The Magazine

A Fortune Underfoot

Can Bolivia develop its mineral wealth—and undermine Hugo Chávez?

Aug 23, 2010, Vol. 15, No. 46 • By VANESSA NEUMANN
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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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