Argentina, Bolivia, and Chile – known as the “ABC’s of lithium” – hold over eighty percent of the world’s lithium reserves. Given this abundance of lithium, Latin America has the chance to become a leading energy supplier and global economic player. Lithium compounds have long been used in various applications, but the metal has garnered substantial new interest from key industries in recent years. For example, the cellular telephone industry needs lithium to manufacture their phones’ lightweight batteries, and the automobile industry is seeking new sources of lithium to meet the increasing demand for hybrid and electric vehicles.
This article outlines recent developments in Latin American governments’ initiatives to exploit their abundant lithium reserves, and discusses different locations in which foreign companies should consider when deciding to invest in Latin America’s lithium resources.
Evolving technology and the world’s increasing population are creating a huge demand for unique sources of alternative energy. For more than a century, the world’s population has relied on fossil fuels as the primary source of energy. In recent years, the attention has shifted to a new valuable resource — lithium. Many nations have become addicted to lithium from Bolivia, Argentina, and Chile because it carries the promise of sustaining the energy supplies after fossil fuels are depleted. Unfortunately, like fossil fuels, lithium is also limited in quantity.
Most modern electronic devices such as cell phones, iPods, iPads, laptops, digital cameras, and watches rely on lithium batteries. Even the automobile industry is working fast to produce new fuel-efficient hybrid and electric cars using lithium batteries. This has made lithium the “grey gold” of the emerging electrical transportation sector. Lithium enables more energy to be stored in a lighter, smaller space than most energy source alternatives. Lithium batteries also hold their charge for a longer period. Consequently, as the pursuit for alternative energy picks up steam, the discovery and exploitation of cheap sources of lithium will become one of the energy industry’s primary goals.
Bolivia.
The accelerating demand for lithium has caused some concern, because this precious metal happens to be abundant in nations with political instability and social unrest. Three Latin-American countries, namely Argentina, Bolivia, and Chile, currently hold over 80 percent of the world’s lithium reserve. These three countries are commonly known as the “ABC’s of lithium.” Of these, Bolivia’s untapped lithium reserves make up to half of the world’s total lithium supply.
Bolivia’s president, Evo Morales, has consistently campaigned to keep lithium exploration under Bolivia’s control. Under Morales, Bolivia has organized a multi-national scientific committee to explore options for tapping the country’s lithium resources, as it is projected to be a powerful source of economic growth for Bolivia during the next two decades. The Bolivian government has already announced an investment of about $400 million in the construction of lithium processing plants, set to begin operations by 2014. Not surprisingly, the Bolivian government remains in complete control over the resource and continues to decline offers for partnership and foreign investment.
Argentina and Chile.
In addition, Argentina and Chile have become two of the largest recipients of foreign investment in lithium exploitation. According to a U.S. Geological Survey, Chile provides 61 percent of its lithium exports to the United States, while Argentina provides 36 percent. Chile has an estimated reserve of three million tons, while Argentina has 400,000 tons. Bolivia’s reserve is estimated to be about 5.4 million tons.
The Future for Lithium.
As the metal of the future, Lithium holds the power to resolve many of the world’s alternative energy needs. If political and geographic barriers in Latin America permit this mineral to satiate the world’s ever-growing needs, we could witness a new era in the energy sector.
While overseas investors appear to be increasingly keen to enter the Latin American market, it is important that they do so having taken proper advice. Diaz, Reus & Targ, LLP is well placed to assist overseas investors seeking to invest in Latin America. The firm has offices across Latin America and can advise investors on the best investment structures, can carry out necessary due diligence, and negotiate the legal documents.
