Bolivia and Chile are the 50 Cent and Kanye West of Latin America.
Now, it is true, they share a border.
But other than that, they couldn’t be more different.
Bolivia is one of the poorest countries on the whole continent, while Chile is among
the wealthiest.
Bolivia is a paragon of the so-called indigenous socialism, while Chile is known as the Mordor
of neo-liberalism.
And as if this was not enough, the two countries are involved in seemingly never-ending territorial
disputes with each.
Nonetheless, now, there is one thing this two countries have in common.
Yes, dear viewer... we are talking about WHITE GOLD.
Wait…
no, I’m not talking about that sort of white gold.
I’m talking about LITHIUM.
Lithium is the metal used for manufacturing the batteries that power your cell phone,
your laptop and those electric cars that, eventually, might flood our roads and highways.
They call it “the new oil.”
It’s the lightest metal on the periodic table.
It’s value has been multiplied by 10 in the last two decades alone.
And it’s demand doesn’t stop growing.
Between 60 and 80% of the world’s known reserves are in an area called the LITHIUM
TRIANGLE.
This is an area that covers parts of Argentina, Bolivia and Chile.
In these countries, lithium is abundant and easy to extract.
In other words, this part of the planet might soon become the new Saudi Arabia.
Among those three countries, Bolivia is the luckiest one.
The so-called SALAR DE UYUNI holds 2 or 3 times more lithium reserves than the mines
in Argentina or Chile.
On the other hand, Chile already has a world class mining industry.
However, despite these reserves Bolivia is exporting less lithium than the other two
countries.
And Chile might actually soon be out of this new “white gold rush”.
In fact, Argentina is the nation that is getting the most attention from international investors.
So today’s question has to be...
What’s going on in Bolivia?
Why is no one exploiting their lithium resources?
And why is Chile following suit?
Today, we are going to answer all of those questions.
But before… let’s take a look at the history.
A NEW POTOSI?
If you’ve been subscribed to VisualPolitik for a long time, you already know that having
natural resources doesn’t mean you are rich.
Bolivia is a clear example of this.
This country has all the natural wealth you can imagine: lithium, silver, natural gas…
Nevertheless, this is one of the poorest countries in all of South America.
The silver mines of Potosi were the site of war for the Spanish crown during the 16th
and 17th centuries.
In fact, Spaniards still say ‘this is worth a “POTOSI”’ meaning that something is
too expensive...
But the native Bolivians didn’t reap the benefits of that silver wealth and millions
died under the extreme working conditions.
This is why it is understandable that the Government of Evo Morales is so reluctant
to allow foreign companies to get into the country and extract the lithium.
Besides, let’s be honest… the real business here is not in the raw materials but in the
industry that comes afterwards.
For a better understanding of this, while we make this video, a metric ton of lithium
costs around $9,000 on the international market.
But if we take that raw lithium and we turn it into batteries for mobile phones, we can
turn that lithium into a value of somewhere between $1.5M and $5M.
Of course, this is just a rough estimated and there lots of things that should be considered
here.
But it can help to look at a comparison.
Indeed it can explain this sort of news: ‘President Evo Morales opened, in 2013,
the first plant of lithium carbonate and, in February 2014, the first factory of ion-lithium
batteries manufacturing.
But that is not all...
In Bolivia, Lithium is nationalized.
This means that, if you are a private mining company and you want to work on Bolivian soil,
you must partner with the government and start a new company which will be owned, partly,
by the government.
This new company can get paid for their service of building the mine, setting up the machinery,
extracting the lithium etc…
BUT the lithium they extract belongs to the government - they have no right to sell it.
So, now you might be wondering…
Why does Bolivia need foreign companies to exploit their own wealth?
Can’t they do it themselves?
Well, the answer is NO.
Modern-day mining has nothing to do with the image you probably have in your mind of a
guy with a hard hat and a pick ax.
Today mining requires high-end machinery and world-class engineers.
As you can imagine, these things are scarce in a country as poor as Bolivia.
If you wanted to create a competitive mining industry in that country, without outside
help, you’d need decades.
This is why it is so important to utilize companies who have the technology, the tools,
and the staff to do the job.
And this is why even Morales himself, unfriendly to multinationals as he is, had to get out
there and find investors.
‘As soon as we have a big lithium industry, Bolivia will set the lithium price for the
whole World’ ‘I want to say to you, governments and private
companies, now you can join us’
OK, so what exactly is the problem here?
Well… as we said before, Bolivian lithium is owned by the state.
This means that those companies who might invest in the country, can only get a profit
from partnering with the government.
And from that profit, they must pay a special mining tax that goes up to 37.5%, which is,
by far, the largest in the region…
And if this was not enough, according to the World Bank, Bolivia ranks among the 50 countries
where it’s hardest to do business.
They rank at about the same level as Sierra Leone...
Now, let’s say that you wanted to invest in lithium!
Fancy investing in Bolivia, or maybe you might prefer one of those other countries.
Maybe.
This explains why, at this moment, Bolivia, while it is the country with the biggest lithium
resources, it is also the country that is exploiting them the least.
If you pay attention to the chart here, you will see that today, the leader of the lithium
race is AUSTRALIA.
This is surprising because the resources of this country are 4 times smaller than those
of Bolivia.
Plus, Australian salaries are six times higher than Bolivian ones.
So, as you can see, this is not a matter of low paid jobs or natural wealth- but, simply,
good and bad economic policies.
But hold on a minute, because this is not the only problem...
Don’t forget that Evo Morales’s dream for Bolivia is that it becomes a manufacturing
leader in the lithium battery industry.
But…
well…
how exactly can they achieve this without foreign companies setting up inside the country?
Alright, alright, yes, the government can set up its own factory.
Great!
But technology, patents and the skills needed are held by companies like Panasonic, Samsung
or Tesla.
Without these, Bolivia would need decades of research in order to be competitive on
the international market.
Alright, so we mentioned Chile earlier…
Well, what’s going on over there?
CHILE FOLLOWS IN THE STEPS OF BOLIVIA
For years, Chile has been known as something of a free market Disneyland.
More precisly, their mining industry was one of the freest in the entire world.
We are talking about a country where the economy relies heavily on copper mining.
This is why, in the year 1981, PINOCHET’s dictatorship passed the so-called MINING LAW,
that allowed private businesses to own the 100% of a mine.
As you can imagine, this law kick-started foreign investment in the country.
Suddenly, lots of companies like the Australian BHP BILLINGTON or the Swiss XTRATA came to
Chile.
And yes…
I know what you are thinking…
all of these multinational corporations looted the country and left it in poverty, right?
Right?
Well… you’re actually wrong.
Of course, these Canadian, Swiss and Australian companies came to extract the copper.
But they also helped to finance lots of brand new companies which employed Chilean workers
and were headquartered in SANTIAGO.
Companies like MINERA ESCONDIDA or ANTOFAGASTA MINING.
In fact, thanks to this wave of investors, Chile now has a world-class mining industry.
Actually, many of the engineers that are now needed in Bolivia, live in the best neighbourhoods
of Santiago.
And this means that, Chile has been in a great position to lead the white gold rush.
Nonetheless, in 2016, Chilean President, Michelle Bachelet, declared that lithium was a different
animal.
‘We confirm the strategic condition of lithium, which is property of all the Chilean people
and we will keep its state of non-concessible material’
–Michelle Bachelet
In other words, the government of Chile is following suit with Bolivia.
But with a difference.
In this case, the country already has the technology and the staff to exploit its mineral
wealth in an efficient way.
Of course, many of those companies who were willing to invest in the country have lost
all the interest.
But Chile has its own companies so it’s not that much of a big deal.
Besides, until 2014, the other countries of this Lithium TRIANGLE, Argentina and Bolivia,
were way worse places for investment.
So… this is sort of a “in the land of the blind, the one-eyed person is king”
situation…
Until now.
Argentina has been the big surprise here.
While Chile and Bolivia have nationalized their lithium and have tried, badly, to scare
away foreign companies, Argentina, with MAURICIO MACRI (MAU RITHIO MAKRI) as its president
is doing something rather different…
And they are now getting all the attention from international investors.
But we’re going to talk about that in upcoming weeks, in a sort of second-part to this video.
So if you don’t want to miss that, please do be sure to subscribe to this channel!
In the meantime, we have question for you…
Do you think both Bolivia and Chile can reap the benefits of their lithium with these kind
of policies?
Or maybe Argentina will overshadow them?
You can leave me your answer on the comments section below.
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