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Chile is the second largest producer of lithium in the world aafter Australia and holds approximately 45% of the mineral reserves in the world. (Phooto: Invest hile)
Thursday, May 4, 2023

Chile’s National Lithium Strategy: A New Beginning?

Chile’s new national strategy does not nationalize its lithium industry.


Last month, President Gabriel Boric launched Chile’s much anticipated National Lithium Strategy. Many investors saw the announcement as damaging to Chile’s status as a global leader in lithium production. Headlines around the world reported the nationalization of the industry. The value of shares of lithium companies in Chile fell. Even Elon Musk weighed in.

The strong reaction was a reminder of Chile’s prominence as a supplier of lithium for the batteries that will power the global energy transition. Chile is the second largest producer of lithium in the world, and electric vehicle producers hope it will help assure affordable supplies of this critical mineral.

In fact, Chile’s new national strategy does not nationalize its lithium industry; Boric said he would honor existing contracts and not expropriate any production facilities. Rather, the strategy calls for public-private partnerships for future lithium projects, with the state holding a majority share in a subset of projects.

The Chilean state has always played a major role in the mining industry. A 1979 law declared lithium to be a strategic resource and stipulated that its development was the exclusive prerogative of the state. Only two companies – SQM and Albemarle – are licensed to produce lithium in the country. Still, Chile is a leading lithium producer, and it holds one of the largest reserves on the planet.

The new strategy is designed to expand production through partnerships between a new state-owned lithium company and private investors. Chile already operates a mining company, Codelco, which is one of the largest copper producers in the world. At the same time as he expands the industry, Boric is taking steps to reduce its environmental impacts on the salt flats and local communities in the Atacama desert. He has also pledged to more fairly distribute the revenue from lithium production, including to local communities, and to promote local research into green technologies that rely upon lithium.

The new strategy is also designed to expand the geography of Chile’s lithium industry. Today, Chile’s lithium extraction take place solely in the Atacama. But there are dozens of unexplored salt flats. The new approach encourages new exploration and production, taking advantage of widespread interest in the country’s critical minerals.

Though companies generally reacted negatively to Chile’s new strategy, the announcement brought an end to a long period of uncertainty for the sector. For the first time in four decades, it is clear Chile’s government favors the growth of the lithium industry, and sees a continued role for private investors in its expansion.

Patricia I. Vásquez is a  Global Fellow at the Wilson Center, an independent energy expert and former Jennings Randolph Senior Fellow at the U.S. Institute of Peace.

Republished from the Wilson Center’s Weekly Asado blog with permission from the author and the Wilson Center.




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