Image credits: Leon Overweel
News Article

CELAG Bets on OPEC Model for Latin American Lithium Producers

By Fernando Mares | Wed, 06/08/2022 - 18:34

The global lithium demand is expected to grow 42 times from its current size by 2040, as the threat of catastrophic climate change is urging developed countries to accelerate their energy transition, which requires key minerals such as lithium. In this context, Latin American countries may benefit of this increasing demand as its key producers.

According to the Latin American Strategy Center for Geopolitics (CELAG) Mexico, Argentina, Chile, Bolivia, Peru and Brazil could receive over US$530 billion annually toward lithium exploitation by 2040. “In this context, Latin America has much to gain if it integrates as a bloc and much to lose if moves toward a ‘lithium balkanization,’ and every country acts separately,” CELAG stated. 

According to the center, Argentina, Bolivia and Chile hold 64 percent of the world's lithium reserves. If the Peruvian, Mexican and Brazilian potential reserves are added, the region holds over 68 percent of global mineral reserves. This may translate to a restructuration of the global economic scenario regarding the energy transition and represent a good source of income for Latin American economies. 

CELAG stresses the importance of bargaining beneficial prices as a bloc through the creation of the Latin American Organization of the Lithium Exporting Countries (OLEC), which must be formed by the key regional producers, Argentina, Bolivia and Chile as well as by Peru, Mexico and Brazil, which do not have proven relevant reserves but could be important members due to their access to technology and geopolitical advantages. 

CELAG proposes a two-staged process in the short and mid-term. In the short term, the countries must sign a foundational treaty, where basic strategic goals and rules as well as coordination and communication points are set. In the mid-term, the countries should sign a new treaty to create a permanent UN-approved organism that coordinates the region in the form of a cartel, much like OPEC. This treaty would not require constitutional modifications, so it would not interfere with the sovereignty of states.

On Arp. 27, 2022, President López Obrador expressed his intention to establish communication channels with lithium-producing countries in the region to exchange experiences and knowledge regarding the mineral’s exploitation, with the aim to support Mexico’s creation of a state-owned lithium company. In that same regard, in May 2022, the Latin American Chamber of Lithium (CALBAMERICA) was created, gathering professional technicians and SMEs from Argentina, Chile and Peru. The new chamber also seeks to invite Mexico, Bolivia and Brazil, aiming to set fair prices through the creation of common contract models.

The data used in this article was sourced from:  
Photo by:   Leon Overweel
Fernando Mares Fernando Mares Junior Journalist and Industry Analyst