How to build the lithium triangle?
A cooperation proposal

Cover image by Felix Dorn

The triangle metaphor

Reference to the “lithium triangle” is commonplace when discussing lithium in South America. As in the case with “white gold” or the “Saudi Arabia of lithium”, the metaphor is both easily understood and powerful. However, it does not in fact represent what it refers to. The triangle describes a geography: a delimited territory that concentrates a set of lithium-rich salt flats that, with known technologies, present relatively favorable conditions for their economic exploitation.

But the countries of the region have diverse strategic visions and objectives regarding lithium, and they differ in their regulatory frameworks and in the policy instruments they employ.

For example, in Bolivia and Chile, lithium is a strategic resource that is not covered under the regulatory framework for mining, but by specific rules that grant an important role to the states and establish the specific conditions under which the private sector can participate.

This is not the case in Argentina, where lithium is regulated by the general mining regulatory framework, which is liberal in nature and primarily aimed at attracting private investment. Further, in this country, with its federal structure, the original domain of the resource is in the hands of the provinces, while in Bolivia and Chile, countries of a unitary nature, lithium is controlled by the central government.

Regarding industrialization initiatives, Bolivia has proposed advancing in the localization of the entire lithium battery value chain – “from the salt flat to the battery” – with majority control by the central state, while Chile and Argentina have adopted a less comprehensive planning, concentrated in certain segments of the value chain and with greater openness to private capital.

Since lithium entered the public discussion more than a decade ago, cooperation between Argentina, Bolivia and Chile has been scarce, which is largely a consequence of such differences. Frequently, hopes for greater regional cooperation have focused on the formation of a cartel between the three countries – the so-called lithium OPEC– to control the international price and, thus, improve the conditions to capture a larger share of income.

The idea appears to be a political chimera. At present, we do not see even the minimum conditions necessary to achieve the desired effect. For example, the region accounts for a diminishing share of global lithium production and, furthermore, its production is carried out entirely by private companies.

Elements for a regional agenda

This bleak scenario, in which fragmentation prevails, leads us to wonder if it is possible to build a true lithium triangle. I am referring here to endowing the accidents of physical geography with a political vision and some common instruments to carry it forward.

Las encrucijadas del litio. Panel: El litio en la cooperación internacional:¿hacia una agenda común?

The Lithium Crossroads conference, which took place in Buenos Aires in October of 2022, also provided space to form such a vision, and discuss such instruments. One of the panels featured officials from international organizations who have an influence on the regional cooperation agenda. They discussed opportunities to build a platform for collaboration that facilitates this process and the challenges they face to advance it. The three participants were Jeannette Sánchez (ECLAC), Martín Walter (IDB) and Nicolas Maennling (GIZ).

The exercise was based on a common diagnosis that could be summarized as follows: the growing demand for lithium offers an opportunity to the region that, ideally, could contribute to improving the development conditions of the countries and regions that comprise it. However, this opportunity comes with significant challenges. There is no doubt that, with the increasing pressure on the extraction territories, environmental and social risks will increase and, with them, conflict.

Here is the first item on the cooperation agenda: Sánchez pointed out that it is necessary to strengthen governance with a comprehensive view of the resource. The exchange of regional and national experiences is undoubtedly one path forward. However, in past experiences, cooperation has ended there, or failed entirely. For this reason, it is necessary to generate new approaches to dialogue and cooperation that give rise to multi-level and multi-actor forms of governing the ecosystems linked to the salt flats.

International organizations can shape appropriate spaces to advance in this direction, support the formulation of new regulations and standards (perhaps regional in scope), strengthen state monitoring and control capacities, and create mechanisms for information and transparency.

Another item on the agenda was highlighted by Maennling, namely economic rent and its uses. When talking about lithium as an “opportunity”, reference is made – sometimes implicitly – to the need for the state to capture a greater portion of the economic rent from the natural resource. This requires at least two conditions, namely that the price of the exported product be properly recorded and that the state then have the mechanisms to tax the economic rent generated by the exploitation of the resource.

The capacities to deal with these issues are uneven within the region. The Chilean experience in recent years offers a point of reference on both issues. For example, the country designed a progressive royalty system, in which the tax increases in relation to the price of lithium compounds. The other countries could find a “source of inspiration” that, supported by political will, would contribute to improving the capacity to capture resource rent.

Then, there is the question of the use of these resources and the mechanisms to decide their distribution: should the promotion of productive activities of the inhabitants who live in areas surrounding the salt flat be prioritized? The development of technological and productive capacities at the national level? infrastructure construction? what type? The temptation is to answer “yes, all of this”. However, we know that resources are scarce and their allocation conflictual. How has it been done in other sectors? How are other countries doing it? How could we? Another space for dialogue and cooperation.

Third theme: downstream expansion in the value chain – or how to “add value to our lithium”. This is, perhaps, the main hope present in the public arena: the exit door to the “extractivist” trap. Martín Walter points out that the scale of the challenge is enormous because it is not only about building capacities to make the “battery” competitively, but about accessing critical inputs in a safe and stable way to manufacture it, and creating a regional market for electromobility that demand those batteries.

How to build the lithium triangle

These conditions raise the need for greater coordination between countries (even beyond the lithium triangle), closing the door to exclusively national ventures. In this direction, for example, ECLAC has created a regional technical forum, which aspires to build a space that makes it possible to reduce learning times, based on the socialization of national experiences in the development of activities throughout the value chain.

It cannot be ignored that the challenges of cooperation are important. Yet its absence is not simply the result of “forgetfulness”. The countries of the triangle are also in competition with each other, the issues raised are sensitive and state capacities are limited. The idea of “us first” prevails, in a scenario that develops with a sense of urgency because the “window” (another metaphor) of opportunity offered by lithium is closing.

International organizations can offer a space where this agenda is deployed, also providing technical support, sharing experiences and facilitating resources. Before creating grandiose initiatives, perhaps the first step is to build a space to share technical knowledge that generates bonds of trust and offers tangible results. The foundation stone of the true lithium triangle.

End notes

The note reflects the views of the author. It is prepared based on the dialogue that took place in the panel “Lithium in international cooperation: towards a common agenda?”, at the international conference “Lithium Crossroads”, held in Buenos Aires on 24 and October 25, within the context of the “Green Dealings” research project (green-dealings.com) The panel included Jeannette Sánchez (Director of the Natural Resources Division, Economic Commission for Latin America and the Caribbean), Martín Walter (Inter-American Development Bank specialist) and Nicolas Maennling (Senior Adviser of the MinSus Program of the German Corporation for International Cooperation –GIZ– in Chile). A video of the panel is available here .