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News Article

Nationalizing Lithium Would Waste Geopolitical Opportunity

By Alejandro Ehrenberg | Mon, 06/22/2020 - 17:19

Víctor Toledo, Mexico’s Minister of Environment and Natural Resources, suggested that lithium be nationalized, according to Imagen Radio. Furthermore, Minister Toledo stated that it would be desirable that the Mexican government create a company to control lithium production in the country. The relevance and desirability of these proposals are unclear.

All mineral resources lying in Mexico’s subsoil, including lithium, are already national property. Enrique Rodríguez del Bosque, partner at RB Abogados explains in an article for Lexology (1) (2): “Mexico, as a nation, is the direct owner of all mineral deposits within the national territory as noted in the Constitution. The exploration and exploitation of such mineral resources are concessional to private parties pursuant to concessions granted by the federal government.” The Mexican state acts as an intermediary between private parties and the Mexican nation, granting permission to the former to exploit mineral resources on behalf of Mexico. Those permissions are technically called concessions and, as social and environmental expert Juan Pablo Gudiño said to Mexico Business News, “the state receives royalties for letting a private party exploit mineral resources on its behalf. The royalties are meant to be used to the benefit of the citizenry.”

Perhaps Minister Toledo’s idea is to make lithium exploitation exclusive to the Mexican state. Having done that, the only way to exploit Mexico’s lithium deposits would be through a PEMEX-like enterprise focused on the white metal. Undertaking such a course of action might not be completely potty. Lithium is primed to be the oil of the future, and there are a few examples of successful state-owned oil companies — like Norway’s Equinor ASA.

Nevertheless, focusing on whether Mexico’s lithium is exploited by public, private, national or foreign capital may be missing the point. The real opportunity lies in using lithium extraction as a lever for other industrial sectors. As Undersecretary of Mining Francisco Quiroga stated during his keynote presentation in Mexico Mining Forum, “success of mining activities should not only be measured by the volume of minerals we produce but by what we can do with those resources. The goal should be to make mining a competitive leverage for other manufacturing industries and for Mexico’s position as a manufacturing powerhouse.”

The COVID-19 outbreak has opened a vast opportunity for Mexico, as the lithium value chain seeks to diversify risk by becoming less China-centric. A transversal industrial policy linking Mexico’s mining sector with its automotive, manufacturing and energy sectors would arguably be more relevant to the country’s development than the mammoth task of “nationalizing” lithium and creating a public company for its extraction.

Alejandro Ehrenberg Alejandro Ehrenberg Journalist and Industry Analyst