Against the backdrop of the global push to net carbon zero, supply chains for the critical metals and minerals underpinning this shift are facing immense pressures. As followers of ARPN well know, China, which not only holds the pole position when it comes to sourcing critical minerals, but has also cornered the downstream supply chain, is the elephant in the room here – but there are other significant geopolitical challenges stakeholders have to reckon with.
Often overlooked in the policy discourse, yet no-less crucial in the global race for critical mineral resources, is the Southern Hemisphere. Resource-rich Latin and South America have long been key players in this sector, but, with Latin America emerging as a major source of renewable energy metals and minerals, the region’s importance is growing in the context of the green energy transition.
Renowned author and energy expert Daniel Yergin agrees, stating that Latin America is “a major, major source of lithium, a major source of copper. Those are two of the critical elements in the energy transition.”
Yergin points to a rising challenge that is set to have major geopolitical implications that should get U.S. policy stakeholders thinking, and ultimately acting:
“But you also have across Latin America a wave of populism… Resource nationalism is not just about oil and gas, it’s also about minerals, definitely, with the batteries and everything else.”
Indeed, as Peter Schechter and Juan Cortiñas outline in a recent piece for Marsh McLennan’s Brink News,
“[t] he political tide in Latin America has turned decisively toward leaders who openly shun laissez-faire economics. A new generation of presidents and legislative leaders is advocating for greater government control of national economies, and with this trend, the specter of resource nationalism has once again gained a foothold in the region.”
Argentina, Bolivia, and Chile, which form the so-called Lithium Triangle — home to more than half of the world’s known lithium reserves according to experts — are central in this new development, but other countries in the region, like Mexico, are also in the critical minerals business. In each case, the trend toward resource nationalism is unmistakable.
President Andrés Manuel López Obrador has called for reserving future lithium extraction for the state, stating that the Mexican government “will deny any request for a concession to exploit lithium, and we have the power to do that.”
In Chile, home to the world’s largest reserves of lithium and copper, recently elected center-left president Gabriel Boric has also proposed to nationalize mineral operations and end private concessions, with government documents arguing that “the strategic resources such as copper and lithium should serve the interest of all Chileans and therefore be incorporated into the ‘full and exclusive domain of the state.’”
Argentina’s government is developing a new strategic roadmap for mining. With lithium mining at its heart, policy changes could include “analyzing investment incentives for lithium mining, including a possible exemption for profit repatriation … and a system of ‘progressive’ export taxes to charge lower rates at the start of a new project.”
In Peru, another key traditional mining jurisdiction, President Pedro Castillo ran on a platform calling for increased mining royalties during his 2021 campaign, and has taken “a hands-off approach to the increasing social conflicts in the country’s mining regions” since assuming office.
According to media reports, against the backdrop of a global lithium market expected to grow by 500% in the next 35 years, developers in Argentina, Bolivia, Chile and possibly Peru are even evaluating the possibility of creating an OPEC-like cartel.
And while Schechter and Juan Cortiñas contend that it is “important not to confuse this resource nationalism with predictions of a highly ideological leftward turn,” this does not change the underlying implications for U.S. critical mineral resource supply chains as U.S. demand for lithium and other green energy critical materials continues to grow.
With its 100 Day Supply Chain Report and subsequent policy statements, the Biden Administration committed to an “all-of-the-above” approach to mineral resource policy. However, since then, the overall approach to date has appeared more geared towards “rely[ing] on ally countries to supply the bulk of the metals needed to build electric vehicles and focus[ing] on processing them domestically into battery parts, [as] part of a strategy designed to placate environmentalists.”
As we previously pointed out, the “friend-shoring” concept may be an important pillar of the “all-of-the-above” approach, and highly appealing especially to those policy makers with “not in my backyard (NIMBY)” constituencies.
However, it will not be sufficient to meet our vast material needs, particularly as NIMBY-ism is going global.
It’s time we come to terms with the fact that as much as we want to rely on our friends and allies, this can only be part of our critical mineral resource strategy. To succeed and remain competitive in the 21st Century, we will also have to harness our arguably vast domestic resource potential across the entire value chain — from mine to manufacturing.
