Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Thursday, February 06, 2020

Bolivian lithium subject to the ups and downs of politics

Evo Morales annulled the agreement established with a German company to manufacture lithium batteries and develop the Salar de Uyuni and now the new government is looking for a “friendly” solution.

While the interim government of Jeanine Áñez seeks a “friendly” solution with the German company ACI Systems, due to the breaking of the agreement they had for the joint production of lithium batteries, more and more evidence of a political background in the decision taken by the previous government headed by Evo Morales is seen.

It should be remembered that the Salar de Uyuni, located in the department of Potosí, is the largest salt desert at the highest altitude in the world, with some 21 million tons of lithium, which many consider the world's largest reserve of that mineral. As a strategic partner for Uyuni, the YLB (state-owned Bolivian Lithium Deposits) elected, in October 2018, the German ACI Systems, to develop and implement a complex lithium mining project such as the Salar de Uyuni and the manufacture of cathodic material and lithium batteries with the latest technology.

The agreement signed in December 2018 provided for the association of the YLB (state-owned Bolivian Lithium Deposit) - with 51% participation - with the German private firm ACI Systems to develop the Uyuni salt flat and build a lithium hydroxide plant, as well as a battery factory for electric cars in Bolivia. ACI Systems also promised to hold talks with German companies and other parts of Europe for the supply of lithium from Bolivia. The company sought to produce up to 40,000 tons per year of lithium hydroxide from 2022, over a period of 70 years.

The implementation of this project established investments totaling US$ 1.3 billion and the creation of up to 1,000 direct jobs, the majority of qualified personnel, and 10,000 indirect, in addition to a whole training system and the implementation of environmental preservation measures as the reduction in water use.

However, almost from the beginning, the Comcipo (so-called Potosinist Civic Committee) demanded details of the contract, in addition to questioning the technical capacity of the German company to develop and implement a complex lithium mining project such as the Salar de Uyuni, as well as for the manufacture of cathode material and lithium batteries with the latest technology. This committee, like others existing in different regions of the country, is made up of groups of businessmen and professionals linked to the main companies in that area.

The Comcipo, led by Marco Pumari, gave no respite to the Morales government with a series of demands that came to ask for an increase in royalties, set at 3%, to a total of 11%, among other things. Social pressure became stronger at the beginning of October, the month of the presidential elections, where Pumari began a hunger strike, in the framework of marches and blockades of streets in Potosí. 

All this situation resulted in that Morales, at the beginning of last November, repealing Supreme Decree 3738 by which the company was created with the German company, to end the social upheaval in that region. However, the opposite happened. The unrest continued increasing and Pumari, along with his colleague from the Santa Cruz Civic Committee, Fernando Camacho, led protests and requested for the resignation of Morales, whose term ended at the beginning of December with his resignation.

After the effect of the change of authorities and the call for new presidential elections for next May 3, the interim government is now trying to solve the problem of breaking a contract with a European company. While some members of the Government point out that there would be companies interested in joining the lithium industrialization project, the German Government, through its ambassador in Bolivia, Stefan Duppel, reminded them that “stopping the project would represent a severe setback for our bilateral economic relations and for the international credibility of Bolivia as a place of investment.”

However, reality marks that it is very unlikely that any company interested in the project wants to reach an agreement when in a few months a new constitutional government will be elected. Surely the impasse will continue in a subject that is key for the economic future of Bolivia.

 

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