On July 6th, the Economic Commission for Latin America and the Caribbean (ECLAC) published the publication entitled “Extraction and Industrialization of Lithium”. Opportunities and Challenges for Latin America and the Caribbean. A key idea we have laid out in this paper is that the accelerated growth in future demand for critical minerals, expected to be associated with the transition to electric mobility and renewable energy, opens up opportunities for Latin America and the Caribbean (LAC) promotion a development agenda around the exploitation of lithium.
The fight against climate change is the main driver triggering current and future demand for lithium and other critical minerals. Variable or intermittent renewable energy technologies and electromobility are mineral intensive as they require greater mass and number of them. According to the International Energy Agency, the demand for lithium could multiply 42 times in 2040 in the sustainable development scenario in line with the achievement of the goals of the Paris Agreement.
Due to its high lithium resources and reserves, the region is destined to become a major global player in this industry. 56% of the world’s lithium resources are concentrated in the so-called lithium triangle, consisting of Argentina, Bolivia (plurinational state) and Chile.
Given this proportion of the world’s identified resources, it is not surprising that LAC is already a major player in global lithium production, accounting for nearly a third of total production. In 2021, Chile accounted for 25% of world production, Argentina for 6% and Brazil for almost 1%. In the same year, the world’s four largest lithium producers (in order of importance: Australia, Chile, China and Argentina) concentrated more than 96% of world production. This has motivated countries that produce lithium-ion batteries to include this mineral in their lists of critical minerals.
China, the United States and the European Union are leading the electric mobility industry and are pursuing a range of policies aimed at securing supplies of minerals believed to be critical to the energy transition. In Latin America, on the other hand, the resource is considered strategic in Argentina, Bolivia, Chile and Mexico, as it has the potential to boost socio-economic development, value creation and production chains. However, LAC’s current production output does not reflect its potential, making it necessary for countries to accelerate exploitation of this resource and promote a prolific development agenda around lithium and other critical minerals.
In the coming years, this productive agenda will bring opportunities, but also challenges and threats in the region’s lithium resource-rich countries. The most immediate opportunities for the region come from lithium mining and refining: export growth, job creation, increased tax collection and creation of upstream manufacturing links.
For their part, the challenges are related to the fact that expanding the stake in the downstream segments of lithium-ion cell and battery production would be closely linked to the development of a large-scale electric vehicle industry in the region and would require high financing, access to others deemed critical Minerals, as well as human and technological abilities.
The extraction of lithium also poses challenges of a socio-environmental nature, mainly arising from the water consumption in the extraction processes in areas of high water stress, the impact on biodiversity and the traditional economic activities of the social groups living near the salt Apartments. For this, the lithium industry needs, on the one hand, stricter regulations and standards that ensure the sustainability of the activity and, on the other hand, the technological innovation of more efficient extraction methods in the use of water and a smaller ecological footprint in the salt pans. Likewise, there is a need to improve social and environmental governance to ensure social participation, transparency, community benefits, minimization of environmental impacts and better conflict management and social freedom of action.
The main threat is the possibility of developing alternative battery technologies that are less intensively or not related to lithium, as well as the development of lithium supply in other regions and countries, suggesting that the exploitation of lithium may have a limited time window Time horizon, which is why the countries have to accelerate their extraction and industrialization projects. However, setting a deadline for this window of opportunity is not easy as it is subject to a high level of technological uncertainty.
Finally, regional cooperation and integration are important tools to strengthen opportunities for the industrialization of strategic minerals and the development of regional value chains, especially technologies for the energy transition and electric mobility. There is ample scope for strengthening the region’s position in the face of developed world demands in the context of global governance; the regional production development agenda around strategic minerals; the promotion of an electric mobility and renewable energy market that will help promote the development of regional industrial capacities for the production of batteries and their inputs; Agreeing on common content in environmental and social regulations to avoid downward regulatory competition; and the exchange of knowledge and experiences.
LAC has a great opportunity to leverage the rise of lithium and other critical minerals to accelerate the transformation of its manufacturing structure, create wealth and employment, and drive energy transition, electric mobility and sustainable development not only for itself but also for the US World.
Jose Manuel Salazar-Xirinachs is Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC)