Bolivia pauses decision on $2 billion lithium extraction

The contracts has sparked a wild debate in Bolivia. This week, the lower house of parliament, Chamber of Deputies, to they intend wait his approval of the contracts until to the process of "socialization" is completeThe decision follows loud criticisms directed at the contracts oh, not least, what is considered a deficiency socialization process.  

Socialization is a consultation process that aims to give the civilian population and other stakeholders the opportunity to have insight and feedback on the projects. It concerns two different contracts, together worth approximately 2 billion US dollars, which would provide China and Russia respectively opportunity to invest in the extraction of Bolivia's lithium resources.  

– The government uses the argument that “it’s now or never” when it comes to starting to exploit lithium, even though they have had four years to come up with more well-thought-out proposals and contracts that could have been discussed and socialized, says Sebastian Caballero Paz, program officer and head of climate and environment at Union to Union.  

Bolivia has the world's largest lithium reserves, and is appreciated together with Chile and Argentina be home to half of the world's lithium resources according to US Geological Survey. The mineral is a key component in electric car batteries, among other things, and a valuable asset for the country.

The extraction has long been relatively low in Bolivia then investors hesitated to establish where due to the unstable economic and political situation. Most recently in June 2024, the country was shaken by one failed coup attempt against the incumbent government.   

The situation in the country is complex, underlines Caballero Paz, who himself comes from Bolivia and also sstudying effectsna of mineral extraction in the Bolivian Amazon in his doctoral position at the University of Helsinki.  

Bolivia is currently suffering from an economic crisis, largely due to the decline in its vital natural gas exports. The situation has drastically weakened support for the incumbent government.. 

Proponents of the contracts with China and Russia argue that they can finance the extraction of Bolivia's resources, and that they will lead to increased industrialization and more jobs. 

Kthe critics, which includes both opponents in the civilian population and political representatives, indicates that the contracts increase China's and Russia's influence over the important resource. Poor working conditions and environmental damage are further risks that highlighted. De wants to see a solution where assets better benefit Bolivia and its people. Men Peace tells about the situation in Potosí, which is the area where lithium extraction will take place.  

– Many people in Potosí feel that the government is abusing its power and leaving the region without natural resources, with pollution and in poverty. 

Men Paz emphasizes that the contracts forlived provides the region with revenues and royalties, but both the residents and the government of Potosí believe that these compensations are too low. According to them, the benefits do not outweigh the negative consequences of lithium extraction. 

“Governments have based their development plans on the export of natural resources. Today, lithium is seen as the new ‘miracle solution’ for national development,” says Knight Peace. 

In August this year, both parliamentary and presidential elections will be held in Bolivia, Caballero Paz describes how outgoing governments have historically introduced “strange” and often economically damaging measures at the end of their term of office and that lithium contracts seen by many as a typical such measure.  

Latin America – a playing field for US and Chinese interests 

Possible risks connected to Bolivia's economic and political situation has not stopped China and Russia from securing leading positions in the hunt for Bolivia's lithium. More recently, it has also voices raised in the USA with an increased interest in Bolivia and its resources.  

– It is not only Russian and Chinese companies that are interested in investing in Bolivia. Our country is not closed to any company, said the country's president Luis Arce in November 2024 to Reuters. 

The situation in Bolivia is  rather not unique. More countries in Latin America, for example Panama, has become a playing field for Chinese and American interests and is forced to navigate between these tensions. Caballero Paz reflects on the situation in his home country. 

– Given the current situation in the country, its exploitation is a necessity, but the question is: according to what criteria and under what rules? 

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