Bolivia sees profit in lithium, but can it exploit it?

On a remote Andean plain here, a short drive on unpaved roads from the world's largest salt flat, 120 government workers are constructing a facility to help power the fuel-efficient electric cars of the future.

The plant, in a sparsely populated region, is supposed to begin producing basic compounds of lithium, which is used to make batteries for cellphones, power tools, computers, and other electronic devices, by year's end.

Government officials think that Bolivia possesses the world's biggest lithium reserves, and they also think that the country is poised to profit big-time from the automakers' push to develop electric cars that will run on lithium ion batteries.

"Bolivia will become a big producer in six years of batteries," Luis Alberto Echazu, the minister of mining and metallurgy, said in an interview. He ticked off three companies that he said have expressed interest in investing in the government's lithium venture: Sumitomo, Mitsubishi, and Bollore, a French company.

Officials from the three companies didn't respond to requests for comment.

Lithium is the lightest metal and the least dense solid. It's typically extracted from beneath salt flats, and about 70 percent of the world's supplies come from Chile and Argentina. While lithium batteries don't power hybrid vehicles such as the Toyota Prius, analysts think that the fuel-efficient electric cars of the future are likely to use them.

Rather than helping lead the way to a cleaner, more fuel-efficient future, however, Bolivia could be a case study on the limits to globalization.

The country's socialist president, Evo Morales, and its powerful union leaders are all deeply suspicious of foreigners, and their politics could stymie yet another opportunity for Bolivia to improve the lives of its citizens.

Bolivia, though, has long experience with foreigners who've exploited its minerals – tin, silver, and gold – and its mineworkers, and with neighboring countries that have annexed its Pacific coast, part of its oil fields, and its rubber-growing region.

That helps explain why, in 2003 and again in 2005, Bolivians hit the streets to oust their presidents and protest what seemed to be a sensible business proposition: exporting Bolivian natural gas to Chile, the neighbor that cut off Bolivia's access to the Pacific.

Those protests led to the 2005 election of Mr. Morales, the country's first president of self-proclaimed indigenous ancestry.

He said that the government would own and operate any lithium-mining operations, and that foreign companies can invest their cash but must play only secondary roles.

A longtime socialist who's wary of capitalism in general and foreign investors especially, Morales already has nationalized several foreign-owned companies.

In his biggest move as president, he also raised taxes on the foreign companies that hold the rights to Bolivia's natural-gas reserves, the second-largest in Latin America, and also gave the government the right to decide when and where the gas is sold.

Morales declared that the gas belonged to Bolivians, not "transnationals," as foreign companies are known here.

The result? Foreign gas companies have stopped investing in Bolivia, and Bolivia has been unable to supply the gas it promised in contracts with Brazil and Argentina.

Enrique Arteaga, a mining consultant and a former minister of mining, said that Bolivia already has missed one opportunity to tap the potential of its lithium reserves.

Lithco, an American company, wanted to invest $100 million in the early 1990s in the Salar de Uyuni, a flat expanse of salt so huge that astronauts can see it from space.

Leftist students and union leaders, however, rose in opposition and scuttled the project.

Mining companies also have invested heavily in Chile, while Bolivia's reserves remain largely unexplored.

Mr. Arteaga expressed doubts that the current lithium venture will succeed.

"The state is never a good operator of any industrial operation," Mr. Arteaga said. "It will be run by inefficient and unqualified people."

There are physical hurdles, as well as political ones. Heavy rainfall interferes with the evaporation process, and there are no good roads to truck lithium out of landlocked Bolivia.

"There are fairly significant barriers to developing the resource in Bolivia," said Timothy McKenna, vice president of investor relations at Rockwood Holdings, one of the three major lithium producers in Latin America.

Neither Rockwood nor the other two major Latin American lithium producers, SQM and FMC Lithium, have shown any interest in Bolivia.

Morales inaugurated construction of the new $5.7 million facility in May, but work has proceeded at a snail's pace. Government officials blame state bureaucracy and bitter winter weather, when the temperature drops to zero degrees F. at night.

The site is at the southern edge of the Salar de Uyuni, near the town of Rio Grande. More llamas, vicunas (small camels), and ostriches than people prowl the plains.

Getting to the facility requires a two-hour drive over a bumpy dirt road from the town of Uyuni, which has become a popular jumping-off point for backpack travelers to see the salt flats, unique rock formations and odd-colored lakes.

A few travelers even go to San Vicente, several hours away by car, to see the remote mining town where Butch Cassidy and the Sundance Kid met their end 100 years ago.

At the lithium facility, workers from the state mining company, Comibol, are midway through their first task: erecting two-story barracks. Later, they'll build evaporation ponds to separate the lithium from the brine of the salt flats.

At the lunch break, the workers line up for bowls of soup followed by bowls of rice, chicken, and vegetables. They sit on rocks and try to keep the wind from blowing dust into their food.

They're a discontented lot.

"We work 21 days, and then get seven days off," said Oscar Crespo. "They take us to Uyuni in the back of a dump truck, packed together like sardines."

"We don't have any medical care here," added David Bautista, who, like the other workers, wears sunglasses and a woolen face mask to protect him from the sun at 12,000 feet above sea level.

Angel Calcina said the coveralls and hard hat he was wearing came from the private company where he previously worked.

"I don't understand it," he said. "Private companies treat us better than the state company."

In La Paz, Bolivia's capital, mining minister Mr. Echazu still brims with confidence. He said that foreign companies are welcome, but they must follow the government's orders.

Francisco Quisbert, who heads a powerful local union in Uyuni, fondly recalls the street protests and hunger strikes that prompted Lithco to abandon plans to invest in Bolivia more than a decade ago.

Mr. Quisbert thinks that Bolivia's lithium will lift thousands from poverty, but he warns that foreign companies must come only on Bolivia's terms.

"We consider ourselves to be the owners of the salt flats," Quisbert said.

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