Chilean far-left President Gabriel Boric announced plans to nationalize the country’s lithium industry in a national broadcast on Thursday evening.
The South American nation holds the world’s third largest lithium reserves and was the world’s second largest lithium producer in 2022. Lithium is one of the most important minerals fueling the “green” economy, necessary for the manufacture of electric vehicle batteries as well as the batteries in mobile phones, laptops, and other ubiquitous technology.
Chile’s lithium industry has increasingly faced pressure from Chinese companies seeking to operate in the country and corner the market for the critical resource, often at the expense of Chilean companies.
The nationalization of Chile’s lithium industry was one of Boric’s main campaign promises. The far-left president, who has declared the “climate crisis” a priority for his administration, began his presidential term in March 2022.
Boric’s plan, which he has branded the “National Lithium Strategy,” is to create an independent, state-owned company to manage the nation’s lithium supplies. The Chilean president said that lithium is “key in the fight against the climate crisis” and described it as an opportunity for economic growth “that is unlikely to be repeated in the short term.”
“Together with the development of green hydrogen and the knowledge generated in our universities and communities, it is the best chance we have to move towards a sustainable and developed economy,” Boric asserted during his speech. “We cannot afford to waste it.”
Boric aims to turn Chile into the world’s largest producer of lithium through the development of lithium products with added value “based on the principle of virtuous public-private collaboration.”
“Our challenge is for our country to become the main lithium producer in the world, thus increasing its wealth and development, distributing it fairly, while protecting the biodiversity of the salt flats,” Boric said.
The proposed state lithium company would eventually grant the Chilean state participation in the production cycle of lithium through “public-private” partnerships with state control.
“Any private party, whether foreign or local, that wants to exploit lithium in Chile will have to partner with the state,” Boric added.
Chile holds the world’s third largest lithium reserves at 11 million tons, according to the United States Geological Survey. The South American nation accounted for roughly one third of the lithium produced in 2022 with 39,000 metric tons produced, second only to Australia’s 61,000 metric tons produced in that year. Chile was the world’s top producer of lithium until 2016, when it was surpassed by Australia.
The country’s lithium exports in 2022 yielded $7.76 billion to the country in sales, an 777-percent increase when compared to 2021, overtaking salmon, iron, and cherries in Chile’s export portfolio and only surpassed by the nation’s copper industry.
China, the world’s largest lithium consumer, has maintained a keen interest in both Chile’s lithium and copper reserves throughout the years. The creation of a state-owned lithium company would present an obstacle to Chinese ownership of lithium-rich territory in the country beyond public and civil society challenges to Chinese corporate takeovers. Boric’s plan would require majority state control and participation in any and all prospective lithium mining partnership agreements in the future.
In January 2022, two months before the beginning of Boric’s term, self-proclaimed “center-right” President Sebastián Piñera granted the Chinese BYD Chile SpA company a 20-year contract to extract up to 80,000 tons of lithium per year in the Copiapo region. The contract was suspended hours later by a Chilean appeals court after the governor of the Copiapo and local indigenous communities filed an appeal.
Piñera, having already pushed Chile into formally joining China’s predatory Belt and Road debt trap initiative in 2018, offered Chile as a “gateway” to China into Latin America during an official visit to Beijing in 2019.
China’s attempts to further its foothold in Chile and control the nation’s mining of copper and lithium predate Piñera’s presidency and go back to almost 20 years ago. Chile, under the presidency of socialist Ricardo Lagos (2000-2006), almost sold away one of the country’s copper yields to the Chinese Communist Party.
Lagos’ administration awarded China Minmetals Corporation a 24-percent ownership of the Gabriela Mistral copper mine, which would have allowed the Chinese company to elevate its stake up to 49 percent. The agreement would have left Chile with a majority 51-percent stake but technically granted China the ability to keep a majority percentage of the mine’s yearly copper production, as China had already paid $550 million in advance for 55,750 tons of copper per year over 15 years.
Despite facing fierce pressure and protests from local Chilean citizens and mining workers, the office of socialist former President Michelle Bachelet announced during an official visit to China in 2008 that her administration would respect the agreement signed under Lagos’ presidency. The agreement was eventually suspended in September 2008.
57 percent of Chile’s electrical industry clientele is under Chinese control as of 2020 after the Chinese State Grid Corporation of China (SGCC) bought all of the American Sempra Energy company’s interests in Chile, including its 100-percent stake in the Chilean Chilquinta Energía power company. SGCC also bought 96.04 percent of Chile’s largest electrical company, Compañía General de Electricidad (CGE).
Hours before Boric’s announcement of his plans to nationalize Chile’s lithium industry, Chile’s Production Development Corporation (Corfo) announced on Wednesday that it gave approval to the Chinese electric vehicle manufacturer BYD to build a $290 million battery component plant in Chile’s northern region of Antofagasta.
Chile’s Corfo also announced that it had designated BYD’s Chilean subsidiary BYD Chile a “specialized lithium producer,” which allows the Chinese company access to lithium at preferential prices.
Boric made no mention of China, nor its continued influence and presence on the country’s industries, during his announcement speech.
The state-owned national lithium company that Boric wants to create must be first established through a legislative bill that requires the approval of an absolute majority of both chambers of the Chilean Congress. Until then, Boric announced that Chile’s National Copper Corporation (Codelco) and National Mining Company (Enami) will handle the agreements and bidding processes with private companies to exploit the country’s lithium deposits.
Presently, the exploitation of lithium in Chile is being carried out by two companies in the salt flats located at the northern Chilean region of Atacama: The American Albemarle company, whose lease is set to expire in 2043, and Chilean-based Sociedad Química y Minera (SQM), whose lease expires in 2030.
China’s Tianqi Lithium Corporation is SQM’s second-largest shareholder, having purchased a 24 percent stake in the Chilean company in 2018.
Boric pointed out in his speech that the current lithium mining contracts will be respected but did not rule out the possibility of the to-be-established state company entering into partnerships with the corporate entities already active in Atacama.
“I have instructed Corfo, the institution that manages our lithium reserves, to instruct Codelco to seek the best ways to achieve, as of now, the participation of the Chilean State in the extraction of lithium in the Atacama salt flats,” Boric explained. “Thus, Codelco will be our representative before the companies that are currently in the salt flat in order to have a State participation before the expiration of the current contracts.”
Boric remarked that the country has more than 60 salt flats in addition to Atacama’s salt flats, where one third of the world’s lithium global market is produced.
“This policy, therefore, will also be a crusade to explore them, evaluate their extractive potential and, very importantly, to delimit the protected areas and lagoons where no operations will be installed,” he said.
The Chilean president asserted that his administration will be “responsible” with the revenue that it will derive from the nationalization of lithium through the creation of a rule that the country’s Autonomous Fiscal Council will establish to define spending thresholds and savings to ensure the “long-term financing of social, technological and productive investments.”
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.