The stark white landscape of the Salar de Uyuni in the Potosí department of Bolivia is punctuated only by pink flamingos and salt pyramids being slowly shoveled and loaded onto llamas by the Quechuá Indians. It is an unlikely place to be at the forefront of the future of the world’s energy supply. Yet this remote salt flat high in the Andes is at the heart of a global battle which captures nearly every modern ideological struggle: north vs. south, east vs. west, socialism vs. capitalism, native vs. foreigner, rich vs. poor. What lies beneath the surface here could turn Bolivia (one of South America’s poorest countries) into the Saudi Arabia of the 21st century. In 2009, the U.S. Geological Survey confirmed that Bolivia is sitting on half the world’s lithium, and it is concentrated in the Salar de Uyuni.

Lithium is the oil of green technology. Rechargeable lithium-ion batteries are vastly superior to nickel-based batteries. Lighter than nickel, lithium can hold a much greater charge and for longer. It also has a much lower self-discharge rate—5 percent a month compared to 10-30 percent for nickel batteries. Rechargeable lithium-ion batteries are already powering everything from cameras, cell phones, and laptops to cars, and former Bolivian president Jorge “Tuto” Quiroga told me that the applications are limited only by the imagination. “Right now it’s cars; someday it’ll be motorcycles; someday it could be boats, and one day small planes. I am sure that well before 2045, in Denmark, Norway, or someplace in California, houses or apartments will be able to have lithium batteries outside and that from midnight until two in the morning the electronic system will charge the battery so the house can function all day without drawing on the grid.” That day may be closer than he realizes: Earlier this year, a small plane flew for 24 straight hours powered only by solar panels and rechargeable lithium-ion batteries.

The Salar de Uyuni is the latest and greatest discovery in the “Lithium Triangle”: 16,000 square miles straddling northern Argentina, Chile, and southern Bolivia, where an estimated 75-90 percent of the world’s lithium deposits are located. So far, Chile’s Salar de Atacama has been the largest source and the best exploited—particularly by the Chinese, who imported 4,300 tons of it in 2008.

The importance of the Salar de Uyuni is not lost on Bolivia’s socialist firebrand president, Evo Morales, who said before a meeting in February 2009 with French billionaire industrialist and Sarkozy chum Vincent Bolloré: “Lithium is the hope not just for Bolivia but for all inhabitants of the planet.” Though Bolivia has yet to produce or export one pound of the stuff, delegations of Canadians, French, Chinese, South Koreans, Brazilians, Russians, and Japanese have been clogging La Paz’s international airport as they come to court Morales. Reducing dependency on Middle East oil will mean increasing dependency on imported lithium from South America, with all its political complexities.

For there is another group of people who understand the value of Bolivia’s lithium: the Quechuá Indians on whose ancestral lands it is found. Francisco Quisbert, the 64-year-old leader of Fructas, a union-like group of salt gatherers and quinoa farmers on the edge of the Salar de Uyuni, has said: “We know that Bolivia can become the Saudi Arabia of lithium. We are poor, but we are not stupid peasants. The lithium may be Bolivia’s, but it is also our property.”

A Hugo Chávez protégé, Morales rode into office on a wave of nationalist sentiment by styling himself a defender of the native Indian against the foreign ravager. He kicked out Americans, has defended the farming of coca as a protected indigenous tradition, and likes to nationalize foreign-owned companies on May Day. A new constitution ratified in January 2009 was aimed at empowering Bolivia’s indigenous peoples and granted them vaguely worded ownership of all natural resources on their lands—a provision that is now throwing a wrench in the works of lithium-mining negotiations.

Despite the new constitution, Morales—who notably speaks neither of the indigenous languages, Aymara and Quechuá, but only the colonialist language, Spanish—is insistent that “the state must have control of 60 percent of the earnings” from lithium. But in late March, Morales was forced to repeal a decree that established a state resources company to handle the extraction of the Salar de Uyuni’s lithium. The community of Potosí rejected the government decision to create a La Paz-based company, and Concipo (the civic committee of Potosí) threatened a region-wide strike if the department did not receive a more direct role in the business. Concipo wants a 50-50 joint venture between the department and the national government to develop the deposits—not exactly the split that Morales or his foreign suitors had in mind.

Morales treads a dangerous line between his moneyed foreigners and his poor indigenous supporters. But Bolivia cannot exploit its lithium without foreign investment and expertise, and its main competitors have the jump on it. Chile and Argentina (the other two legs of the Lithium Triangle) already account for more than half the world’s 27,400 metric tons of annual lithium production. Since lithium comes mainly from high-altitude deserts, Australia and China are also major producers—though China’s reserves are mainly in the western provinces of Qinghai and Tibet, where infrastructure is rudimentary at best. In the United States, Nevada’s Western Lithium Corporation is developing deposits in King’s Valley in hopes of being a major domestic supplier to the U.S. automotive industry. And now also Mexico, where the Cierro Prieto geothermal brines in Baja California are ramping up their production capacity to meet the rising demand for rechargeable lithium-ion batteries for the new electric cars being launched this summer.

Then of course there’s Afghanistan and its much-touted $1 trillion in mineral reserves. According to the report released by the Pentagon and published by the New York Times, mining could finally bring peace and prosperity to Afghanistan. Besides copper, gold, and iron, Afghanistan’s Ghazni province allegedly has lithium reserves to rival Bolivia’s and make it “the Saudi Arabia of lithium,” according to the leaked Pentagon memo.

But not everyone is convinced. William Lamarque, a cofounder of Balor Capital, an adviser on risk management to the mining industry, says: “This is Pentagon spin to garner support for the war effort in Afghanistan. There’s no mining culture there.” Not only does Afghanistan lack the physical and institutional infrastructure to sustain large-scale industrial mining, minerals tend to be found in predictable and proven tracts, and there is little evidence of this yet in Afghanistan. Lamarque is not convinced the deposits are really as large as the Pentagon claims. “They’re based on aeromag surveys, airplane flyovers with equipment that records the magnetism of what lies beneath the surface. But to really know what’s there,” he says, “you have to go around drilling holes in the ground. It’s a very old-fashioned process and geologists are like explorers: a guy roaming the landscape alone with his pick.” Security in Afghanistan, moreover, is a concern. “You can’t protect an armored patrol in Afghanistan, never mind a poor fellow with a pick.”

Even if you could mine successfully there, getting the minerals out would be another obstacle. Afghanistan is a landlocked country. The most accessible deepwater ports are the Chinese-built port in Gwadar, Pakistan, and Chabahar, Iran. Both options likely to be unpalatable to Westerners, though not to the Chinese, whose state policy of political neutrality in their pursuit of natural resources makes it easier for them to do business in the region. “The only viable option, then, is to fly the minerals out. While that’s cost-effective for gold, platinum, and palladium, it isn’t for iron, coal, copper, or raw lithium: too much bulk, not enough value-added. Afghan mining could be important and profitable, but we’re a generation away,” says Lamarque. So he would rather mine in Bolivia? “Oh, God, yes! Bolivia, a thousand times Bolivia.”

Bolivia’s greatest hope for the rapid development of its lithium reserves lies with the automotive industry. Carmakers are switching their hybrids from nickel-based batteries to lithium-ion batteries, which are essential in fully electric cars, such as the new batch of Beijing taxis made by BYD, a Chinese company that is one of the world’s leading manufacturers of rechargeable lithium-ion batteries and an emerging manufacturer of inexpensive electric cars. The average car battery consumes 30 times the lithium of a laptop computer battery, and Bolivia would be an attractive place to manufacture them. (The country stands to make $30-40 billion from the export of high value-added lithium-ion batteries, but only $5 billion if it merely exports the raw materials, says Quiroga.) While many foreign companies—including BYD—simply want to mine and export Bolivia’s lithium, as has been done with the country’s silver and copper, the Bolivians know money is pouring into the lithium-ion battery industry.

In 2008, Warren Buffett bought a 10-percent stake in BYD through his MidAmerican Holdings, and MidAmerican’s chairman David Sokol thinks BYD’s technology is “a potential game-changer if we’re serious about reducing carbon-dioxide emissions.” Based in Shenzen in southern China, BYD already employs over 12,000 engineers in producing rechargeable lithium-ion batteries. LG and Samsung are also getting into the business. The market for lithium is booming. Although tonnage prices have dropped from $5,000 per ton to $4,500 per ton as a result of shrinking demand during the recession, the demand from electric carmakers is expected to push prices back to $5,000 per ton and more in 2011.

The Bolivians hope that companies might manufacture lithium-ion batteries in the country, and eventually even electric cars. For the Morales administration, the most tempting offer so far has come from Bolloré. On April 29, 2010, Thierry Maraud, Bolloré’s financial director, announced a proposed deal with the La Paz government. Clearly designed to curry favor with the Quechuá, it is entitled “A Franco-Bolivian Project for the Well-Living of Bolivians in Harmony with Pachamama.” (Pachamama is the Andean Mother Earth.) The Bolloré proposal is for full industrialization of the Salar de Uyuni—mining not just lithium but potassium, borax, and a variety of other minerals as well—and would include the manufacture of both batteries and electric cars.

Yet while Bolloré’s ethnically sensitive proposal is tempting to the various Bolivian parties, it is not the most efficient way for the country to join the world lithium market. While no one has disclosed the amount of additional investment required to take production from lithium carbonate to metallic lithium to new-generation batteries, it looks certain to take at least six to seven years to start producing cars. Quiroga, for one, thinks the Morales administration is wasting the country’s time and would do much better to go straight to the Chinese or South Koreans and persuade a company like BYD or LG to establish a joint venture in Bolivia for the processing of lithium carbonate and the manufacture of rechargeable lithium-ion batteries. Building electric cars in Bolivia could be a later step.

Quiroga has a very clear vision for his country. He was involved in the negotiations with Intel to build a microchip assembly plant in Bolivia in the late 1990s and knows that the dry Andean climate is perfectly suited to microtechnology production. He would like to see a variety of lithium-based battery production in Bolivia—for cars in Oruro, south of La Paz; for laptops and cell phones in Potosí and Sucre; and for buses and motorcycles in Bolívar and Cochabamba. “We know that batteries will continue climbing the production chain. Taiwan started making hard drives and now makes computers, but we have to start with lithium batteries.” He says he was the first to publicly mention lithium battery production—in a public forum last September. The Morales government, which had previously been silent on the topic of lithium, then stepped in and insisted they must assemble cars as well. It’s a position Quiroga finds “very defensive,” though he does see electric car manufacturing in Bolivia’s future. “I would like to make a free trade zone in eastern Bolivia, close to Brazil, where you can assemble cars with Brazilian bodies and Bolivian batteries and flood the Brazilian and Argentine markets with cars made in South America.”

So far the Morales government’s modus operandi has been to sign accords or memoranda of understanding with everyone who comes along. In April 2010, the Canadian mining consortium New World Resource was invited to join the advisory committee to shape the new law to exploit the Salar de Uyuni. South Korea has no fewer than 13 companies and state-run research institutes advising on the most suitable infrastructure for Bolivia’s lithium industry. The Russians, as is their custom in Latin America, offered weapons in exchange for access. They hosted a Bolivian delegation in Moscow in late April to talk about securing Russia’s participation in exploiting Bolivia’s lithium—as well as its zinc, gold, and magnesium—in exchange for which Putin and Morales agreed on Bolivia’s borrowing more than $100 million on credit for the purchase of Russian military equipment.

Yet little has been done on the ground to build up the necessary infrastructure in Potosí. “The truth is that Bolivia has been talking for years about a pilot desalination plant,” laments Quiroga. “In four years of the Morales government, I think they have invested the grandiose sum of $300,000, not 1 percent of the new presidential plane that’s just been bought.”

Some political observers see a darker motivation for Morales’s stalling on lithium: the Machiavellian hand of Hugo Chávez, whose entire political strategy is based on oil. “What worries me about Bolivia’s current government,” says Quiroga, “is that it works closely and absolutely with and completely follows all the dictates of Hugo Chávez. .  .  . A car that runs [on lithium batteries]—a Nissan Leaf, a GM Volt—is a car that is not burning oil.” PDVSA, the Venezuelan state-owned oil company, is rumored to own up to 80 percent of all the drilling rights in Bolivia. Chávez treats Morales paternalistically and has spent hundreds of millions of dollars in buying up Bolivia’s debts, effectively turning it into a Venezuelan dependency.

Regardless of whether you prefer simple incompetence or geopolitical conspiracy as an explanation for the Morales administration’s sluggishness, the truth is that to exploit its vast lithium reserves Bolivia needs heavy infrastructure development. Although the Salar de Uyuni is accessible by roads and a train line, much more is needed if international companies are to invest in lithium production and battery manufacture. Nevertheless, sprucing these up and expanding the local airport so the product can either be flown out for just-in-time manufacturing or taken overland to Chile or Peru, is a mere trifle compared with what it would take to make Afghanistan a viable source for world manufacturers. Bolivia simply holds much more promise for investors in green energy.

Quiroga has a refreshingly passionate utopian vision for his beloved country. “What does Bolivia have? .  .  . We have three semi-clean fuels [gas, biofuel, geothermal] and the three clean technologies of the future [hydroelectric, solar, wind] and we have half the lithium. What a great opportunity to turn Bolivia into Latin America’s green heart. It is my mission to turn Bolivia into the green heart, generating clean energy with rechargeable lithium batteries made here.” Though how it would affect the lives of the Quechuá and their laden llamas remains unclear.

Vanessa Neumann is editor-at-large of Diplomat magazine and an associate of the University Seminar on Latin America at Columbia University.

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