One the edge of the Madidi National Park in the Bolivian Amazon a vast polluted wasteland has sprung up. Dotted with makeshift campsites, machinery and piles of soil and waste but yet humming with the energy from non-stop mining. The site is the hub of illegal gold mining in the region. Local co-operatives backed by Chinese mining interests have scrambled to take advantage of lax law enforcement in the area and ruthlessly extract the land’s mineral wealth.
Mining has destroyed the local environment, polluting the water with mercury, making locals sick. Many illegal Chinese migrants have flocked to the area attracted by the chance for easy money. Chinese and local firms operate without licences and paying taxes, their activities apparently shielded from officialdom by China’s geopolitical power.
China has steadily extended its influence into Bolivia and many neighbouring countries, investing, extending credit, and providing diplomatic support – a welcome shift in a region often wary of US motives and power. But has Bolivia swapped one form imperialism for another?
Bolivia’s Past
For many years Bolivia was been stripped of its natural wealth, first the conquering Spanish extracted the nation’s silver until independence in the 19th century. In the 20th Century tin mining dominated but largely failed to bring wealth to the country.
The election of Evo Morales in 2006 and the Movement for Socialism appeared to open a new chapter for the country. Bolivia could utilise its natural resources for the good of the country. Bolivia has enormous mineral wealth and in particular reserves of the world’s lightest metal which also happens be in huge demand right now.
Salar de Uyuni
The vast salt plains or Salars of Bolivia hold huge deposits of lithium. This white gold of the net-zero transition is highly prized by battery makers across the globe. But unlike neighbours Chile and Argentina that make up the lithium triangle (together representing nearly 60 percent of global lithium production), Bolivia has never developed a lithium export industry. Companies have been wary of dealing with the government and other countries appeared to have better prospects.
This could be about to change. The signing of contracts with Chinese and Russian firms to commercially exploit lithium should mark a start of a new era. The Bolivian government hope this will allow the country to benefit from its mineral riches. The country has been scarred by its inability to benefit from its mineral wealth in the past. But critics are probing the deal wondering why the contracts with the Chinese and Russians are so opaque.
Yacimientos de Litio Bolivianos (YLB) a state owned company is part of a consortium including Brunf (a subsidiary of CATL the world’s biggest battery producer) that will build production plants using direct lithium extraction to produce 25,000 tonnes of battery grade lithium by 2028. The deal is worth around US$ 1.4 billion. Scaling up battery production is of course a key plank of the global energy transition.
Zinc
China has also recently signed a deal for a new zinc processing plant in Bolivia. The investment is significant because it would mark a stepping stone for Bolivia in terms of moving up the value chain and processing zinc, rather than just exporting the raw metal.
Geopolitics
These deals also have a strategic and geopolitical angle. Not long ago, German firms were in prime position to extract lithium. Now the Luis Arce has moved towards Russia and China and away from the west. But any sign that these foreign powers are exploiting Bolivia will be extremely damaging for the government. The Government’s political capital is bound up in stopping foreign interests from plundering Bolivian’s wealth.
The lithium deal needs to add value to the economy and minimise environmental damage to truly prove its worth. Local residents have been watching and learning from lithium projects in neighbouring Chile and will want to protect their land and local ecosystems. Russian and Chinese companies have often been criticised for failing to have high environmental standards.
Violent protests erupted in Potosi in 2019 directed at a German firm and the national government, locals felt the lithium royalties were not enough. The exploitation of land for gold near the Madidi National Park has not gone unnoticed by critics of the government.
The Bolivian Economy
Doubts over the deal have emerged as the Chinese government has pushed for confidentiality clauses to be inserted into the processing plant contract. This means that stakeholders cannot share details of the deal with the public or Congress. This secrecy will ensure that the terms of the deal and the influence China has over the Bolivian economy will remain closely guarded. These clauses are commonplace with Chinese led natural resource deals but this lack of transparency will only raise more questions and doubts about the relationship. In particular, is it a good one for Bolivia?
Chinese influence does not end with the lithium investments. Bolivia has started using the Chinese Yuan for 10 percent of its trade and China become the Andean country’s biggest bilateral creditor.
All this comes at a time when the Bolivian economy is facing serious problems: a lack of dollar reserves, its debt rated as junk and falling exports (in particular its mainstay natural gas). All this makes the country more likely to fall into dependence on China. The risk is that Bolivia fails to capitalise on its lithium wealth by selling it cheap to China and at the same time ignores environmental concerns around mining in the country. But hopefully this time round Bolivia can overcome the mineral curse.