The following is from a Foreign Policy magazine newsletter:
Chile’s left-wing government is moving to exert more state control over one of the country’s most valuable natural resources. Chilean President Gabriel Boric announced on Thursday that he will nationalize the country’s lithium industry to boost the economy and protect biodiversity. Chile is the second-largest producer in the world of the lucrative metal, also known as white gold, which is critical for producing the batteries used in electric vehicles and other clean energy technologies. According to the World Bank, lithium demand is expected to explode in the coming decades. Economists predict that production must increase by more than 450 percent by 2050 to accommodate skyrocketing need.
Under the plan, the government will negotiate with the two lithium-mining companies in the country, SQM and the U.S.-based Albemarle, for a larger stake in their current contracts; these negotiations, as well as any new contracts, will be overseen by the state-owned copper producer Codelco, which has also been tasked with creating a framework for establishing a new state-owned lithium company in the future. Boric must still seek approval from Chile’s National Congress, where he lacks a majority, in the second half of this year to solidify the move—meaning the plan could undergo significant changes before all is said and done.
Boric argued that the country’s lithium reserves represent “an opportunity for economic development that will likely not be repeated in the short term” and that nationalizing the industry will enable the country to build “a Chile that distributes wealth we all generate in a more just way.”
“This is the best chance we have at transitioning to a sustainable and developed economy,” Boric said. “We can’t afford to waste it.”
The rest of the world is certainly hungry for Latin America’s lithium—some 60 percent of the world’s reserves of the metal can be found in the so-called lithium triangle, a region that encompasses Chile, Argentina, and Bolivia. Chinese Belt and Road Initiative (BRI) investments in lithium and copper have surged in Latin America over the last few years, with Chile joining the BRI in 2018. The European Union secured lithium and copper trade deals with Chile in December 2022, and German Chancellor Olaf Scholz visited Chile and Argentina in January to strengthen lithium ties so Berlin becomes less reliant on Beijing. To solidify Latin American control over the resource, Mexico and Bolivia both proposed the creation of a lithium OPEC, with Chile, Argentina, and Peru as fellow members. Mexico also nationalized its own lithium deposits last year.
Whether Boric’s nationalization plan will actually benefit Chile the way he envisions is yet to be seen. Some analysts are skeptical, saying nationalization is difficult to implement and could freeze new production players from entering Chile. “I think it could send a chill through foreign direct investment into the country in the coming years,” Chris Berry, president of House Mountain Partners, an independent metals analyst, told Foreign Policy.