With its vast salt flats, Latin America is rich in a metal that has become more sought after than gold: lithium. Known as white gold or the oil of the 21st century, this metal is now essential for energy transition and the booming market for electric cars. The so-called Lithium Triangle, located in the Andean highlands and comprising Bolivia, Argentina, and Chile, covers 52 percent of the world’s lithium reserves, which has aroused the interest of the world’s main economic players and has spurred a race to acquire this metal in South America. Having access to lithium is now synonymous with power.
In the unbridled race for the Lithium Triangle, the People’s Republic of China (PRC) has its foot on the accelerator and is in the lead to fulfill one of its major tasks: to dominate the energy sector. So far in 2023, the Asian country has closed ambitious agreements to invest in the Andean region’s salt flats. So far, China is the only country that has signed with the three nations of the Lithium Triangle. “Latin America should worry about China because it is coming for its natural resources,” Argentine journalist and writer Agustín Barletti warns in his most recent investigation, The Dragon’s Hunger: China’s Plan to Eat the World.
A warning that recalls what the Chinese government has repeatedly said, and which is explicitly found in China’s 2016 National Mineral Resources Plan: “China depends on natural resources to safeguard national economic security, national defense security, and the development of strategic emerging industries.” The PRC, however, does not have the capacity to meet the needs of its accelerating population growth, nor China’s unbridled industrial expansion.
China’s method of ensuring supply security appears to be physical control of the resource. According to Barletti, China has more than 2,700 companies in the region and they all depend directly on the Chinese Communist Party. “It’s a way to build on the ‘landings,’” the writer says, adding that “most of the investments are destined to strategic values for China, with natural resources as its main target.” And lithium is undoubtedly among those natural resources. It is a strategic metal for China, the worldwide leader in lithium batteries and electric car manufacturing, which also seeks to lead in the big bet on renewable energy.
According to international data and analytics company S&P Global Market Intelligence, in 2021 China accounted for 79 percent of lithium-ion batteries globally. While China is already the source of 13 percent of global lithium production, these volumes are not enough to supply its colossal battery industry and its much-desired energy transition; it must therefore look to source from other countries. “What China is pursuing in this race is long-term strategic positioning for the benefit of its own economy, for the growth of its country, and to supply the high demand for energy because oil is no longer enough,” Eduardo Gamarra, professor of politics and international relations at the University of Florida (FIU) and founder of the consulting firm Integrated Communications and Research (ICR), which specializes in public opinion and data-based research, told Diálogo.
How China rides the Lithium Triangle
A glance at China’s progress in the countries of the Lithium Triangle is enough to illustrate this reality. Its most recent acquisition is in Bolivia, the so-called “Saudi Arabia” of lithium. Although it is the country with the most lithium resources in the world — around 21 million tons — it still has no commercial or industrial activity. In January 2023, the Chinese consortium CATL BRUNP & CMOC (CBC) signed a contract with the Bolivian government for the construction of two lithium carbonate plants to generate direct lithium extraction (DLE) in the Uyuni and Coipasa salt flats. According to Bolivian Minister of Hydrocarbons and Energy Franklin Molina, this is a $1 billion investment and is the first time a foreign company takes part in Bolivia’s lithium industry.
In addition, Chinese mining company Tibet Summit Resources Co. Ltd. announced a new $2.2 billion investment in lithium mining projects in Argentina, according to the Argentine Ministry of Foreign Affairs, International Trade, and Worship. The projects in the Arizaro and Diablillos salt flats in Salta province are expected to produce between 50,000 and 100,000 tons of lithium. Another Chinese capital project operated by Ganfeng Lithium, the largest Chinese lithium producer and one of the main players in the global lithium market, is expected to start operations soon in the Cauchari-Olaroz deposit. In addition to these investments, the participation of China for the manufacture and production of lithium batteries in Santiago del Estero, under a consortium formed by Chinese companies Contemporary Amperex Technology Company Co. Ltd (CATL), Tianqui Lithium, and Gotion High Tech, was recently announced.
Finally, in Chile, Chinese investment was announced for the creation of a lithium industrial park in the city of Antofagasta. The companies that will participate will be Tsingshan Holding Group, Rupia Energy, Battero Tech, and FoxESS. “To begin with, we know that our investment will exceed $2 billion,” John Li, vice-president of Tsingshan Holding Group, told Chilean newspaper El Financiero. For its part, Chinese company Tianqui Lithium acquired in 2018, 24 percent of Sociedad Química y Minera de Chile (SQM) to export 80,000 tons of lithium to Chinese company BYD for seven years. As announced by El Financiero, the offer has amounted to $6 billion and the company’s sales soared 144 percent thanks to the growth of the electric vehicle market led by China, highlighting the Asian country as the main buyer of Chilean lithium.
China’s advance is no coincidence
Multiple international companies have tried to enter the Lithium Triangle, but in Latin America China took the lead. “It achieved it the way it has always done it, which is by the stroke of a pen and using the ammunition of its state capitalism,” Juan Pablo Cardenal, writer and former Spanish correspondent in China (2003-2014) and current member of the Center for the Opening and Development of Latin America (CADAL), told Diálogo. A strategy, which, according to experts, has been driven by a strong injection of Chinese capital through loans and state investment, accompanied by a foreign policy of soft and incisive power. How does it work?
First, the substantial Chinese loans that came to the region at the beginning of the 21st century on a government-to-government basis committed recipient countries to contract Chinese companies for the development of strategic infrastructure such as energy. According to a study by U.S. think tank Inter-American Dialogue, the sector that has received the most loans is energy, with $94.6 billion. As a result, the “Dragon” is rapidly moving from being a secondary player to a major player in most countries in the region, attracting investment through state-owned companies.
“No other country is able to compete with the Chinese capitalism proposition,” Cardenal said. “We are not talking about a proposal of companies, but a proposal of the Chinese State, and those companies that come to compete with U.S., European or Japanese companies, are companies that come with official seal and with official financing, they are not only looking for a cost-benefit issue, but they are serving the strategic needs of their country, and in that sense China has no competitor.”
A strategy that is also driven by “opportunism.” “China has taken advantage of the circumstances of the region, it has been able to penetrate precarious economies that have not had access to conventional credit, promising investments and loans, such as Bolivia, which already owes $6 billion to China, but it will be charged,” Gamarra of FIU said.
To this tactic, questioned by economists and experts in the field, China has added a foreign policy of soft and incisive power that has served to expand its diplomatic, cultural, scientific, and military presence, and to penetrate with greater intensity the economies of the global south. “It’s a strategy of personalized outreach to influential individuals in Latin American society — from politicians, officials, and journalists to academics, businessmen, and former diplomats, among others — with the aim of exposing them to the official discourse of the Chinese regime and bringing them closer to Beijing’s cause,” said Cardenal, author of The Art of Making Friends: How the Chinese Communist Party Seduces Political Parties in Latin America.
Analysts stress that China does not think in terms of electoral cycles, but rather plans with strategic objectives of 25 to 50 years or more. “That vision has been key in the privileged position it has today in the region and especially now in the Lithium Triangle,” Gamarra said. “In the Bolivian case, for example, there is a very close relationship with President Arce, but it also had it and still has it with Evo Morales. They have been playing on both sides of the political spectrum with the objective of gaining access to lithium. And they succeeded.”
Such is the PRC’s ability to establish relations with everyone, but without meddling in such a direct or public way so as not to prevent it from moving from government to government or even from capital to region. “The most dramatic case is Argentina, where China has implemented a strategy no longer with the state but through direct relations with governors. It no longer even matters for China to maintain state to state trade relations, and there are already sectors very concerned about this in Argentina,” Gamarra said.
Bruno Fornillo, researcher at Argentina’s National Council for Scientific and Technical Research (Conicet), concurs and points out that structural gaps in Argentina’s economy have allowed an excessive influx of Chinese companies, which the Asian country has been able to take advantage of. “The number of projects that exist in Argentina is because the neoliberal matrix allows a totally uncontrolled entry of foreign companies, which would not happen in China, not even by chance,” Fornillo said.
China’s incisive power is also accompanied by a strong rhetoric, through which it achieves great goals. An example of this is the persuasive speeches that promise generations of employment, but it is employment for their own nationals and for their own benefit, experts stress. “The Chinese arrive and announce that through their investments in the region they are going to generate a great amount of employment, but it is Chinese labor. In Bolivia, for example, more than 20,000 Chinese citizens easy have already arrived to be employed in the projects of their investments in the country,” Gamarra said.
But Gamarra’s analysis goes further, assuring that China not only seeks to create jobs, but also to position and monopolize the industry in strategic sectors such as lithium. “Lithium is the most obvious example of incisive power. What it is trying to do is to create a monopoly over the different phases of lithium,” he said.
Corruption, a latent threat
But there is more. According to analysts and experts there is another phenomenon that has allowed China to have a competitive advantage in the region and in particular in the lithium race. Experts call it: “geostrategic corruption.”
“It is characterized by the use of corrupt methods such as no-bid contracts, financial agreements with privileged information, or special relationships with those in power to promote China’s strategic interests,” said Gamarra, author of What Is “Geostrategic Corruption” and How China Uses it to Exert Its Influence in Latin America.
“China takes advantage of the corruption structures that prevail in the region to advance its interests without the penalties faced by countries in the West,” Gamarra added. “In other words, for them corruption is a kind of necessary evil; corrupting an official is not a moral issue, it’s a matter of strategy and necessary to advance their interests.”
An opinion shared by Douglas Farah, president of IBI Consultants, a national security consulting firm that focuses on organized crime, who in an interview with El Nuevo Herald explained how China has been using geostrategic corruption to gain a foothold in the region. “China is using bribery and other shady practices to push U.S. and European companies out of the lithium production industry in Latin America,” he said.
Irregular operations in Argentina and Bolivia?
It’s a situation that already seems to be evident in Bolivia and Argentina. According to experts, an example of this is what is currently happening in Bolivia after it became known that the government of Luis Arce signed a multi-million dollar contract for the exploration and extraction of lithium in Bolivia, when the Germans were on the verge of winning the contract. “It was a more or less good agreement for Bolivia, but it did not prosper and now Bolivia comes out with the surprise that it is closing with China,” Gamarra said.
This decision has caused a stir in the MAS socialist country. The Bolivian media have alluded to the project’s lack of precision and emphasized that it is unknown how the Chinese consortium CATL BRUNP & CMOC (CBC) will recover its investment and obtain profits. In theory, the agreement establishes “absolute control” by the State, but to date the specific terms of the agreement, payments, amount of investments, and the role the Chinese consortium will play are unknown, if it is not to have any participation in the business. “This is very serious because there is no information about the conditions or how they will not violate the law,” Gonzalo Mondaca, an environmental researcher at the Bolivian Documentation and Information Center (Cedib), told Bolivian newspaper Los Tiempos.
Juan Carlos Zuleta, a Bolivian expert on the lithium economy and advisor to the Potosi Civic Committee (Comcipo), said that this agreement violates the sole article of Law 928, which establishes that 100 percent of lithium production and commercialization must be in the hands of Yacimientos de Litio Boliviano YLB. Zuleta questioned the poor transparency of the contract and CBC’s lack of proven experience in applying EDL technology.
“In contracts with Chinese companies there is no transparency about the agreements that are signed; many times China, including its loans, demands confidentiality; then when an agreement comes to light we see why many times they are completely asymmetric agreements in favor of China, sometimes with leonine clauses or with sovereign guarantees by the receiving State,” Cardenal said.
Corruption scandals with Chinese companies in Bolivia have already happened. “The corruption relationship with China has been going on for a long time and continues,” Gamarra of FIU said. In late 2022, daily La Nación reported on a bribery scandal involving a Chinese company and Bolivian state officials. As this newspaper reported, the complaint refers to a bribe amounting to millions of dollars from a Chinese company to officials of a state-owned company in charge of controlling roads in this country. In response to the complaint, which stipulates that it was a bribe of close to $2.6 million, several officials of state-owned ABC and an executive of the Chinese firm Harbour Engineering Company were arrested, La Nación reported.
The case of Argentina is one of the most controversial, according to a recent report by the International Coalition Against Illicit Economies (ICAIE), which focused on one of Xi Jinping’s most prized trades: lithium. This study examines how the Argentine government has allowed the PRC to take over multiple strategic interests, including the vital lithium trade through corrupt practices and deception, with the complicity of Argentine national and provincial governments, which not only shield PRC companies from fair competition, but also from accountability, environmental oversight, and community participation, the report indicated.
According to the study the case that stood out is Santiago del Estero. “China did not even know where Santiago del Estero was and there are already millions of Chinese dollars that have entered that region, and now they are interested in building a battery factory in a place where there is not even lithium,” said Gamarra, who knows the case in Argentina well.
The biggest advantage that China achieves, experts say, is that this corruption is permissive and is tied to its “autocratic” model, where companies are not judged by their government because they belong to it. “We have found Chinese articles where they compare how to achieve a business by paying a bribe, versus how to win it without paying a bribe, and they conclude that it is better to pay it because it gives them a competitive advantage,” Gamarra said.
A worrying situation that Cardenal also highlights. “The cost paid by Chinese companies and Chinese financial institutions for their bad performance, their bad practices abroad have an illegal social cost of zero in China.”
China’s advantages are disadvantages for the Lithium Triangle
China’s lead in the lithium race has political and economic circles worried. Experts from all over the world consider that this competition is unequal, because while countries such as the United States, Germany, and Japan sanction companies that engage in corrupt practices to obtain contracts, China does not, and its companies take advantage of the institutional weakness and deep-rooted corruption that exists in the region. But there is more, and according to experts, China has no qualms or questions about any environmental impact that may result from exploration or exploitation such as lithium.
In the second part of this report we will analyze how China’s investments in lithium extraction have become a headache for countries like Argentina, and why Latin America is at risk of repeating the history of overflowing extractivism, thus wasting a white gold opportunity for the region’s development.
Read the next installment of China Goes After South America’s New Treasure: Lithium. Part II.