The Rise of a Lithium OPEC: Should Latin America Follow in the Footsteps of the Gulf States?

The vast lithium reserves of the Lithium Triangle have the potential to power a green revolution worldwide along with regional development. Photo by Ser Amantio di Nicolao.

Throughout the last half-century, the Gulf States have transformed a desert landscape into a dynamic one of new wealth, led by Saudi Arabia. The impetus behind this transformation is petroleum, the black gold that has driven the region since its discovery in the early twentieth century. 

Saudi Arabia, the most populous state in the region, also leads the Organization of the Petroleum Exporting Countries (OPEC) as the largest producer in the bloc of oil-rich nations. The group, founded in 1960 to negotiate control of petroleum reserves away from Western firms, is today responsible for a vast swath of the global oil market, and its members meet to decide production and pricing for the valuable commodity it produces. 

As the world increasingly grapples with the effects of a warming climate, there has been a new focus on securing a post-oil future for the global economy, which means new materials to power this green revolution. Perhaps foremost among these materials is lithium, dubbed ‘white gold” and the primary ingredient of a lithium-ion battery.

Latin America, particularly the ‘Lithium Triangle’ of Argentina, Bolivia, and Chile, is home to the majority of the world’s reserves of lithium and will play a key part in the green transition worldwide. The region’s resource wealth has led to a resurgent interest in resource nationalization by various states. Both President Luis Arce of Bolivia and President Andrés Manuel López Obrador of Mexico have called for the creation of a “lithium OPEC” to govern the extraction of the mineral. 

The region has long struggled with achieving autonomy over its precious natural resources. From the early days of enslaved people extracting silver under Spanish colonialism to the mixed legacies of nationalizing oil and copper during the twentieth century, the region has faced a history of foreign exploitation. The leaders of the Lithium Triangle, along with Brazil and Mexico, which have smaller lithium deposits, are keen to change their fates on the backs of the green revolution. Yet while the Lithium Triangle maintains the largest reserves of the precious metal, they fall far behind countries like Australia in terms of essential infrastructure for the production of the mineral. A significant investment still needs to be made by mining corporations and/or national governments to actualize their potential.

The lithium of the Lithium Triangle is found in salt flats and is extracted through evaporation, making it the cheapest lithium to produce in the world. The lower production costs give the countries of the Lithium Triangle a large competitive advantage over other producers. Consequently, creating an L-OPEC could backfire by seeking to raise its lithium prices, hurting their comparative advantage as there would likely be a corresponding increase in investment in lithium production in countries like India and the United States. The more lithium extracted outside the L-OPEC, the less leverage for the proposed cartel. 

This has already been an issue for OPEC, as the U.S. fought to achieve energy independence due to the high prices the cartel set. The emphasis led to technological advancements that made extracting oil from alternative sources like shale economically viable for the first time. Following this development, the U.S. emerged as the largest petroleum producer in the world in 2018, forcing OPEC to expand from 13 producers to 23 producers in 2019, creating OPEC+.

The nations of the Lithium Triangle will furthermore have to consider their geographic positioning. They remain far from the world's industrial centers, whereas the member states of OPEC are positioned closer to Europe, Asia, or North America. This geographic disadvantage will further reduce the leverage of the Latin American states when they inevitably face new competition closer to the manufacturing sites.

The Latin American states must also consider the impacts, both positive and negative, of state ownership of these mining ventures. While Saudi Arabia and the other Gulf countries involved in OPEC have famously achieved vast wealth and political influence through their petroleum exports, their experience is not universally replicated throughout OPEC nor in oil-producing countries at large. Latin American states need not look far afield to find the disastrous economic implosion of Venezuela, caused in large part by the socialist government’s mismanagement of the world’s largest oil reserves. While the Boric administration of Chile discusses the future of an L-OPEC with neighboring countries and considers the role of the state in the lithium industry, the hundreds of thousands of Venezuelan refugees in the nation remain a politically sensitive issue for Chilean lawmakers.

Though OPEC will remain a tempting organization to emulate for the leftist leaders that prevail across the continent at the moment, perhaps a wiser example would be that of Norway. The Nordic state has used its vast oil reserves to make its population among the wealthiest and most equitable in the world. There is considerable debate among scholars about the precise recipe to achieve similar success; however, there is agreement that building strong institutions is a key component of achieving lasting success. 
While Latin American leaders claim that nationalization is important for sovereignty and national prosperity, increasing state control without transparency will inevitably increase corruption without providing highly sought-after and transformative wealth distribution. This will prove a considerable challenge to the nations endowed with lithium, which have long struggled with corruption scandals, including various Bolivian ministers, Brazil’s and Mexico’s state oil firms, and Argentina’s former president, Cristina Fernández de Kirchner. Even Chile, once considered a bastion of transparency in the region, has been dealing with damning accusations of corruption in the last weeks. However, as President Gabriel Boric of Chile said when he first announced his plans for the nation’s lithium sector, “This is the best chance we have at transitioning to a sustainable and developed economy. We can't afford to waste it.”

Alex Vilarin is a staff writer at Columbia Political Review. He is a junior studying Political Science as part of the Dual BA between Columbia and Trinity College Dublin. He is from New Jersey and you can most likely find him there or in the city, arguing with New Yorkers that Jersey bagels are better.