Bargaining chip: fight over lithium changes power in Bolivia

Struggle for Resources

Bolivia is one of the poorest countries in Latin America, where the state still plays a key role in the economy. However, this was not always the case - during the period of the Spanish conquest, a silver deposit was discovered in the southwest, which made the region one of the richest and most populous in the Spanish Empire. But by the end of the 18th century, the mines were exhausted, and the colony was in decline. The mother country did not respond to its problems, causing the local population and the merchant bourgeoisie to begin a struggle for economic power, leading to the 1809 uprising and the War of Independence. Unable to independently develop deposits of guano and sodium nitrate, necessary for the production of fertilizers and gunpowder, the Bolivian authorities entered into land lease contracts with Chilean companies with financial support from Great Britain. Already in 1879, the Guan War broke out when Bolivia canceled tax breaks for the Chileans, and they, in turn, drove the Bolivians out of the Pacific coast and seized the deposits. In fact, the conflict was sponsored by England, but carried out by the hands of Chile. The peace treaty between the parties was signed only in 1904 and marked Bolivia's recognition of the loss of all its coastal territories.

tin mining developed in Bolivia, and within 10 years its production increased from 12% of world supply to 20%. Although the Bolivian deposits of the element were underground in hard rock, the high tin content allowed some ores to be mined by hand, providing about 6% annual growth in production. Tin mining consumed much more capital and produced comparatively more infrastructural changes than silver mining, including the construction of hydroelectric dams and the Guaqui-La Paz, Rio Mulatos-Potosi, Oruro Viacha, Uyuni Atocha, and Arica-La Paz railway lines. Tin mining companies have become complex international enterprises, solving labor shortages by bringing in foreign power. Despite the recently ended war, Chilean capital formed the basis of tin mining. By 1913 foreign investment exceeded £10 million and was mainly of Chilean, British and, to a lesser extent, American origin.

After reaching unprecedented levels in 1920, tin prices fell due to the economic downturn in the global economy and inventories began accumulate. The main reason for the reduction was the voluntary winding down of the activities of wealthy concerns. Bolivian industrialist Simon Patino played a key role in concentrating production. Over the next 10 years he established control of the mines of Irishman John Minchin, British Penny and Duncan and the Minera El Balcon company, also owned by British capital. By the 1920s, he also bought out the Chilean interests in his mining company and continued to buy tin works in England and Germany. By the 1940s, he controlled the international tin market and was one of the richest men in the world.

During the Second World War, Great Britain and the United States of America had to compete even more intensely for the supply of tin ores than during the First World War. England, while maintaining a leading role in mining, did not want to lose its hegemony, and the United States wanted to reduce its dependence on tin metal supplies from London. On November 4, 1940, the main Bolivian manufacturers, with the exception of the Patino Company, signed a contract for all production with the American Metal Reserve Company. The ore was sent to a new smelter that the US government had built in Texas for the purely political purpose of reducing dependence on foreign processing, since foundry production was unprofitable. The Patino group of companies, in turn, already had a contract agreement with the British steel plant Williams Harvey, to which they continued to sell products during the war at the same prices that the Americans offered.

In 1951, the National Revolutionary Movement (MNR) came to power in Bolivia , and the issue of nationalization of production became one of the central issues for the political leadership. Because of fears that the big industrialists might overthrow supporters of revolutionary development, the MNR established a monopoly on the export and sale of mineral ores under the auspices of Banco Minero . The purpose of such decisions was the need for complete control over the foreign exchange generated by the mining industry. However, already on October 2, 1952, the Bolivian Mining Corporation (COMIBOL) was created to manage state mines, and on October 7, the government nationalized the Patino and Hochschild enterprises and Aramayo. And if in the early years the ideology of state capitalism brought success, then already in the mid-80s the economic situation in Bolivia was undermined by galloping hyperinflation, and the country was unable to pay its debt to the International Monetary Fund.

On August 29, 1985, the economy was liberalized by Supreme Decree 21060 - a free market regime was introduced. Already in October, the tin market collapsed, prices were halved - from just over £8,000 to less than £4,000 per tonne. The plan for economic liberalization was drawn up by Harvard University professor Jeffrey Sachs, who later specialized in rebuilding post-communist regimes in Eastern Europe and Russia. And although the level of inflation after the implementation of the Sachs plan in Bolivia did decrease and stabilize, the usual way of life of the Bolivians was destroyed. Thousands of miners and factory workers, having lost their livelihoods, fled to farmland to sow coca, the only crop with a guaranteed market. According to government estimates, in 10 years - from 1977 to 1987 - the area under cultivation increased 10 times, the production of coca leaves increased 45 times, and the number of producers increased 6 times. Coincidentally, it was from 1980 to 1990 that the World Bank and IMF promoted Bolivia as a success story of neoliberalism, and the country once again began receiving hundreds of millions of dollars in loans. In fact, however, Sachs's plan set the stage for 15 years of slow economic growth and growing resistance to globalism and the Cochabamba Water War against the privatization of the municipal water company.

At the same time , mass production of phones and laptops begins around the world, which requires lithium. Bolivia, home to more than 21% of the world's reserves, has realized its value to the global market. In 2008, the government decided to launch the ERIP project - the Bolivian Mining Corporation was tasked with creating a National Authority that would be responsible for the industrialization of lithium. In 2009, the Bolivian Constitution declared the mineral to be strategic for the country. This meant that lithium exploration, exploitation and industrialization were now under full administrative control.

The Lithium Nation

Bolivia aims to supply up to 40% of the world's lithium supply by 2030, making it the "lithium capital of the world" according to President Luis Arce . According to the latest study, demand for lithium mining in global markets will grow from $ 5.7 billion in 2023 to $ 9.1 billion in 2028, at a compound annual growth rate of 10%. Together with Chile and Argentina, Bolivia forms the so-called "lithium triangle", which contains 54% of the world's reserves. The richest deposit is located in the vast Salar de Uyuni salt plain, which covers more than 10 thousand square kilometers. In 2010, the government invested $ 5.7 million in a pilot plant to determine the best mining method, which would ultimately allow the country to surpass Chile, which dominates the global lithium market along with China and Australia which own 90% of the exploration permits for this element.

Since all natural resources are, according to the constitution, the property and exclusive heritage of the Bolivian people, in order to participate in the production chain of a mining project, it is necessary to obtain an administrative right to mine from the Mining Jurisdictional Administrative Authority. In April 2021, Bolivia announced its first tender for the development of lithium deposits. In January 2024, the government entered into a $ 1 billion deal with China's largest battery manufacturer CATL and largest cobalt mining company CMOC. The investment involves the construction of production plants that will use direct lithium mining in the Salar de Uyuni and Salar - de Coipasa . 

The government has also teamed up with Indian firm Altmin to develop cathode material technology for lithium batteries. The company opened its plant in December 2023 , with an expected capacity of up to 15,000 tons of lithium carbonate per year. At the same time, Bolivia signed two more agreements worth $ 1.4 billion with the Chinese Citic Guoan Group and with the Russian Uranium One Group, a subsidiary of Rosatom. The company plans to invest $ 600 million in the project with a production capacity of 25,000 tons of lithium carbonate per year and the potential for further expansion of production based on exploration results.

The President of Bolivia has repeatedly emphasized that lithium is a real opportunity to improve the economic and infrastructural situation of the country. Low commodity prices in a country dependent on mineral exports have significantly worsened an already dire situation. Under Arce's presidency, the country experienced a shortage of dollars and fuel, foreign exchange reserves decreased, and the budget deficit increased. Bolivia was gripped by protests and unrest, the situation was complicated by an unprecedented split in the ruling Movement Toward Socialism party, a political force with an anti-American ideology that has been in power since 2005.

General Juan José Zúñiga , the army commander, criticized Morales' plans and announced that the Bolivian armed forces would arrest him if he ran for president. On June 25, Zúñiga was relieved of his post, and the next day a group of military officers under the command of a retired general broke into the Bolivian government building. The official position was that the coup was aimed at changing the cabinet, releasing political prisoners and restoring democracy. However, President Luis Arce cited economic aspects as the real reason, and specifically the long-term contract "for the award of a contract for a lithium project from 2019". There is no clear indication of what kind of deal this is, but the 2019 coup that overthrew Evo Morales came as Bolivia seeks partnerships with Russia and China and the cancellation of a lithium mining deal with the German company ACI Systems Alemania. Morales, who was subsequently forced to flee to Argentina, called what was happening a “lithium coup” and the US desire to punish Bolivia for collaborating with its opponents.

China and Russia against the West

The coup attempt lasted only three hours and ended with the appointment of a new military command. Zúñiga was sent to a maximum security prison on charges of terrorism and instigating an armed insurrection. The retired general told reporters that Arce himself ordered him to organize a fictitious coup in order to boost his flagging popularity. This version found support among the opposition, which demanded a parliamentary investigation. On June 30, Morales condemned the incumbent president, apologized for expressing support for him during the coup, and called for an independent investigation.

On July 2, 2024, Bolivian authorities announced that they were investigating the possible participation of external forces in the attempted coup. The head of the Bolivian Presidential Administration, Maria Nela Prada, in an interview with China Central Television, emphasized that the interests of certain groups of people and leaders within the country apparently contributed to the military colluding with external interest groups and the coup. On the same day, a detachment of ships of the Russian Northern Fleet, consisting of a frigate and a medium sea tanker, arrived at the port of La Guaira in Venezuela. The main objectives of the campaign are to demonstrate the flag and ensure a naval presence in operationally important areas of the far ocean zone. On July 7, the Prosecutor General's Office of Bolivia announced that 24 people were involved in the case of an attempted coup. The results of the investigation have not yet been published.

The Russian Foreign Ministry strongly condemned the attempted military coup and warned against attempts at destructive foreign interference in the internal affairs of Bolivia and other states. Spain, Venezuela, Peru, Cuba, Chile and Paraguay also condemned it. China called for maintaining peace and stability in the country, and Washington, in turn, called on Bolivians for calm and restraint. At the same time, members of the international community admit that there is no reason to believe that the confrontation between Arce and Morales will end. Thus, internal and foreign policy contradictions will aggravate economic problems and weaken the ability of the Bolivian leadership to resolve them. At the same time, using the example of the 2019 coup, analysts agree that it was discontent within the country that made it possible to overthrow Morales, and , therefore , the current contradictions between the two leaders form the basis of future discontent and, consequently, the coup.

Foreign exploitation of minerals and local poverty have been fertile ground for popular unrest throughout Bolivia’s industrial history. Despite the fact that the government has nationalized the resources, foreign capital still plays a key role in the development of mines and salt flats. It is clear that the level of corporate investment, including in factories, infrastructure, and deposits, will be the determining factor in protecting investment. Today, China and Russia are the largest investors in Bolivian lithium, while Western companies such as Germany’s ACI Systems Alemania have been denied access to the territory. There is no doubt that the warring parties within Bolivia will receive political and financial support from competing companies.