LitioMx: The Government Creating Problems Where There Were None

Is it necessary to ban private investment and participation in the exploitation of lithium to preserve or enhance a country's sovereignty? Will ideological principles and political decisions regarding the exploitation of natural resources and the involvement of the private sector in the economy accelerate or slow down a country's economic growth and development?  

On April 20, 2022, the Mexican government published an amendment to the Mining Law declaring the public utility of lithium. In consequence, the Mining Law now states that no concessions, licenses, contracts, permits, or authorizations will be granted related to lithium. The Law "acknowledges" that lithium is part of the nation's patrimony and that its exploration, exploitation, benefit, and production are reserved in favor of the people. Article 10 of the amended Mining Law provides that all the activities related to lithium must be carried out by the decentralized public organism created by the president. 

Five months after this amendment, on Aug. 23, 2022, President Andrés Manuel López Obrador issued a Decree creating the public entity called Litio para México (Lithium for México, "LitioMx" per its legal acronym). As provided by the Mining Law, the object of LitioMx is the exploration, exploitation, benefit, and production of lithium in Mexican territory as well as the administration and control of the lithium economic value chains.

The Decree states that in order to achieve said purpose, LitioMx is entitled to and responsible for, among other concepts, the following: (i) elaborate the medium and long-term strategic plans for the exploration, exploitation, benefit, and production of lithium; (ii) develop and execute the engineering projects, research, geological or any other type of activities related to the exploitation of lithium; (iii) research and develop the technology required for the utilization of lithium; (iv) locate and identify the geological areas with lithium deposits; (v) promote the sustainable production of lithium for the energy transition, and (vi) administrate and control the activities required for the production, transformation, and distribution of lithium products. 

Although the mandates mentioned above seem logical and reasonable, the first question that comes to mind is whether this newly created entity will actually be able to carry them out. Further, will it have the economic and human resources to perform those activities? How long will it take LitioMx to develop the technology or engineering projects required for the exploitation and benefit of lithium? Will it be possible to collaborate and work with the private sector to achieve the objective of sustainable exploitation of lithium? Can Mexico afford to waste time and fall behind the rest of the world in the lithium industry simply because of ideological reasons?  Does a country's sovereignty depend on the "acknowledgment" that lithium is part of the nation's patrimony or on the welfare, economic growth, and means of development of its population? 

According to the Decree, LitioMx's patrimony consist of (i) the resources assigned each fiscal year in the federal budget; (ii) the profits derived from the exploration, exploitation, benefit, and production of lithium and its economic value chains, and (iii) the assets furnished by the federal government. 

In the first weeks of September, the president will present the proposed federal budget for the 2023 fiscal year before Congress. The budget will provide the first hint of how serious and realistic the government's bet on lithium is. If the budget proposed for LitioMx is insignificant, there will be no means for the government to achieve the proposed objective, and the only consequence of the legal amendment to the Mining Law and the creation of LitioMx will be the banning of private investment in any lithium-related project in Mexico. 

This scenario is relevant because without a real and absolute commitment through the budget in favor of LitioMx there will be no possibility of exploiting or producing lithium in the near future. It is a well-known fact that the federal government's budget faces severe challenges and that the current administration is consistently reducing the resources destined for public entities ("republican austerity") to foster the social programs and the three infrastructure projects favored by the president. 

Supposing the federal government is facing serious challenges and limitations in its budget and has no means to develop a solid and robust lithium industry from scratch, then it should allow the private sector to participate in lithium’s exploration, exploitation, benefit, and production and promote those projects where private entities are willing to use their resources, technology, and expertise to exploit lithium. The latter will create a win-win scenario. Otherwise, the lithium deposits in Mexico will remain part of the nation's patrimony but will not provide any benefit or growth for our country.