Recharging Bolivia: Evo Morales' lithium dilemma.
Hopper, Anna
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Name: Harvard International Review Publisher: Harvard International Relations Council, Inc. Audience: Academic Format: Magazine/Journal Subject: Business; Economics; Law; Political science Copyright: COPYRIGHT 2009 Harvard International Relations Council, Inc. ISSN: 0739-1854
Date: Summer, 2009 Source Volume: 31 Source Issue: 2

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One of the poorest nations in Latin America, Bolivia saw a record-high 6 percent economic growth in 2008. Despite this improvement, the citizens of the landlocked country have yet to reap the benefits. The nation continues to lack basics like adequate health care and extensive infrastructure. And the outlook for 2009 is grim, as the IMF predicts only 2.2 percent growth. However, Bolivia's large lithium reserves have the potential to revitalize the country's economy.

The world's lightest metal, lithium has been rising in prominence for its use in batteries, powering everything from cameras to laptops to electric cars. Most of the world's lithium reserves lie in the Andean region of South America, with Bolivia containing an estimated 5.4 of the total 11 million tons of the mineral under the Salar de Uyuni, the largest salt flat in the world. Controlling such a large share of the world's resources, Bolivia potentially stands to profit immensely. But President Evo Morales will face a dilemma as he leads the development of lithium mining in Bolivia. Only if he can quickly find the right balance between his people's needs and international demand will he successfully be able to recover his country's economy.

The first indigenous president of Bolivia, Morales is committed to ensuring that his people reap the benefits of their natural resources. Nationalization of the lithium industry is one option which Morales is considering in order to reach his goal. The Bolivian people would probably support such a step, as 61 percent of them approved a new, strictly socialist constitution in January 2009. And Morales has set a precedent. In 2006, on his one-hundredth day in office, he nationalized both the oil and the natural gas industries. In addition, Bolivia has also taken steps to begin lithium extraction independently. Comibol, the government-controlled mining company, is currently in the process of constructing a lithium plant. Though it is set to begin some operations in 2010, it is not scheduled to be complete until 2012.

Although still an option, nationalization seems unlikely in the near future. Despite the construction of the Comibol plant, Morales and his advisors know that Bolivia lacks the infrastructure and the money to invest in the lithium industry, much less the technology to extract the mineral effectively on a large scale.

Given Bolivia's lack of expertise, Morales has been searching for foreign companies willing to partner with his nation to extract the lithium. Many companies are eager for extraction contracts, but Morales will not settle for foreign companies coming into his nation, mining the lithium, and then leaving with the proceeds. Instead, as he told reporters in March 2009, at least 60 percent of the profits from the lithium must stay within the country. Additionally, he hopes to mandate the construction of products like lithium-ion batteries and potentially even electric cars within Bolivia to help strengthen his country's economy in the long--term.

If President Morales can find foreign companies agreeable to his terms, this option may be the best for Bolivia. And a few French and Japanese corporations, including car manufacturer Mitsubishi, have expressed interest in meeting Morales' demands. Over the first several months of 2009, they repeatedly met with Bolivian officials to try to iron out an agreement. In March Morales asked several of these companies to join a scientific committee to determine the best methods of extraction. But as of the beginning of June 2009, the Bolivian government was still in the process of evaluating the various proposals, and no deal had been struck.

Morales must proceed quickly and carefully with the negotiations. So far his government has set only one deadline: they must close negotiations with the multinational corporations before the 2012 completion of the Comibol plant. But Morales would be wise to make a decision before then--lest foreign corporations decide they are better off taking their money elsewhere.

Foreign companies, for example, may decide that lithium is not worth the effort and begin to search for alternative technologies. Nickel-ion batteries are already in use in Toyota's hybrid car, the Prius. While those batteries are not as ideal because they are larger and less efficient than lithium-ion ones, they may suffice until a better technology is developed. Companies might also decide that it will take too long to install the necessary infrastructure in Bolivia, and instead invest in nations like Chile, where infrastructure is already in place. Finally, international corporations may fear that Morales' government plans to nationalize the industry later, once foreigners have brought in the technology and infrastructure that Bolivia needs. Such concerns could lead investors to search for less riskier places to do business.

Given these possibilities, Morales should decide soon what steps to take in order to take advantage of Bolivia's position in the lithium market. Bolivia is a solidly socialist country; but if it hopes to improve its failing economy, it may have to step back from its new constitution and commit to long-term partnerships with multinational corporations willing to invest in its future infrastructure and technology. Morales must be careful to make the right decision and to make it quickly. Lithium appears to be Bolivia's one big chance to make its mark on the world. Hopefully, the government can reach a decision on this issue soon enough so that all of the Bolivian people will benefit from it.
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Copyright 2009 Gale, Cengage Learning. All rights reserved.