Chile Announces Plans to Nationalize Lithium
An aerial view of the brine pools and processing areas of the Rockwood lithium plant on the Atacama salt flat, in the Atacama desert of northern Chile. Source: Ivan Alvarado/Reuters
Chile, the world’s second-largest producer of lithium, has recently announced plans to nationalize its lithium industry. The metal, also known as white gold, is an essential component in making the batteries for electric vehicles, as well as other kinds of green technology. As renewable energy becomes more popular globally, it is expected that to satisfy rising demand, production will have to increase more than 450 percent by 2050. This recent move is an ambitious attempt to boost the economy, protect biodiversity, and incorporate local communities.
Currently, two private mining companies are responsible for lithium production in Chile: SQM and the United States’ Albemarle. The new National Lithium Plan will still respect the existing contracts, which expire in 2030 and 2043, respectively. However, the government hopes to negotiate the current contracts in order to obtain a larger share of control.
The state-owned copper company, Codelco, has been put in charge of the negotiations. It is also in charge of setting up the framework for a future state-owned National Lithium Company. This move will not lead to complete state control, but rather a quasi-nationalization where the state has a majority share. The plan emphasizes private-public partnerships, and every future company involved will have to partner with the state.
The idea is that private companies will still be able to offer their expertise, technology, and capital. In return, the state will help finance, provide logistical support, environmental regulation, and correspondence with local communities. This could potentially lead to an increase in exploration and extraction, as well as higher stability. Comparatively, neighboring Bolivia has full state control of the industry and Mexico nationalized it last year. Argentina, on the other hand, simply grants concessions to companies.
Chile’s President Gabriel Boric looks at lithium samples and applications while visiting Universidad de Antofagasta venue. Source: Ximena Navarro/Chilean Presidency/Reuters
Around 60 percent of global reserves are located in the “lithium triangle” of Chile, Argentina, and Bolivia. This makes Chile an important player on the global stage, it has been busy setting up economic ties over the past few years. Chile joined the Chinese Belt and Road Initiative in 2018 and signed a trade deal with the European Union in 2022. Mexico and Bolivia recently proposed the establishment of an OPEC for lithium with Chile, Argentina, and Peru.
The goals of the plan go beyond just state control. The government hopes to help redistribute the mineral wealth with the surrounding indigenous communities. Beyond that, they hope to prioritize the demands of these local communities by turning to direct lithium extraction (DLE) instead of the common brine evaporation, which wastes millions of liters of water and has a much larger environmental impact. Although DLE is not yet feasible on a large-scale, Chile has promised to increase investment in this new technology.
Nationalization is a risky process that is difficult to implement. There have been concerns that it will push foreign investors away from Chile and therefore diminish the money flowing into the industry. Moreover, this plan needs the domestic support of the National Congress, but the current President Gabriel Boric does not have a political majority, so planning could hit a roadblock within the year.
Nevertheless, President Boric has argued adamantly in favor of the policy. He claims that nationalization is “an opportunity for economic development that will likely not be repeated in the short term… [for] 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. We can’t afford to waste it.”