In the global race for lithium, which is often dubbed “the white gold,” Bolivia should be one of the winners. The South American country holds the world’s largest reserves at an estimated 23 million tonnes, but a decades-long nationalisation strategy, coupled with economic and political instability, is preventing the industry from taking off.

Divisions in the governing party have spiralled over the past few weeks, and they may not be resolved until next year’s election.

Another attempted coup

On Wednesday 26 June, the now ex-commander of the Bolivian army Juan José Zúñiga stormed Plaza Murillo, a square in La Paz home to Bolivia’s presidency and Congress.

The three-hour coup attempt saw a tank try to break the metal door to the plaza and a reported standoff between Zúñiga and President Luis Arce. Zúñiga was swiftly arrested and people swarmed to the street in support of Arce on the same day.

Later that week, Evo Morales, the former Bolivian President and mentor of Arce, said the coup was orchestrated to gain political clout among the electorate. 

“President Luis Arce deceived and lied to the Bolivian people and the world,” he wrote on X, formerly Twitter, calling for an independent investigation into the incident. The general public agrees with this stance, a Bolivian national tells Kallanish. 

Bolivians are no strangers to coups, with around 190 taking place since the country gained independence from Spain in 1825. The most recent one was in 2019, when Morales resigned as president and fled the country, to be briefly replaced by conservative Jeanine Áñez. However, she was accused of taking power illegally and was sentenced to 10 years in prison, which she is currently serving.

In 2020, Arce – now leader of the left-wing MAS-IPSP party – won the election with the support of Morales, who previously headed the MAS. The pair used to be close friends, and Arce served as economy minister during Morales’s office between 2006 and 2019.

Yet, their relationship crumbled when Morales returned to Bolivia and announced he would run for president once again in the 2025 election as MAS’s candidate. The party is now deeply split as both Morales and Arce fight for leadership, with clashes spilling into the streets of La Paz.

As many economic powers around the world eye Bolivian lithium, some countries have been accused of meddling in local politics to gain control over natural resources. 

According to an investigation by Declassified UK, Britain’s Foreign Office, the British embassy and a British company swiftly acted to access lithium projects shortly after Morales’s government was overthrown five years ago. The UK had spent years courting his office to be allowed to operate in Bolivia to no avail.

Similarly, state news agency Agencia Boliviana de Información earlier this year accused the US of turning the current political crisis in its favour amid plans “to carry out the recolonisation of Latin America.” It claimed Washington wants to push its own “outsider” candidate at next year’s election to attract right-wing and undecided voters. A “servile” right-wing government would give the US a preferential route to lithium, the agency says.

“The political crisis that was initiated at the end of 2019 needs also to be understood in the context of a hegemonic dispute between the United States and China, i.e. the Chinese expansion since the beginning of the century and the consequent reaction by the United States to resume its influence in the region,” academics write in the 2021 book Bolivia at the Crossroads.

“For Bolivia, China seems to occupy the space of main strategic partner, as illustrated by the signing of several bilateral agreements,” they continue. “The US interference in Bolivia is historic, mainly around the alleged confrontation with narco organisations (drug traffic) that masked the interests in accessing natural resources.”

A resource for the nation

Morales, Bolivia’s first Indigenous president, established a “process of change” whereby the country would move beyond capitalism to “living well.” His administration performed what has been defined as an “economic miracle” as natural resources, especially natural gas, bankrolled the welfare system and cut poverty by 42%. But as commodity prices crashed in the 2010s, so did Bolivia’s economy, which plunged into a deep crisis. Its total gold and US dollar reserves plummeted from $15.1 billion in 2014 to $1.8 billion last year and it is battling with high inflation and social unrest.

The very same nationalisation policies that spurred this growth ended up hindering a recovery in times of crisis. With Bolivia’s natural gas mostly closed to foreign investment, the current active projects are depleting their reserves and there isn’t much money to carry out exploration or start production elsewhere.

Similar challenges apply to lithium, which Morales strove to keep nationalised. His successor, Arce, established a slightly more open strategy, letting in a handful of companies from Russia, China and India – Uranium One, CATL, Citic Guoan, and Altmin. They have committed $2.8 billion for four new projects with a total capacity of 100,000 tonnes/year of lithium carbonate, which remains under construction.

“Bolivia does not have the technology, it does not have the human capital to develop its lithium industry by itself,” says Fernando Prats, programme director for Latin America at London Politica. “It is a strict need for [Bolivia] to access the financing, the technology, the tools and the labour, especially the highly specialised labour, to develop its resources.”

Indeed, Bolivia only produced 543 tonnes of lithium carbonate in 2021. State-owned company Yacimientos de Litio Bolivianos (YLB), which manages the country’s lithium strategy, said production would reach 40,000 tonnes of lithium carbonate annually by 2025 thanks to the new projects.

In comparison, last year Chile and Argentina produced 39,916 t and 8,708 t of the mineral, respectively, according to the USGS.

The three countries form the so-called lithium triangle, which contains 53% of the global lithium resources. They are all mulling nationalisation measures to reap the benefits of the mineral. With Brazil, they have proposed creating a “lithium OPEC” to access the global market in a “sovereign way, with prices that benefit our economies,” Arce said last year.

But the future of Bolivian lithium hangs in the balance until at least 2025, when the election may bring some political clarity. According to Prats, there are three potential scenarios based on whoever takes power.

If Arce gets a second mandate, the lithium industry would remain somewhat open to foreign investors, although they would face “a lot of hurdles in terms of regulations and in terms of how you have to deal with the Bolivian government, and especially with the Bolivian state-run company, YLB.”

A Morales return would create further uncertainty, as it is not clear whether he would reinforce a much more restricted approach. Liberalisation seems more realistic in the case of a right-wing government, although it would still be difficult to achieve.

“The political scenario today seems very fragmented, so whoever wins in 2025 is not likely to have a big legislative majority,” notes Prats. “Another constraint would be the community. The communities living and local governments around the lithium exploitation areas are traditionally reluctant to lithium projects, especially if they are run by a foreign company.”

Prats believes the deeply entrenched state-run approach to mineral policy will be difficult to shift. Until then, for better or worse, Bolivia’s lithium may remain in the ground.