Lithium reserves could help transform Bolivia's economy

Government officials think that Bolivia may profit from automakers' push for electric cars

On a remote Andean plain in Bolivia, a short drive on unpaved roads from the world's largest salt flat, 120 government workers are constructing a facility to help power the fuel-efficient electric cars of the future.

The plant, in a sparsely populated region, is supposed to begin producing basic compounds of lithium, which is used to make batteries for cell phones, power tools, computers and other electronic devices, by year's end.

Government officials think that Bolivia possesses the world's biggest lithium reserves, and they also think that the country is poised to profit big-time from the automakers' push to develop electric cars that will run on lithium ion batteries.

"Bolivia will become a big producer in six years of batteries," Luis Alberto Echazu, the minister of mining and metallurgy, said in an interview. He ticked off three companies that he said have expressed interest in investing in the government's lithium venture: Sumitomo, Mitsubishi and Bollore, a French company.

Officials from the three companies didn't respond to requests for comment.

Lithium is the lightest metal and the least-dense solid. It's typically extracted from beneath salt flats, and about 70% of the world's supplies come from Chile and Argentina. While lithium batteries don't power hybrid vehicles such as the Toyota Prius, analysts think that the fuel-efficient electric cars of the future likely will use them.

Rather than helping lead the way to a cleaner, more fuel-efficient future, however, Bolivia could be a case study on the limits to globalisation.

The country's socialist president, Evo Morales, and its powerful union leaders are all deeply suspicious of foreigners, and their politics could stymie yet another opportunity for Bolivia to improve the lives of its citizens.

Bolivia, though, has long experience with foreigners who've exploited its minerals - tin, silver and gold - and its mineworkers, and with neighbouring countries that have annexed its Pacific coast, part of its oil fields and its rubber-growing region.

That helps explain why in 2003 and again in 2005, Bolivians hit the streets to oust their presidents and protest what seemed to be a sensible business proposition: exporting Bolivian natural gas to Chile, the neighbour that cut off Bolivia's access to the Pacific.

Those protests led to the 2005 election of Morales, the country's first president of self-proclaimed indigenous ancestry.

He said that the government should own and operate any lithium mining operations, and that foreign companies can invest their cash but must play only secondary roles.

There are physical hurdles, as well as political ones. Heavy rainfall interferes with the evaporation process, and there are no good roads to truck lithium out of landlocked Bolivia.

"There are fairly significant barriers to developing the resource in Bolivia," said Timothy McKenna, vice-president of investor relations at Rockwood Holdings, one of the three major lithium producers in Latin America.

Neither Rockwood nor the other two major Latin American lithium producers, SQM and FMC Lithium, have shown any interest in Bolivia.

Morales inaugurated construction of the new $5.7m facility in May, but work has proceeded at a snail's pace. Government officials blame state bureaucracy and bitter winter weather, when the temperature drops to 0F (-17.8C) at night.

In La Paz, Bolivia's capital, mining minister Echazu still brims with confidence. He said that foreign companies are welcome, but they must follow the government's orders.

Francisco Quisbert, who heads a powerful local union in Uyuni, fondly recalls the street protests and hunger strikes that prompted Lithco to abandon plans to invest in Bolivia more than a decade ago.

Quisbert thinks that Bolivia's lithium will lift thousands from poverty, but he warns that foreign companies must come only on Bolivia's terms.

"We consider ourselves to be the owners of the salt flats," Quisbert said.