Is a lithium triangle alliance coming?

Latin American countries collectively hold over 50% of the world's identified raw lithium. These resource-rich nations have begun asserting that they will no longer accept extractive international trade relationships-hoping to leverage this natural wealth of a suddenly in-demand mineral to bolster the region's development and encourage the growth of specialized industries and clean energy infrastructure.

"We don't want to sell lithium to Europe ... we want to sell lithium vehicles that run with lithium batteries," said Argentina's undersecretary for Latin American and Caribbean affairs, Gustavo Martínez Pandiani.

Argentina is building the first lithium battery factory in Latin America, which will help move it beyond extraction and into the potential production of electric vehicles and batteries.

"That will allow us to develop our own capabilities in terms of our own industries, our own companies exporting with added value. That is the type of cooperation we want to develop," he said.

"This was the first time that we had the opportunity to discuss in such clear terms a mechanism that would take us away from extractivism in Latin America," Argentina President Alberto Fernández said at the Community of Latin American and Caribbean States Summit in Brussels last month.

Even though Argentina is an outlier with only about 20% of the world's resources still largely undeveloped, officials there have joined the table to discuss setting up a strategic regional alliance on lithium-or, in the words of Bolivian president Luis Arce "a kind of lithium OPEC."

Between the 1950s and 1980s, oil-producing countries like Venezuela and Saudi Arabia increased state involvement in their industries, finally launching the Organization of the Petroleum Exporting Countries (OPEC), defined as "a permanent intergovernmental organization of 13 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries" which today controls 40% of the global oil supply, its production, and prices.

Nationalizing lithium

Countries across South America have begun to exercise more control over their national resources and supply chains; for example, with only a couple projects in development by American Lithium, Peru's Congress is currently debating a bill that would declare the mineral a strategic public good and construct a national lithium plant, similar to Mexico.

The Peruvian government had also stated its intent to begin production of lithium batteries.

"We have a lot of reserves and we think this is an opportunity and a challenge to carry out extraction and value-added production," said Peru Vice Minister for Mines Jaime Chavez.

While Chile also announced changes, the new strategy does not fully nationalize its lithium industry; Chile's president Gabriel Boric honored existing contracts and did not expropriate any production facilities. Rather, the strategy outlines public-private partnerships for future lithium projects, with the state holding a majority share in a subset of those.

Chile's lithium plans, though focused on expansion and sustainability, met with uncertainty from investors and could open the door to Peru snatching up contracts as current projects stall and new projects must now be negotiated with the government. As the world's second-largest lithium producer, Chile's national strategy will be a litmus test for observing countries on alert to join the lithium race.

Even with only 1.7% of the world's lithium on hand, and that in difficult clay-based resources, Mexico created a state-run lithium company late last year, putting several present exploration deals into limbo in lieu of developing state control over the strategic resource. While this has been criticized for creating confusion and potentially deterring investors, the move is catching momentum.

Boric also has plans for Chile to develop lithium products in addition to the raw mineral, calling for more dialogue with communities near lithium deposits and a planned research institute dedicated to exploring emerging sustainable extraction technologies.

The country's two existing lithium mines in the Atacama Desert are currently operated by U.S. mining giant Albemarle and Chile's SQM and will be expected to pass to a state mining company within a few decades, with all future projects run as public-private partnerships.

Joining forces

Of the world's identified lithium resources – inching up just shy of 100 million tons per the 2023 U.S. Global Survey – Argentina possesses nearly 38 million tons, followed by Bolivia with 23 million and Chile with over 9 million.

While Chile has successfully transformed the majority of its available resources into economically viable reserves available for commercial production, Argentina and Bolivia have struggled to do so, largely due to unfavorable investment climates and more challenging geographic conditions. But unifying plans on the horizon may give these regions the support they need to begin production.

Bolivia, which has always kept its lithium in state hands, has been the most newsworthy alongside Chile in past months, calling for a joint Latin American lithium policy earlier this year, intending to fortify their countries against a history of foreign political and corporate power plays.

Arce expressed concern about historical foreign meddling, especially from the United States.

"We don't want our lithium to be in the [U.S.] Southern Command's crosshairs," the Bolivian president said.

He cited a similar proposal from Mexico's president, drafting a bill to Congress that would create a lithium ministry in an effort to have a more direct hand in extraction and profits, stating he would be willing to set up a strategic regional alliance, developing lithium policy with other Latin American countries to jointly benefit their economies.

Like OPEC, a similar path of creating a state-controlled, globally influential lithium industry in Latin America-an "OLEC," perhaps-could theoretically help the region control its resources and, by inference, its prices.

Plenty of interest

Higher lithium prices have made it viable for countries around the world to develop lithium deposits that were previously too expensive to access, a fact South America needs to take advantage of to keep its seat at the top of global production with Australia's hard rock lithium mines.

The governments of Argentina, Bolivia, and Chile-known collectively as the lithium triangle-have increasingly emphasized sovereignty over their natural resources, planning to strengthen state control over the industry and process their lithium domestically with company partnerships from other nations-including China, which already dominates global lithium markets with approximately three-quarters of the world's lithium-ion batteries, and is actively working to remain the international leader in most lithium operations.

Swooping into the gap left by uncomfortable U.S. foreign relations, the EU wants to become "the partner of choice" for Latin American countries, said European Commission spokesperson Sonya Gospodinova, maintaining the goal is "to jointly develop a competitive, sustainable and responsible industry for extracting, processing, refining and recycling critical and strategic raw materials."

Michael Schmidt, a researcher at the German Mineral Resources Agency, said betting successfully on nascent lithium sectors in the global market depends "to a certain extent, on whether a country already has a car industry, whether it already has a local supply chain industry ... and whether you have a domestic sales market or access to other markets."

Room to grow

South American governments' focus on state support, sharing of information, and accelerating the development of "direct lithium extraction" methods could potentially reinforce their edge in the global market while reducing environmental impacts and making extraction more efficient – and profitable.

Direct lithium extraction technology has the potential to double the yield of lithium from South America's majority of brine projects, improving sustainability and providing ESG credentials for its implementors.

Boric asserts that laying out Chile's public-private partnership strategy will create the certainty needed to spur investment, and that state control of lithium is the "best chance we have at transitioning to a sustainable and developed economy."

Lithium triangle governments support the adage of partnerships over hierarchies, seeming to risk financial setbacks to develop a self-sustaining industry of integration rather than competition. Old habits of conflict and intervention are being rejected and (if the U.S. can play ball) replaced with productive partnerships based on a higher priority – the clean energy transition.