New OPEC Model for Latin American Lithium Producers

Latin American governments are gearing up to create a regional lithium organization to expand South America’s lithium processing capacity. The new organization aims to create a cartel comprising Argentina, Chile, Bolivia and Brazil to ensure that most of the extracted lithium is used for the manufacturing of electric vehicles. Mexico might join this organization at a later stage, too.

The new group is based on the Organization of the Petroleum Exporting Countries (OPEC), taking notes on how it coordinates production flows, prices and best practices. “Argentina, Chile, Bolivia have been negotiating the issue since July 2022,” said the Argentinian representatives.

Currently Argentina, Chile and Bolivia form the so-called lithium triangle since they hold 64% of the world's lithium reserves. If Peruvian, Mexican and Brazilian potential reserves are added, the region holds more than 68% of the global mineral reserves. This can translate into a restructuring of the world economic scenario around the energy transition and represent a good source of income for the Latin American economies, according to the Latin American Strategy Center for Geopolitics (CELAG).

Traditionally, Mexico has always been more associated with North American countries. However, since the lithium boom materialized, it has sought to partner more with South America. On April 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 to support Mexico’s creation of a state-owned lithium company. 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 said that the addition of Mexico and Brazil would be beneficial for the entire region, as both countries offer immense opportunities.

According to the Latin American Strategy Center for Geopolitics (CELAG), 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. CELAG highlighted that 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.