Bolivia's Economic Upheaval Threatens Renewable Energy Development

• Published date: 21 September 2023
• Subject Matter: Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Renewables
• Law Firm: Flaster Greenberg PC
• Author: Daniel B. Markind

Just four months after agreeing to give a Chinese consortium led by the lithium-ion battery manufacturer, Contemporary Amperex Technology, control over the development of Bolivia's lithium deposits (Source), Bolivia's economy is undergoing a severe crisis.

For 15 years after the 2006 inauguration of Evo Morales, Bolivia's first indigenous President, the Bolivian economy boomed. Fueled by enormous wealth from the export of high-priced natural resources and agricultural products, Bolivia enjoyed an enormous increase in its standard of living over a short period of time. That came to an abrupt end, however, in 2014 when commodity prices crashed. Thanks to its enormous financial reserves generated during good times, Bolivia managed to hold off the day of reckoning for a few years but, buffeted further by COVID-19, the economic miracle came to an end a few years back. Fearing the inefficiency of state control over the country's wealth, Bolivians rushed to convert their liras into American dollars. Now, those dollars have all but run out. With no trust in the local currency, Bolivia's economy could go into free fall at any moment. Should that happen, social instability is likely to occur. Following that through, the question for the world as a whole becomes whether or not the planned development of Bolivia's lithium resources will be disrupted by the lack of economic and social stability in the country.

At 21 million tons, Bolivia has the largest proven lithium reserves of any country on earth (Source) Bolivia alone accounts for a fifth of all world lithium reserves which, needless to say, are a key component of the worldwide fight against climate change given lithium's critical role in manufacturing batteries to store the "green" electricity planned to be produced by many more solar panels, wind energy, hydro power, and the like. Developed properly, these reserves could make Bolivia an economic powerhouse and quell any social unrest. However, history is filled with many examples of countries with enormous mineral wealth squandered by corruption and mismanagement.

Just last week, the Chinese battery giant, CATL, announced that it plans to open two battery factories and invest over $1B in Bolivia (Source). This will involve extracting lithium from brine.

Should CATL prove successful, more massive investments from other foreign interests are sure to follow. What happens, however, if the predicted social upheaval caused by the current economic collapse disrupts...