China’s Latin American gold rush all about clean energy Analysis by Foreign Policy

According to a piece in the Foreign Policy magazine, China is not mining for gold in Latin America, but rather for lithium. Caliber.Az reprints the article.

A new gold rush is underway in Latin America—only this time around, the bounty is white. With its sprawling salt flats, the region is rich with a new ore—lithium—and everyone from Germany to China is clambering to get in on the race.

White gold, or lithium, is a coveted critical mineral that is key to making the batteries that drive the energy transition. Some 60 percent of the world’s lithium reserves can be found in the so-called lithium triangle, a region that encompasses Chile, Argentina, and Bolivia. It’s not just lithium either: Peru and Chile are the world’s two largest copper producers, while Brazil is home to 17 percent of all nickel reserves.

“Latin America is front and center in the race for minerals,” said Ryan Berg, director of the Americas Program at the Center for Strategic and International Studies. “It’s just about every single mineral you need to power the modern infrastructure, the green infrastructure that we’re going to need.”

That has sparked a global scramble to tap the region’s wealth—one in which Chinese companies have an edge. For decades, Beijing has rapidly ramped up its trade and investment in the region, entrenching its economic ties and influence there while the United States’ attention wandered. A growing number of Chinese projects in Latin America now center around the clean energy sector, part of what experts say is emblematic of a broader shift, as Beijing scales back its big-bore lending and zeroes in on what it sees as the prize.

“We’ve all known that renewable energy would eventually get the momentum necessary to pick up speed and really dominate the investment horizon,” said Rebecca Ray, an international development finance expert at Boston University’s Global Development Policy Center. “And we’re beginning to see that pivot in the [China-Latin America] relationship, where it goes from potential to reality.”’

Spanish conquistadors in the 16th century found loads of silver in Potosi, Bolivia. Chinese investors think they’ve found their own mother lode of a different kind. Chinese firms won a bid to develop two lithium plants in Bolivia last month, beating out offers from American and Russian companies. Led by Chinese battery giant Contemporary Amperex Technology, the consortium is betting big on Bolivia’s enormous potential mineral wealth—estimated to be home to the world’s biggest lithium resources—although extraction challenges and political hurdles have long stymied the Bolivian industry’s development. Bolivia’s lithium just isn’t as easy or cost effective to pluck as it is in neighboring countries.

“Many countries and many companies have gone in there, tried to exploit the resource—for lack of a better phrase—and just run into challenges either with the government or with purifying that brine,” said Chris Berry, president of House Mountain Partners, an independent metals analyst, referring to the process of drying brine in salt flats to extract lithium ore. “That’s always been the problem with Bolivia.”

Beijing has found more success in Argentina, with Chinese battery powerhouse Ganfeng Lithium paying $962 million to buy Lithea Inc. and snap up the firm’s rights to two salt lakes. A year ago, another Chinese company, Zijin Mining, funneled $380 million into Argentina to build a lithium carbonate plant.

Beyond lithium, Beijing has also struck deals for solar, wind, and hydroelectric projects across the region, pouring hundreds of millions of dollars into solar parks in Argentina and Brazil as well as signing contracts for hydroelectric projects in Bolivia and Argentina. In Brazil, Chinese firms have also made inroads in the country’s electric vehicle industry. Ray, the Boston University expert, said as Western firms withdrew from the region during the pandemic and resulting economic slowdown, Chinese companies moved in and began building up their portfolios. “And so now, Western companies may be playing a bit of catch-up,” she said.

Part of the allure of partnering with Beijing, experts say, is the very nature of Chinese deals. China has boasted about its no-strings-attached financing, with fewer economic and political conditions than Western lenders. Many Latin American governments see China as the only option, and criticism that Beijing’s lending practices have overburdened borrowers with debt have failed to resonate in the region, Berg said. Last September, debt-ridden Ecuador and China inked a deal to restructure $4.4 billion in debt.

“[Governments] know that they’re not going to get the same level of quality by partnering with Chinese companies, but they also will get fewer headaches, fewer regulations, fewer lessons on the environment, fewer complaints from [nongovernmental organizations],” Berg said.

In the past, Chinese-funded projects have come under fire for creating lasting environmental harm, including deforestation, pesticide toxication, and the mismanagement of delicate ecosystems. In Ecuador, for example, a copper mining project operated by the subsidiary of a Chinese state-owned company led to the displacement of local populations, land seizures, and environmental damage, according to the U.S. Foreign Affairs Committee. Still, China’s silver has currency.

“Even though China has this image as insensitive to environmental protection, it is the principal player in this region in this very dynamic green energy sector,” said Benjamin Gedan, director of the Wilson Center’s Latin American Program. “That’s to the disadvantage of U.S. companies and influence in the Western Hemisphere.”

Western countries, which have marketed themselves as more environmentally and socially conscious investors, have been rushing to compete. Last month, German Chancellor Olaf Scholz traveled to Argentina and Chile to secure new lithium deals while the European Union updated its trade ties with Chile just a few months ago. Canada has issued regulations that forced three Chinese companies to divest from Canadian lithium mining firms.

The Biden administration’s answer, the Americas Partnership for Economic Prosperity, promises multi-sector, region-wide cooperation and involves 11 countries that account for some 90 percent of GDP in the Western Hemisphere. Although the details of the partnership haven’t been hashed out yet, Washington has pledged to use it to expand supply chains and boost economic growth—all while deepening U.S. trade ties with the region.

All of these competing interests have put Latin American leaders in a tricky position. They can get easy money, with headaches. They can get good money, with strings attached. But it’s all part of the new great game.

“They’re all really trying to triangulate both Western and Chinese financing,” said Stephen Kaplan, a professor at George Washington University. “In a lot of ways, the region is looking to circumvent some of the geopolitical tensions.”

But increased interest could also come with its own benefits. As foreign investors scramble to make attractive offers for clean energy deals, Latin American governments are also in a unique position to pick the highest bidder—and maximize their own economic interests.

“It serves Latin America to have competition,” Ray said. “If they get to have competitive bidding processes with many different competitors—be it European, Chinese, American, Japanese, Korean—they may get better outcomes than if they’re just working with one.”