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Will Bolivia Board the Lithium Express? AS/COA Online 6/23/09
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| 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.
Brazil Fights Recession with Investments AS/COA Online 01/27/09
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| Brazil announced a sharp rise in Petrobras investments. (AP Photo) |
Brazil began 2009 facing deteriorating economic conditions and rising unemployment. But, through recent actions, the Brazilian government seeks to steer the economy into safer waters by committing billions of dollars to create jobs and propel Petroleo Brasileiro (Petrobras) into the heavyweight category of oil production companies. Furthermore, U.S. President Barack Obama signaled his interest to work with Brazilian counterpart Luiz Inácio Lula da Silva to move forward on biofuels and the Doha round of global trade talks. Lula will visit Washington to meet with Obama in March.
With the goal of jumpstarting the ailing economy, Brazil’s Central Bank reduced its overnight lending rate by a full percentage point to 12.75 percent on January 21. The move intended to stimulate economic activity at a moment when financial markers signaled the danger of recession; private consumption has shrunk, December job losses hit their highest level since 1999, and analysts predict GDP growth may not reach the 2 percent mark in 2009. The Economist Intelligence Unit’s ViewsWire augurs that industrial growth could be close to zero and private consumption may drop to 0.9 percent in 2009—down from 6.2 percent last year. The analysis applauds the cash infusion of more than $42 billion into the Brazilian Development Bank (BNDES), designed to stimulate the creation of new employment. The fund helped create 2.8 million jobs in 2008 alone, according to BNDES data. “The businessmen who used to shop for funds on the international market and are not managing to obtain capital due to the financial crisis will be able to resort to the BNDES,” said Brazilian Finance Minister Guido Mantega last week.
In tune with the government’s actions, Petrobras unveiled a plan on January 23 that promises a 55 percent expenditure increase over the next five years. The package includes investments of more than $174.4 billion, with $28 billion alone to finance exploration of recently discovered pre-salt oil fields. The company also hopes to double its total oil and natural gas output by 2015, counting on the Tupi oil field and three other offshore camps to begin production. The day after the plan’s release, the first fully Brazilian-made natural gas platform, with capacity to generate electricity for 300,000 people, started operations. This also marks a step forward for Brazil’s naval industry, which will build another eight platforms to be deployed by 2013.
Washington’s new administration has signaled interest in working with South America’s largest economy this week in the fields of energy and trade. Following Monday’s phone conversation between the presidents of both countries, a spokesperson from Lula’s office announced that Obama “is interested in continuing discussions to advance the Doha round” of trade negotiations. In his January 26 edition of his radio show, “Café com o Presidente”urged Obama to push Doha forward.
A new report by AS/COA’s Trade Advisory Group entitled Building the Hemispheric Growth Agenda: A New Framework for Policy proposes creation of a hemispheric energy partnership that would include Brazil: “[A]s a starting point to greater regional integration, the United States and other willing partners across the hemisphere, perhaps as an E4 or E5, should join together to formulate a mutually beneficial hemispheric energy agenda roughly analogous to the original European Coal and Steel Community.” The report also suggests that the new U.S. administration should scrap the 54 cent-per-barrel tariff on Brazilian ethanol and consider a pact for a civil nuclear program similar to the one signed with India during the Bush administraion.
A December AS/COA panel analyzed the investment climate for energy in the region, with an emphasis on Brazilian energy and Latin American integration.
Venezuela’s Oil Diplomacy May Dim AS/COA Online 01/08/09
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| Citgo oil delivery to a low income house in Philadelphia. (AP Images) |
Crude oil prices continue to fall, forcing countries such as Venezuela that rely heavily on oil exports to rethink their 2009 spending priorities. Earlier this week, the nonprofit organization Citizens Energy headed by U.S. Congressman Joseph P. Kennedy II (D-MA) announced that Citgo—the U.S.-based subsidiary owned by Venezuela—would curtail its fuel assistance program for low-income Americans. Two days later, Citgo and the government of Venezuelan President Hugo Chávez asserted that the program, which last year provided assistance to some 200,000 households in 23 states, would remain in place.
The reversal raised questions about whether Chávez’s plan to continue the program represents a costly political investment at a time when oil prices hover around the $40 per barrel mark. Venezuela’s Central Bank announced on January 8 that inflation reached 30.9 percent in 2008, the highest in more than 10 years. The Economist Intelligence Unit’s ViewsWire explains that Chávez “has his eyes more on the ballot box than on his purse strings.” The analysis argues that, as he plans to call for a national referendum that would allow him to seek unlimited reelection, he must maintain his support base among the poor through social programs.
Yet, to strengthen its balance sheet, Caracas may find that it must cut back social programs that extend beyond its border, such as fuel assistance programs. A Stratfor podcast explains that “it is practically impossible” for the Chávez government to avoid cutting social programs, with cheap oil programs facing the greater risk. The report also suggests that, before reducing popular subsidies on medicines and gasoline, Venezuela may increase sales taxes, default on government contractor’s compensation, or even halt payments on previous nationalization deals. An analysis by RGE’s EconoMonitor reports that even if average oil prices float around $50 per barrel in 2009 and spending levels mirror those of 2008, Venezuela’s fiscal budget may fall from a surplus of 0.7 percent last year to a 5.5 percent deficit in 2009. For now, they may rely on cash reserves that stand at roughly $38 billion, but risk a ratings downgrade if those reserves are depleted. “Venezuela’s government is stuck. It needs to maintain spending to ensure political support, but it may find it harder to access needed funds,” write RGE Analysts Italo Lombardi and Rachel Ziemba.
Left-leaning Upside Down World recognizes that “Venezuela has reportedly not been keeping up with current [Petrocaribe] quotas” and other initiatives like the Bolivarian Alternative of the Americas Banco del Sur, Petroamerica, and Petroandina have stalled. Through the Petrocaribe cooperation agreement, Venezuela has provided cheap oil with preferential payment terms to 16 Caribbean countries since 2005. (Although Cuba is not part of the pact, Caracas also supplies Havana with 100,000 barrels per day plus contracts to boost Cuban refining capacity.) To ease worries over Venezuela’s ability to continue supplying affordable oil, Dominican Republic President Leonel Fernández in December offered a reassurance that Petrocaribe provides elasticity on purchases and payments to the countries receiving fuel shipments and emphasized Chávez’s commitment to keep the agreement afloat. In an op-ed for the Jamaican newspaper Gleaner, University of the West Indies Lecturer Robert Buddan underlines the importance of the pact for Jamaica, saying “Petrocaribe stands out as the best example of the benefits of regional cooperation.” Former Attorney General of Grenada Lloyd Noel, writing for Caribbean Net News, recognizes how critical energy cooperation remains but concedes that “Now that the gas and oil bonanza is down to its lowest value for years, Venezuela in particular is no longer as influential in the negotiations as when it was selling crude oil at $140 per barrel as opposed to $40.”
Read a previous AS/COA analysis on how falling oil prices have taken a toll on Venezuela’s economy.
En español.
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.
Brazil Vows to Curb Deforestation AS/COA Online 12/03/08
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| A raft in Belem, Brazil loaded with illegally cut logs. (AP Images) |
With Amazonian deforestation on the rise, Brazil’s environmental ministry on Monday announced an ambitious plan to curb rainforest destruction. As a UN-led climate change conference got underway in Poland, Brazilian Environment Minister Carlos Minc unveiled the initiative, which would seek to cut deforestation rates by 72 percent by 2017. The plan also offers proposals to increase biofuel production without using more arable land while decreasing carbon dioxide emissions by 4.8 billion tons in the same 9-year period.
During his remarks, Minc emphasized that this voluntary effort puts Brazil in the vanguard on climate change issues, marking a shift from past policies that placed responsibility for curbing global warming on the shoulders of industrialized nations. But the efforts come as the Brazilian government finds itself pressured on one side by conservationists ringing alarm bells with deforestation figures and on the other side by cattle ranchers and soy growers who cashed in on the recent commodity boom.
At the UN’s 2007 General Assembly, Brazilian President Luiz Inácio Lula da Silva called for more actions from industrialized countries to curb carbon emissions, praising Brazil’s decreasing levels of deforestation over the course of the three previous years. Then the government’s environmental record suffered a setback when Brazil’s National Institute of Space Research revealed an increase in deforestation rates during the first five months of 2007.
In response, Lula’s government stepped up policing in the affected areas through an operation called “Arc of Fire,” initiated in February. The program allowed issuing of fines, arresting deforestation suspects, and impounding illegal cargo. Yet the program’s launch was followed with controversy over the resignation of former Environment Minister Marina Silva, a respected conservationist thought to have struggled with the perceived lack of political will to halt environmental destruction. She was replaced by Minc, who helped found the country’s Green Party.
Under Minc’s leadership, the ministry launched Amazônia Sustentável—the Amazon Fund—in August. The program involves the international community, drawing hefty donations from countries such as Norway, which pledged roughly $1 billion over the next seven years for sustainable development. Monday’s announcement of setting targets aimed at lowering deforestation served as another step in building support for protecting the Brazilian rainforest.
But Monday’s announcement of setting targets to limit Amazon destruction coincided with new data about rising deforestation rates, which have increased by 3.8 percent compared to last year. The BBC reports on the setback and says high commodity prices for staples like soy and beef served as an engine for deforestation. But the report also points out that estimates forecasted an even higher increase, which could signify that governmental policies have made progress. An analysis by mongabay.com’s Rhett Butler tracks deforestation rates in the Amazon using statistics available since 1988 until the present.
With the new plan to be presented at the UN’s climate change conference, environmentalists evaluated it by offering mixed praise, ranging from “better than never” to “a modest proposal.” NPR offers an analysis of expectations ahead of the conference in Poland.
The UN summit comes on the heels of last week’s environmental conference in Mexico, which brought together 70 legislators from across the Americas in a push to regulate land use. Tierramérica reports that the summit helped create a favorable climate for building a common strategy but warns that the new commission faces a long road in terms of hammering out results.
Carlos Macías Web 