Chinese companies seeking to gain control of Latin America’s lithium reserves have an advantage against which U.S. and European companies cannot compete: A general willingness to ignore international anti-corruption rules, experts say. This willingness is systematic and aimed at gaining a dominant role in key electronics industries, including the manufacture of cellphones, computers, and electric cars.
“For China, the most important thing in lithium is to grab as much as it can and as long as it can, without worrying about rules, care for the environment, indigenous communities, and so on,” Douglas Farah, president of IBI Consultants, a U.S. firm that focuses on investigating and analyzing threats in Latin America, told Diálogo on July 23. “The prize for China is to control as much as possible the future of the market for this valuable limited resource.”
In 2022, Chinese companies invested some $259 billion in new plants, an increase of 3.6 percent from 2018, CCID Consulting, a research agency of China’s Ministry of Industry and Information Technology, indicated in a report.
The big spending is driven by growing demand, where mainland China is the world’s largest electric vehicle manufacturer for eight consecutive years, as well as the world’s largest battery manufacturer for six consecutive years.
In such a buoyant scenario, Chinese companies use bribery and other covert practices to gain space from U.S. and European companies in the lithium industry in Latin America. Their attempt to monopolize the sector in countries with large deposits of the metal, such as Argentina, Bolivia, and Chile, is constant.
“I call this emerging phenomenon in the region ‘geostrategic corruption,’ through which China pragmatically chooses to massively expand its presence around the world, but particularly in Latin America,” Eduardo Gamarra, professor of politics and international relations at Florida International University, told the Miami Herald. “They can bribe, hire sons of presidents, know in advance the bidding conditions, and therefore subvert the bidding processes.”
The mechanism to corrupt is relatively simple, and its success depends largely on the lack of formal controls and accountability of the authorities with whom Chinese companies deal.
“Chinese companies offer overpriced infrastructure, saying for example: We are going to build a lithium battery factory and invest $100 million. But if in the end there is no big battery factory, the politician can keep the money, and China will not ask for accountability,” Farah said. “These companies take control, and immediately start extraction and along the way arrange whatever is necessary so that there are no problems with the government at the time.”
Those who implement the corruption scheme in the countries are Chinese officials of various kinds: both from the companies and Chinese diplomats stationed in the country.
“To a certain extent, Chinese companies have autonomy to decide how they maneuver to enter tenders and win them […]; it’s a matter of working without formal controls. If there are no invoices, there is no problem. Nor will anything force these companies to carry out environmental impact studies or studies of economic damage to the inhabitants,” Farah said. “When there are bigger things like provision of elements, such as nuclear plants, or space stations, which are more strategic issues for China, they are handled at another level.”
A series of undisclosed deals signed in Argentina between Chinese companies and autocratic governors of northern states, which have the largest lithium deposits in that country, are being exposed by IBI Consultants, Gamarra, and other think tanks as the latest example of the questionable deals. “In several cases, dealing with these state authorities makes the deals much easier,” Farah said.
Investments by Chinese companies in countries such as Argentina and Bolivia are notable. The Chinese company Tibet Summit Resources Co. Ltd. will invest $2.2 billion in two lithium exploration projects in Argentina. This announcement was widely publicized by the Argentine Ministry of Foreign Affairs in November 2022.
In Bolivia, China’s presence in the lithium sector is not only through investments, but also through invitations to “trainings” in China. In June, a delegation of 23 members of Bolivia’s Ministry of Hydrocarbons and Energies, Yacimientos de Litio Bolivianos, and officials from the governor’s office of Oruro, Bolivia, were invited to Beijing, China, “to broaden their knowledge of new technologies and uses of this key resource for the global energy transition,” the Ministry of Hydrocarbons and Energies said in a June 27 statement.
The solution is to curb China’s voracious appetite. “In a globalized world everyone has the right to compete and win or lose, according to the rules of the game, with transparency and honesty,” Farah said. “China can compete, obviously, but with fair play, informing who is financing, how the money is going to be spent, and who is going to oversee the internal processes, among other points that should be mandatory worldwide.”