradoxically, the most welcoming investment climate in lithium triangle countries is found in Argentina. Historically it has been a hostile environment for mining investment despite its large resource base. While ever since the rise of Juan Perón in the 1940s, nationalism, statism, and suspicion of foreign investment have been a feature of political life, during the more investment-friendly government of Carlos Menem in the 1990s, Argentina passed mining legislation that provided for relatively low royalties.

Argentina’s federal system, in which mining revenues are split between the central government and the provinces, enhances the prospects for lithium mining. This system creates a built-in lobby from the provinces which, always strapped for funds and dependent on revenue sharing from Buenos Aires, are happy to see new mining projects. Right now, there are two existing mining operations, one belonging to U.S. firm Livent on the eloquently named Hombre Muerto (Dead Man) salt flat and one belonging to Australia’s Orocobre, together with a Japanese partner, on the Olaroz salt flat. Thirteen as yet non-producing concessions have been granted for lithium development on Argentina’s salt flats. Of course, it remains to be seen which, if any, of these concessions will actually be worked, and in some cases, they have been passed from one owner to another.

But investments of any kind in Argentina require a strong stomach. The governing Peronist-led coalition is divided into radical and more moderate factions and is riven by personal disputes. Anti-foreign (and particularly anti-U.S.) sentiment is never far from the surface. Inflation is running at 100 percent as the country struggles to meet the requirements of its latest IMF program. Corruption and politicization of the courts and bureaucracy are endemic. Still, with the resource in place and the basic legal regime adequate, investor interest remains high.