Resource Nationalism in the Lithium Triangle: Analyzing the Investment Environment for China’s Projects in the Lithium Industry
With the transition to clean energy underway, global attention has turned to the resource-rich Lithium Triangle countries—Argentina, Bolivia, and Chile—which account for nearly 56 percent of the world’s lithium reserves. With each country bearing a history of resource exploitation, each adopts varying degrees of resource nationalization to industrialize their entire lithium battery value chain and meet their goals in environmental protection and economic development. Bolivia and Chile have turned to resource nationalism, promoting state ownership and control to maximize the distribution of economic benefits. Unlike these neighbors, Argentina has a fully liberalized lithium sector, which encourages foreign investment through open markets and favorable terms for investors.
China processes nearly 80 percent of the world’s lithium and produces 60 percent of the world’s electric vehicle batteries, despite only having 7 percent of global lithium reserves. Seeking further dominance in the global lithium supply chain, China has invested billions into the Lithium Triangle and holds a stake in 17 active projects in various stages of production. As Bolivia and Chile turn to state-led industries, there are both inevitable losses and opportunities for China’s continued participation in the industry.
Bolivia: Full Resource Nationalism
Bolivia’s history of resource nationalism explains its current tendency to protect strategic resources like lithium. From Spanish silver extraction to the 2003 gas conflicts, natural resource development has long been controlled by foreign powers with little regard for domestic consequences.
Posturing towards lithium nationalization began in 2008 when then-President Evo Morales declared it a strategic priority. By 2017, he granted the state the exclusive right to exploration, exploitation, and industrialization of lithium with the creation of the Yacimientos de Litio Boliviano (YLB), the state-owned lithium company. This limited private firms to only providing technical services, preventing the export of raw materials and supporting the development of more value-added activities domestically.
Nationalization, while protective of domestic industries and growth, has also yielded few returns. Bolivia holds the world’s largest lithium reserves—around 23 million metric tons—making it one of the most crucial countries in realizing the global energy transition. Yet it accounted for only 0.04 percent of the world’s processed lithium in 2023. Despite nearly $1 billion worth of YLB investments into the Uyuni salt flats, refining challenges persist due to limited technological capacity, and the surrounding Potosí region remains one of South America’s poorest.
To increase production, Bolivia turned to the private sector. In 2021, President Arce announced YLB would partner with private companies through an informal bidding process. The process favored bids offering direct lithium extraction (DLE) technologies, which are key in resolving stagnation in refining and eliminating the use of resource-draining evaporation pools. This was favorable to Chinese firms, which employ some of the most developed DLE technologies in operation. By January 2023, China’s CATL, the world’s largest battery manufacturer, reached an agreement with YLB to develop lithium extraction in Uyuni and Coipasa, backed by $1.4 billion to build two production plants with a combined annual capacity of 25,000 tons of lithium carbonate equivalent (LCE). The contract required CATL to demonstrate positive results within six months before being offered a formal contract.
The success of this agreement will be contingent on Bolivia amending its legislation to allow joint ventures with foreign firms. YLB is expecting companies to accept less than 30 percent profit, while investors anticipate a shift to a 51-49 percent partial nationalization model. If CATL’s contract is formalized, its capital and technical expertise could help develop all downstream activities of the EV battery value chain in Bolivia. As of 2023, China receives 15 percent of Bolivia’s LCE exports, second to Russia at 80 percent. If the CATL project proceeds, it could shift geopolitical balance and push lithium rich countries towards further reliance on China.
Through partial nationalization, Bolivia can secure foreign investment—and with it, the requisite technology and knowledge transfer it needs—while protecting against exploitative and environmentally damaging practices. China’s long-run view on returns of investment has potentially secured it a part in Bolivia’s future lithium industry, and with it, potential for enhanced geopolitical influence and control over critical supply chains in the global energy transition.
Chile: Partial Nationalization
Chile holds an estimated 11 million metric tons of lithium reserves, the smallest among the Lithium Triangle countries. However, it has the world’s second-largest lithium company by market capitalization and the second-largest lithium mine by production. Despite its success in global markets, Chile is moving towards partial nationalization through the National Lithium Strategy (NLS), announced by President Boric in April 2023. The NLS is designed to reduce foreign reliance, increase state oversight, and push the domestic industry to higher value-added activities.
Chile’s progressive commission model contrasts with Argentina and Bolivia’s flat 3 percent royalties, with rates reaching up to 40 percent based on global prices and type of lithium product exported. Economic development agency CORFO also enforces local content laws requiring investments in research and community development, leading to greater economic returns from private sector involvement than its Lithium Triangle neighbors. However, Boric has promised more regulation and economic return than these measures are able to offer. From this emerged the National Lithium Company (NLC), a “state-owned company that will seek private sector partners for the sustainable development of exploration, operation, and added-value projects.” Until fully operational, state copper giants ENAMI and CODELCO are tasked with oversight and issuing tenders for discovery of new lithium reserves.
In December 2023, Chile negotiated its first public-private partnership under the NLS. Before lithium was designated a strategic mineral and granted state protections, only two companies were allowed to lease the Salar de Atacama flats: Sociedad Química Y Minera de Chile (SQM) and Albemarle. With SQM’s original lease set to expire in 2030, its future in Atacama is contingent on forming a joint venture with the NLS and granting the state at least 51 percent ownership. This move directly impacts China’s Tianqi Lithium, which acquired a 24 percent stake in SQM in 2018 for $4.1 billion. The exclusion of Tianqi from negotiations with majority Chilean-owned SQM signaled a prioritization of domestic firms over foreign investors.
To “overcome the extractivist mentality,” the NLS announced a preference for private sector partners that can bring higher value-added activities, specifically prioritizing technological and supply chain development. After years of the duopoly in its private sector, the NLS seeks to diversify the players in its lithium industry. By creating a more competitive environment for these public-private partnerships, they encourage innovation and aim to reduce the dependency and influence of one country on the entire industry.
China plays a significant role in Chile’s lithium industry, most critically through its stake in SQM. Two investments into Chile’s lithium industry were among China’s largest greenfield investments into Latin America and the Caribbean in 2023. The first was a $233 million agreement between CORFO and Tsingshan to build a battery and EV facility, and the second a lithium cathode production plant awarded to BYD. As Chile leans on the private sector, China’s innovative multinationals emerge as willing and capable partners.
By 2022, Chile was China’s largest lithium carbonate supplier at around $6 billion dollars’ worth, driven by Tianqi’s stake in SQM—a figure that will inevitably diminish when SQM transitions to majority state ownership. As Chile opens its private sector to project bids, China is no longer insulated from global competition. To offset potential losses from SQM, China must leverage its technological expertise and continue financing bids in massive investments.
To the detriment of Chile, this rapidly changing investment environment can erode investor confidence. Investors may be motivated to move to more liberalized countries with longer-run policy stability, like Australia. As more lithium reserves are discovered around the world, the rush to extract and industrialize will not only remain concentrated where lithium reserves are most abundant, but also where policy and production are friendly to investment. Ultimately, Chile’s challenge lies in balancing nationalization with maintaining investor confidence.
Argentina: Resource Liberalization
As of 2023, Argentina has an estimated 22 million metric tons of lithium reserves and ranks as the world’s fourth-largest producer. Unlike its neighbors, Argentina’s lithium sector is fully liberalized, creating favorable conditions for foreign investment rather than fortifying its own domestic industrial capacity. In theory, liberalization facilitates knowledge transfer, development of infrastructure, and increases public revenue. In practice, Argentina’s extreme liberalization has yielded little large-scale payoff or development of the industry.
With political power fragmented between the provincial and federal government system, sweeping action towards nationalization is a harder feat relative to Chile or Bolivia. Provincial governments negotiate foreign investment independently, and there are no national requirements for firms to contribute to regional economic development. Revenue is collected through royalties and taxes capped at 3 percent of brine value, but after extraction costs, the state retains less than 1 percent on average. These earnings are rarely reinvested into the development of the lithium industry, leaving value-added activities to more technologically advanced foreign firms.
About 99 percent of lithium exports come from three provinces—Salta, Catamarca, and Jujuy. Each has its own state-owned company that has vast regulatory variations. For example, the Jujuy province often requires investors to form public-private partnerships with state-owned JEMSE to maximize revenue and set quotas for industrialization. Salta’s REMSa takes a 5 percent stake in lithium sales, while Catamarca’s CAMYEN imposes no such conditions on foreign investment.
China has capitalized on Argentina’s open investment environment, putting $2.7 billion into Argentina’s lithium sector in 2023 and accounting for 40 percent of its lithium exports. Between 2020 and 2023, Chinese firms expanded their presence through nearly $1.7 billion worth in mergers and acquisitions. However, Chinese firms are not looking for partners or shared ownership—they aim to create an exclusive presence across entire salt flats. Backed by the China Development Bank and the Export-Import Bank of China, Chinese firms receive competitive financing that enables them to dominate Argentina’s lithium industry. Currently, Chinese companies hold stakes in 13 of Argentina’s 47 active lithium projects, with Zijin and Ganfeng securing exclusive control over two salt mines.
Argentina’s extreme liberalization has created favorable terms for Chinese companies seeking to build entire lithium carbonate equivalent (LCE) export markets for China’s battery production. As Chinese firms look to monopolize entire salt flats, Argentina stands to lose massive lithium reserves without seeing any benefit to their economy or development of their domestic lithium sector. Provisions for joint venture agreements across all provinces would facilitate knowledge transfer and technological innovation while maximizing public revenue for Argentina, but political fragmentation between national and provincial governments creates regulatory variations that prevent these policies from materializing.
Conclusion
The theory of resource nationalism would contend that the limited availability of a critical resource paired with global demand creates prosperous conditions for Lithium Triangle countries, as they can effectively negotiate contracts, concessions, royalties, and more. But until their lithium industries reach a sufficient independent processing capacity, they will have to rely on foreign investments and knowledge transfer in the interim.
The three countries’ levels of resource nationalism create distinct investment environments, and if China’s only long term goal in global lithium development is the mitigation of climate change, then it would be unaffected by variations in project and investment conditions. However, China’s ambitions also include securing a large market share of the global lithium supply chain, enhancing its geopolitical influence in Latin America, and remaining competitive in the global energy transition. The three Lithium Triangle countries provide not only a case-study in the mechanics of China’s long-run quest for regional influence via investment, but also the outcome of lithium development in the Lithium Triangle countries will ultimately offer strategic insight into the merits of resource nationalization versus liberalization.