If Not Now, When? Europe’s Lithium Opportunity in Bolivia

00:00:03: International reports

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00:00:06: with The Conrad

00:00:07: Adonale

00:00:07: Foundation.

00:00:11: Hello and welcome to international reports, I'm Eric Olander.

00:00:14: Europe in China are on the verge of what many believe will be a massive trade war.

00:00:20: Europeans are angry over the steady surge of Chinese exports that have led huge trade imbalances between two sides With China generating more than billion dollars per day of surpluses.

00:00:32: The other major complaint from the EU and some of its member states is over the accusation that China is unfairly subsidizing it's industries, leading to overcapacity.

00:00:41: And lower prices than undercut European competitors in Germany.

00:00:46: this now a full blown crisis with Volkswagen saying they will lay off at least one hundred thousand workers another sector shedding an estimated ten thousand industrial jobs a month.

00:00:58: but here's the thing.

00:00:59: if a trade war was china does break out.

00:01:02: One of the first things that Beijing is likely to do, it's cut off supply of refined critical minerals for European companies.

00:01:10: We know this will probably happen because the Chinese did in a trade fight with

00:01:14: U.S.,

00:01:14: and they're doing right now with Japan where exports of rare earths have fallen around ninety percent this year.

00:01:21: So thats prompted Germany & other european leaders look elsewhere on new sources of critical minerals that don't rely on chinese supply chains And South America is one region in particular that's getting a lot of attention, especially Bolivia.

00:01:36: Bolivia is the three hubs for the so-called Lithium Triangle and South America which also includes Argentina and Chile.

00:01:44: Now up until last year both China and Russia had huge presence within the Bolivian mining sector but all this changed when a conservative Trump leaning president Rodrigo Paz came to power and new opening for German and other European firms to access the country's huge lithium reserves.

00:02:03: Let us now explore this in more detail with Cristina Schottet, head of Conrad Attenauer Foundation's office at Bolivia an author of a fascinating article on international reports.

00:02:13: if not when why?

00:02:15: a Lithium partnership is strategically crucial for Germany desk officer in the Conrad Adenauer Foundation's consulting department and a policy advisor for the Competitives of Europe program.

00:02:30: Tim, Christina?

00:02:31: Welcome to International Reports!

00:02:34: Thank you.

00:02:34: Thanks for the invitation Eric

00:02:37: Great to have both with us today.

00:02:39: Before we dive into Cristina's report on Bolivia... Tim I'd like you to lay out Europe's vulnerability when it comes to critical mineral supply chains And the need for Germany and other EU countries to reduce their dependence on China.

00:03:04: So it makes South America a natural partner because of the difference if materials are coming from Southeast Asia or South America.

00:03:26: Okay, so Christina your report argues that Bolivia is experiencing what you call historic political opening and to be sure It has not been easy.

00:03:37: in the past few months there's been a lot of unrest.

00:03:42: What specifically has changed under President pass?

00:03:45: that makes this moment different from previous attempts to develop the country's lithium industry?

00:03:50: That in many ways led to the Chinese and the Russians becoming dominant.

00:03:54: But now, that's all change.

00:03:56: tell us a little bit about that.

00:03:58: I really do think that Olivia is living historic momentum right now.

00:04:06: last year there was government change but not only that.

00:04:10: it the end of twenty years for socialist government.

00:04:15: And as you can imagine, after twenty years opening up with a new democratically voted governance there are more opportunities for Europe to invest their... There's no openness political and economic openness to work with different partners.

00:04:36: probably we're going into that topic international partnerships Bolivia a little later, but there hasn't been this openness before.

00:04:45: So basically after just political earthquake and after the political shift in Bolivia is opportunity because new government opening up for international investment.

00:05:00: But what about instability that we've seen since?

00:05:05: President pass came to power.

00:05:06: Does that change the dynamic?

00:05:08: or is this something not mining companies and European firms can work around?

00:05:13: Well, it's actually stressing remaining risks Olivia is from being politically stable But I think the European Union is in a good position to work around those topics.

00:05:28: Specifically, lithium projects have always been politically very sensitive and let's say that the european model of cooperation it more transparent or rules based.

00:05:44: so i think Despite the political unrest, the political and economic transition that Bolivia is going through right now.

00:05:53: I think with this new approach because previous lithium projects haven't been transparent—that's the main reason they failed–I think it has a chance to work around those issues which will always be there.

00:06:11: It's politically sensitive issue But I think Europe is in a good position here.

00:06:17: So

00:06:18: Tim, Europe's in a great position but are European firms or European countries ready to move quickly now?

00:06:26: To take advantage of what Christina talks about as a window of opportunity?

00:06:29: do you think?

00:06:31: We have the Criticometer Act and we have Global Gateway And i think europeis really stepping up to tackle this challenge.

00:06:37: Of course it not only Europe It also has international alliances.

00:06:40: The US is heavily investing in South America, actually the only rare earths mine outside of Asia is now being supported by US government.

00:06:49: It's in Brazil.

00:06:50: so these international alliances with Europe have a quite transparent approach and has some merit.

00:06:55: So yes we are really going to know.

00:06:57: Christina you've talked about The European emphasis on transparency.

00:07:03: Tim talks how the approach is different.

00:07:06: I mean, one of the reasons that you highlight in your article why projects failed in the past was because local communities were excluded.

00:07:14: when You talk about this different European approach How do local communities get included?

00:07:19: That would make community participation actually something that helps The project success rather than a liability.

00:07:26: Well, the first thing is prior consultation and actually Olivia is my international law obliged to consult with local indigenous communities about major infrastructure projects.

00:07:41: Never in their history of lithium exploitation in Bolivia has been consultation.

00:07:48: but those communities so that problem starts here before Any exploitation can take place.

00:07:55: Local communities demand that they are consulted, They know a lot about the different techniques of lithium exploitation That there's so much knowledge in local community There... They want to work with those companies coming to exploit lithium.

00:08:15: They want infrastructure for water supply which is crucial for this arid region.

00:08:21: they want employment and support other economic activities such as tourism.

00:08:29: there are a couple of issues to be tackled but i do see a lot of openness from the european side.

00:08:37: To work on those issues because it's already part of the europeen model up development cooperation, And now with the past administration, I also do see this openness to consult with local communities.

00:08:52: With a local government and... ...I would say they have learned from the

00:08:55: past.".

00:08:56: Yeah!

00:08:57: One of your arguments that you made in the report was that Europe has better reputation….

00:09:02: …and European firms have a better reputation than those from China or Russia?

00:09:08: Particularly in South America, there's a long history of European exploitation but today things are different.

00:09:15: Do you have examples of other parts of south america that Europeans can point to as the kind of inclusive model That you're talking about where local stakeholders Are central and benefit from these engagements with europeans?

00:09:28: Are their examples out there that you can point too?

00:09:31: Well, there is resource partnership with Chile.

00:09:35: For example European companies German companies are working in Argentina already and the lithium sector.

00:09:44: so There some recent examples.

00:09:47: And then new Bolivian government sees those examples of successful Lithium exploitation In neighboring countries like Argentina and Chile.

00:09:58: Certainly, Europe had to overcome some sort of prejudice because of colonial resource exploitation.

00:10:07: The Spaniards exploited silver precisely in the same region where now companies from all over the world want to exploit lithium.

00:10:17: so there was some sort.

00:10:25: also had some experiences with the involvement of other international actors such as China and Russia.

00:10:32: And those experiences are more recent, even more negative.

00:10:38: so this is why the Bolivian government is sort-of turning away from China seeking other partners and here Europe with this model of cooperation that is not only centered on resource exploitation but really a long-term economic development.

00:10:57: The establishment of supply chains also within the producing country, I think they have different image than all international actors interested in this race for lithium.

00:11:14: Christina has talked about this different European approach, particularly in the context of the Chinese and Russians who don't have the best reputation when it comes to their mining engagements in the global south.

00:11:25: What's driving European firms to change their approaches?

00:11:28: Is it because of law or is it a motivation for them to be more effective where they can out-compete the Russian and Chinese?

00:11:34: What do you think are driving Europeans take on these different approaches regarding how they access resource partners like Bolivia?

00:11:42: I mean, of course there's a more stand point but also very rational calculation because nowadays the bottleneck in international supply chains when it comes to raw materials is not mining.

00:11:54: It's processing.

00:11:55: so many times materials are mined that say Africa and South America then they're shipped China process their and them included in the national supply chain.

00:12:04: And Of course its an interest for Europe to build up supply chains at least processing in South America to have these supply chains not under Chinese control.

00:12:14: So there's a very rational geopolitical calculation behind this.

00:12:20: hearing this that the European firms can effectively compete with the Chinese and Russians in place like Bolivia, given the emphasis on governance and transparency and local value creation.

00:12:31: I mean it sounds great but oftentimes you increase costs or slow down processes more... Again what happens on paper is sometimes very different and the Chinese have been incredibly effective over these years.

00:12:44: But do you think Europeans now have a competitive advantage?

00:12:48: In the case of Bolivia, I would say so.

00:12:50: Well due to those negative experiences in recent years with Chinese companies but also because government is diversifying away from China they are realistic that China will be in Bolivia and investing heavily.

00:13:12: They are really looking for other international partners in Bolivia.

00:13:18: And here I think, what Bolivia wants itself which is economic development... Bolivia has a huge economic crisis and it's been in crisis for years.

00:13:29: so its crucial to establish this lithium industry.

00:13:41: It hasn't produced major amounts of lithium so far.

00:13:45: So the past administration is interested in generating revenues and here, The European model for them is really a model with most advantages because there's investment infrastructure this consultation model where the local community kids.

00:14:04: they've learned that really technical aspects of the production are important, but I'm not the main reason why the project so far failed.

00:14:15: So they know that have to take a different approach and this is what Europe's

00:14:19: offering."

00:14:35: oftentimes face a lot of regulatory and financing processes.

00:14:39: And again, transparency is great but sometimes can also lead to slower movement.

00:14:44: One of the things about The Chinese Is that they could move incredibly fast?

00:14:49: That's something for developing countries particularly those in turmoil like Bolivia.

00:14:53: It very important because people want to see results quickly.

00:14:56: Is Europe Institutionally capable Of acting at the speed China does In order To deliver the result Bolivians are expecting?

00:15:06: It's an open question, but I feel for one.

00:15:09: China has been very quick.

00:15:11: But it has not been successful and the speed that China had was one of the main problems because there were no consultations with local communities or assessments on environmental sustainability in those projects.

00:15:28: so... In the case of Bolivia and they've made this experience in recent years, China was actually too quick.

00:15:36: And I think here also there's change on the European side—they have realized where their problems are.

00:15:52: different European position also towards its processes, it's decision making that has been too slow in the international competition.

00:16:02: But I feel that they are very much aware of those failures of the past and see them moving very actively.

00:16:11: we don't know whether is going to be successful but i do see a fundamental change on the european posture.

00:16:20: I mean, of course China's speed is a big advantage.

00:16:22: Sometimes i was quite surprised to see this opposite viewpoint from Christina but it makes sense.

00:16:26: Of course if you want to have consultations You cannot do china speed But i think europe just make the different offer And its full package.

00:16:33: now looking at South America as whole and we've finally come To conclusion with Mercasur We have trade deals With chile ,we have one with the indian community.

00:16:43: So were offering a full package experiences that some countries made with Chinese investments, we have a good offer and an offer that not only helps Europe but also South America.

00:16:56: And Tim is what we're seeing in South America unique to South America or this European offer you are talking about?

00:17:02: Also playing out on other parts of the world say here in Asia or Africa?

00:17:07: Yeah I think it will be seen right now in Europe as real change off mind.

00:17:11: before trade negotiations has been rather difficult because Europe had quite high standards that were difficult to find an agreement on in these trade agreements.

00:17:22: But now Europe is really stepping up, we have deals with Indonesia and India now.

00:17:26: so yes there are European three going out also to find new partners after it's getting difficult with China end with the US.

00:17:32: So yeah, Europe already tries to build-up this international order of international trade even as a backup for RWTO.

00:17:42: Christina, you talk about in the article how this is really an important test for Europe that there's a lot at stake both for Bolivia and for Europe.

00:17:50: What does it mean if their success?

00:17:53: In Bolivia but also what doesn't mean if there's failure again?

00:17:57: The pressure as Tim talked about is enormous.

00:18:00: get Europe is squeezed between China And United States on critical minerals.

00:18:05: It has to find its own path.

00:18:07: What's at stake in Bolivia For Europe in terms of getting this right?

00:18:12: Well, as I explained earlier, Bolivia has the largest lithium reserves of the world.

00:18:18: So it could be really a key player in lithium production and a key partner for Europe's supply of lithium which is very important for electronic mobility energy transition.

00:18:34: It's really as they have declared by the European Union strategic mineral For Europe, what's at stake?

00:18:42: It would be a very great chance.

00:18:47: I wouldn't say it all depends on Bolivia because up to now they haven't really been able to establish a look in production.

00:18:55: Production other countries is already functioning well.

00:19:00: so there are alternatives obviously to Bolivia.

00:19:04: Europe is not over dependent on this contract with Bolivia.

00:19:08: the same is true for Bolivia.

00:19:12: I think the package that Europe offers, it's a package most interesting from the Bolivian government because it covers not only raw material extraction but whole economic development which the Government of Bolivia has to put on path and come out this economic crisis.

00:19:31: But if Europe doesn't put together its offer and they work with someone else.

00:19:38: There's a lot of competition, so I think there is realignment of interests that really have both high interest in this corporation.

00:19:48: but if it fails obviously there are alternatives.

00:19:53: Tim i'd like to close our discussion on the point you raised earlier when we talked about critical minerals pulling stuff out-of-the ground.

00:20:06: What happens when lithium comes from Bolivia?

00:20:11: Europe doesn't have a very robust refining capacity right now.

00:20:15: So there's two parts to this equation, and I'm just curious that as Christina says their success in Bolivia is not necessarily success In terms of breaking your dependence from China because a lot of the refined Lithium and refine critical minerals come from China.

00:20:31: How does Europe overcome that second part of the challenge.

00:20:35: You're right, it's actually quite a complex challenge and the equation has many variables.

00:20:40: And one of the most important ones is energy prices.

00:20:43: So refining Europe is quite expensive.

00:20:47: This is why Europe needs partners that could mine and refine at site.

00:20:52: so it would be in Europe interests also in the US interest and Japan's interest to have refining capacities in Bolivia In Brazil in other South American countries and to include them into the European and US supply chains.

00:21:08: Okay, The article is if not now when?

00:21:11: why?

00:21:11: a lithium partnership with Bolivia is strategically crucial for Germany head of the Conrad Adenauer Foundation's office in Bolivia.

00:21:23: And today we were also joined by Tim Pater, desk officer at The Conrad-Adenauer Foundations Consulting Department and a policy advisor for the competitiveness And I want to thank you for listening and watching another episode of International Reports.

00:21:47: Be sure to check out all our archives from the different experts we spoke into around the world, for fascinating discussions like this one on behalf everybody at The Conrad Attenauer Foundation Around the World!