Will Bolivia Board the Lithium Express? AS/COA Online 6/23/09

The Salar de Uyuni holds the second largest lithium reserves in the world. (AP Photo)

Bolivia finds itself in the middle of a struggle for controlling and exploiting a key natural resource for the future of the world’s auto industry: lithium. Underneath the Salar de Uyuni, a salt desert in the southwest region of the Andean country, lie approximately 5.4 million metric tons of the resource. The deposits represent almost half of the world’s lithium reserves. American, Chinese, French, South Korean, and Japanese companies have expressed interest in a slice of the pie. But Bolivian President Evo Morales has made clear that his government, while looking for foreign investment, does not plan to give away sole exploitation contracts to any foreign company. His plans involve a state-run initiative to harvest the mineral deposits and manufacture batteries for electronics and, eventually, the world’s nascent electric vehicle market.

Unfortunately, Morales plans are easier said that done. The Salar de Uyuni in the department of Potosi has limited infrastructure to effectively mine the lithium deposits. As reported by newspaper La Rázon, Bolivia’s Mining Minister Luis Alberto Echazú acknowledged that the country hopes to move forward with the mining operation on its own but still needs a foreign partner to industrialize the battery production. “We need the technology to fabricate car batteries because we are still light-years away from it, that’s why we need a partner,” said Echazú.

Bolivia’s history of nationalizing foreign assets and breaking contracts with energy companies since Morales won the presidency in 2006 may seem like a deterrent for foreign investors. Yet companies like France’s Bolloré, Japan’s Sumitomo and Mitsubishi, South Korea’s LG, and even General Motors (before it declared bankruptcy) wooed Morales’ administration in search of agreements. The Times of London chronicles the competition between Chinese and Japanese delegations in Bolivia, which included donations to build a school in Morales’ hometown and military equipment. Still some preoccupation looms in investor’s minds, as demonstrated in dealings with the state-owned Yacimientos Petrolíferos Bolivianos (YPFB). After YPBF took over the natural gas and oil industries, production has dropped and corruption scandals have flourished.

But while debate persists in Bolivia, other countries have geared up to serve as suppliers in the upcoming lithium boom. Enter Chile, the leading lithium producer and holder of the world’s largest reserves, estimated at 7.5 million metric tons. U.S. Geological Survey expert Brian Jaskula said that more recent studies have reaffirmed Chile as the world leader. He also noted that, given Bolivia’s lack of infrastructure to commercially produce lithium, it may “end up missing the lithium express.” Other considerable lithium reserves are located in Argentina, China, and the United States.

The international pressure to secure access to this new commodity will likely increase in the next decade thanks to Washington’s push for lower emission electric vehicles powered by lithium polymer batteries. The U.S. Energy Department is offering up to $1.5 billion in federal grants for American companies to produce these new batteries and related components. Furthermore, the government is set to release on June 23 $25 billion to the car industry for the development of fuel-efficient cars.

Learn more:

• January 2009 U.S. Geological Survey Mineral Commodity Summary on lithium.
• Background on Bolivia’s infrastructure and economy in the Central Intelligence Agency’s World Factbook.
• U.S. Department of Energy’s portal on its Advanced Technology Vehicles Manufacturing Loan Program (ATVM).
• Technical report on the only lithium plant operating in the United States in Clayton Valley, Nevada.
• View a forecast report on the global supply and demand for the lithium industry through the year 2020 made by consultants TRM Group Inc and commissioned by the Mitsubishi Corporation.

Read the article as originally published at the AS/COA website.

Bolivia, Venezuela Vote Again AS/COA Online 01/21/09

Bolivians vote January 25 in a constitutional referendum. (AP Photo)

Voters in Bolivia are weighing in on their political futures as they take their turns in referenda once again. On January 25, Bolivians headed to the ballot box to vote in favor of a long-delayed constitutional referendum promised during President Evo Morales’ 2005 campaign. On February 15, voters in neighboring Venezuela participate in their own referendum on whether their president can seek indefinite reelection powers.
On Sunday, Bolivians approved the new constitution by as much as 60 percent, boosting Evo Morales’ mandate. The Cochabamba-based Democracy Center outlines top issues dealt with in the 411 articles of the new constitution, from reelection to land reform. The document would allow Morales to seek reelection once, opens the door to government takeover of unused tracts of land, limits the amount of land that could be purchased, and sets up risk-sharing arrangements for private oil firms, and guarantee access to social security.

Despite the strong showing in support of the constitution during Sunday’s election, four departments in the lowlands appeared to have rejected the document. The prelude to Bolivia’s Sunday vote reflected the deep divide among the country’s citizens in terms of how the country should move forward. In 2008, autonomy votes in those four departments sparked violent protests. A recall vote in August reaffirmed Morales’ legitimacy. An October compromise between government supporters and opposition leaders—accompanied by multiple changes to the draft of the constitution—paved the way for Sunday’s referendum.

In his blog Pronto, Bolivian political scientist Miguel Centellas warns about the political fractures running through Bolivia and notes that, even though Morales won the recall vote by a wider margin than he won the presidential election, his support dropped in eastern and southern departments. “As the date of the referendum approaches, new political divisions are emerging,” writes Centellas. Leaders of Bolivia’s evangelical movement, previously supportive of Morales, have come down on the side of “no” on the constitution, citing opposition to provisions they say encourage abortion and homosexuality. Furthermore, indigenous political leaders once aligned with Morales’ party Movimiento al Socialismo and former President Carlos Meza joined the voices against the document. Morales has accused his detractors of failing to offer viable political alternatives to his proposal.

Meanwhile, in Venezuela, the electorate voted and rejected a new constitution in 2007, dealing a blow to Chávez’s ambitions to mark Venezuela’s Magna Carta with his agenda. Venezuelans will soon decide whether to allow Chávez to run for reelection indefinitely. Keeping in line with constitutional law, Chávez’s Partido Socialista Unido collected more than 5.5 million signatures to hold the referendum. Facing the economic impact of declining oil prices, Chávez decided to push for the referendum as soon as possible, while his popularity continues to run high. The Los Angeles Times reports that, despite Chavez’s high approval ratings, polls show the president in danger of facing defeat next month. As the February 15 vote approaches, protesters against the vote have taken to the streets. On Tuesday, marchers clashed with police, who—under Chavez’s orders—used tear gas and water cannons to disrupt the marches.

The government announced that Chávez’s popular Sunday television segment Aló Presidente will not air until after the referendum. However, the president will write a new syndicated column three times a week starting January 22.

Read AS/COA interviews with Venezuelan opposition leader Leopoldo López and student activist Yon Goicoechea.

Updated on January 26, 2009.

Read the article as published at the AS/COA website.

Download a PDF file here.

The Americas 2008: A Year in Retrospective AS/COA Online 12/23/08

View a slideshow of the most compelling events in the hemisphere. Also, read an article by AS/COA Online Managing Editor Carin Zissis on the most riveting events affecting the Americas in 2008.

Click the image to watch the photo gallery.

Electoral Rifts in Bolivia AS/COA Online 06/26/08

Winds of autonomy grow stronger in Bolivia. (AP Images)

On June 22, the gas-rich Bolivian province of Tarija voted overwhelmingly in favor of greater provincial autonomy from the central government, joining the Santa Cruz, Beni, and Pando provinces in direct political confrontation with President Evo Morales’ administration. This raises the political stakes even higher for the August 10 recall referendum, which will determine whether Morales and regional governors stay in office.

Wealthy provinces want to directly manage the profits derived from their natural gas exports—86 percent of Bolivia’s reserves are held by Santa Cruz and Tarija alone—rather than continue the current system of sending them to the central government for redistribution.

Bolivia’s National Electoral Court (CNE) declared all the autonomy votes illegal as they were not approved by Congress but rather by the region’s prefect (governor), in violation of the current constitution.

Adding to the controversy, the day after the Tarija vote five governors (from Santa Cruz, Beni, Pando, Tarija, and Cochabamba) issued a statement saying they would not host the August 10 recall referendum mandated by the CNE unless the ballot includes recognition for the autonomy statutes. Morales condemned the statement, arguing that the governors themselves demanded a recall vote at the end of 2007, a movement he supported and Congress approved on May 8. He questioned the real motives behind the governors’ reversal on the recall vote, saying “they want to keep stealing money that belongs to all Bolivians.”

Both Morales’ political party, Movement for Socialism (MAS), and the opposition-led Podemos party reiterated their support for the recall vote and instructed the governors to respect the constitution. Senator Antonio Pedrero (MAS) emphasized that the opposition pushed hard for the recall vote in order to challenge Morales, and now must follow through on its plan.

The referendum stipulates Morales must call for early presidential elections if he gets more “no” votes than the 1.5 million votes that elected him in 2005. In addition, the percentage of those “no” votes must be also higher than the historical 53.7 percent he attained when elected. The same rules apply for the vice president and the regional governors, with the caveat that if they lose the recall vote, they must vacate their offices immediately and Morales must designate an interim governor until new state elections are held.

Morales launched a publicity campaign to highlight the achievements of his administration and he expects to receive the more than 53 percent of the vote required to stay in office. According to Agencia Bolivariana de Información, Governors Ernesto Suárez of Beni and Rubén Costas of Santa Cruz also expect to win the confidence vote. In contrast, Pando’s Leopoldo Fernández, Cochabamba’s Manfred Reyes, and Tarija’s Mario Cossío risk losing their posts.

The CNE invited international observers from more than 17 countries to guarantee transparency in the electoral process. Chuquisaca is the only region whose governor will not be facing a confidence vote, though they will still vote on the president and vice president. Its governor resigned and an election will be held on June 29.

Tensions have mounted as Bolivians get closer to the recall vote date, spurring brief outbreaks of violence. Militants of a pro-autonomy movement called Unión Juvenil Cruceñista (UJC) seized a toll station on a Santa Cruz highway, clashing with police and leaving policemen injured and several UJC members arrested. The Santa Cruz government condemned the use of violence by the UJC in an effort to thwart announced violent demonstrations against several governmental buildings and offices.

Read an exclusive AS/COA interview with OAS Secretary General José Miguel Insulza on the role of the agency as peace broker in Bolivia’s political conflict. Read AS/COA’s coverage of the ongoing Bolivian crisis.

Editor’s note: The original article incorrectly stated that to remain in office, Morales must attain more than 54 percent of the votes in the August 10 referendum–he won 53.7 percent of the votes during the 2005 presidential election. However, the referendum works such that he will only step down if more than 53.7 percent of the electorate votes against him retaining office, and those ballots surpass the 1.5 million votes he obtained when elected.

Updated July 1, 2008

Read the article as originally posted at the AS/COA website.

Download a PDF file in here.

Positive Talk in Bolivia AS/COA Online 01/15/08

Officials have met to address four provinces’ calls for autonomy. (AP Images)

Bolivian President Evo Morales opened the year by warning that his country may fall short of meeting the energy needs carved out in contracts with Argentina and Brazil, even as 2008 will likely bring record investment in Bolivia’s hydrocarbon industry. The announcement came as La Paz worked to stave off calls for autonomy by opposition leaders’ in eastern states, including gas-rich Tarija and Santa Cruz.

Government officials said investment pledges from Spain, Iran, Venezuela, Argentina, and Brazil could bring in as much as $1.5 billion in foreign investment this year. However, Iran and Venezuela have not specified investment amounts, nor will investment sufficiently boost natural gas production to meet domestic and international demand in 2008. Annual production should hit 42 million by the years end, according to Bolivian Hydrocarbons Minister Carlos Villegas, yet international demand stands at 46 million cubic meters per day. The news came days after Argentina announced a strategy to head off rising energy demands through a daylight savings plan.

The Morales administration nationalized its hydrocarbons industry in 2006, increasing state profits by a large margin and pledging to redistribute the wealth throughout Bolivia. Fund allocation has been central to disputes between La Paz and opposition leaders, with protests set off by Morales’ October 2007 decision to divert a portion of hydrocarbons tax revenues from individual provinces’ public projects to a national pension fund.

Division reached new levels in December 2007, when the Bolivian Constituent Assembly approved a new constitution without the presence of its opposition members, who declared the document illegal. Opposition governors in Pando, Beni, Santa Cruz, and Tarija then published declarations of autonomy to gain control over land reform, tax legislation, and, in the case of Santa Cruz, form a police force.

Although tensions ran high at year’s end, January 7 brought an announcement that Morales and Vice President Álvaro Garcia Linera meeting with governors from all nine provinces to discuss possible changes to the draft of the constitution, the autonomy statutes, and distribution of energy revenues. Reuters presents three possible outcomes for the talks: formation of a national unity pact, the failure of negotiations, or allowing the public to decide through a series of referendums.

Looming over the discussions is the question of how to allocate the tax revenues. Besides political turbulence, Morales faces rising inflation, widespread unemployment, and a poverty rate of 60 percent. Still, Bolivia’s economy is growing at healthy rate of 4.5 percent in 2006—Morales first year in office.

In an interview with AS/COA, Minister Villegas stressed that Bolivia offers a favorable environment to investors. (English version)  (Spanish version) AS/COA’s 2007 Latin American Cities Conference in La Paz emphasized the importance of foreign investment in Bolivia.

Read the article as originally published at the AS/COA website.

Download a PDF file here.