Bolivia's Lithium Ambitions Face Economic and Environmental Headwinds

By Haley Zaremba - Jan 24, 202

Bolivia holds the world's largest proven lithium reserves but faces challenges in developing them due to low lithium purity, lack of infrastructure, and political instability.

The country has signed deals with Chinese and Russian firms to extract lithium, but these deals are facing opposition and are contingent on lithium prices remaining high.

Lithium extraction poses environmental risks, particularly to water security in the arid region where the Uyuni Salt Flats are located.



Bolivia is making a play to become a major global lithium producer by partnering with Russian and Chinese firms – but who has the better end of the deal? Increasingly vocal opposition groups comprising lawyers as well as constituents argue that the nation’s most recent deals with Russia and China, currently pending congressional review, are a sweetheart deal for the international firms and, therefore, a raw deal for Bolivia. But backers of the developments argue that these steps are both prudent and necessary to develop Bolivian lithium as well as the nation’s economy.

In 2023, a Chinese firm built Bolivia’s first industrial-scale lithium plant. In 2024, the Bolivian government inked deals with Russia’s Uranium One Group and China’s CBC. Those deals are currently awaiting approval from congress. “With the two new contracts, we plan to reach 49,000 tons of lithium carbonate annually within three years,” Omar Alarcon, president of state-owned lithium company YLB, was quoted by Bloomberg. “And we plan to send a new contract to Congress in the first quarter of the year.”

Bolivia is home to the biggest proven lithium deposits on the globe but, to date, does not produce any meaningful share of the world’s commercial lithium. The form in which the nation’s lithium naturally occurs – a magnesium-rich brine under the country’s Uyuni Salt Flats – is costly to process due to its low levels of purity. Plus, Bolivia is one of just two land-locked countries in South America, meaning that ports to export lithium to China and other buyers are far away and require border crossings to access.

Bolivia consistently ranks as South America’s poorest nation, so developing the country’s naturally rich deposits of lithium could provide a key inroad to developing the national economy. However, Bolivia has been unable to woo private investors. According to a recent summation from Bloomberg, “Bolivia’s history of political and social unrest and a state-led approach to natural resources have been deterrents to private capital.”

With no public capital to speak of and no sway with private capital, Bolivia has little choice but to collaborate with better-resourced nations like China. “Bolivia may be rich in natural resources, but it is a very poor nation, which makes the prospects of autonomously operating lithium-mining projects slim,” says the Harvard International Review.

But even with investment from Chinese and Russian firms, Bolivia faces considerable challenges to building a healthy and profitable industry. In addition to the lack of national capacities and the relatively impure form of lithium that exists in abundance in Bolivia, there are also unfavorable international market trends to contend with. Lithium demand growth saw a major slowdown in 2024 as EV demand slumped on a global level. As a result, lithium prices have tanked in recent months.

The contracts that Bolivia has inked with China and Russia are constructed on much higher average lithium prices, with an estimate of $30,000 per ton. Current prices are hovering more around the $10,000 mark. Omar Alarcon, president of Bolivian state-owned lithium company YLB, says that a minimum price point of $10,000 is necessary to keep the plants economically viable. Under the stipulations of the agreements, Bolivia will repay the approximately $2 billion in Chinese and Russian investments in kind, with lithium carbonate.

In addition to the potentially sticky economics of these contracts, the arrangement will likely harm more than help Bolivian locals. While the investing dollars are highly unlikely to trickle down to poor Bolivians, they stand to bear the brunt of the negative environmental externalities associated with lithium extraction. The high desert where the Salt Flats are located is one of the driest places in the world, and lithium extraction requires massive amounts of water, posing serious threats to local water security.

By Haley Zaremba for Oilprice.com