Bolivia sees profit in lithium, but can it exploit it?

Officials want to tap vast reserves to produce electric-car batteries, but threat of nationalization could scare off foreign investors.

from the February 4, 2009 edition

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Mining companies also have invested heavily in Chile, while Bolivia's reserves remain largely unexplored.

Mr. Arteaga expressed doubts that the current lithium venture will succeed.

"The state is never a good operator of any industrial operation," Mr. Arteaga said. "It will be run by inefficient and unqualified people."

There are physical hurdles, as well as political ones. Heavy rainfall interferes with the evaporation process, and there are no good roads to truck lithium out of landlocked Bolivia.

"There are fairly significant barriers to developing the resource in Bolivia," said Timothy McKenna, vice president of investor relations at Rockwood Holdings, one of the three major lithium producers in Latin America.

Neither Rockwood nor the other two major Latin American lithium producers, SQM and FMC Lithium, have shown any interest in Bolivia.

Morales inaugurated construction of the new $5.7 million facility in May, but work has proceeded at a snail's pace. Government officials blame state bureaucracy and bitter winter weather, when the temperature drops to zero degrees F. at night.

The site is at the southern edge of the Salar de Uyuni, near the town of Rio Grande. More llamas, vicunas (small camels), and ostriches than people prowl the plains.

Getting to the facility requires a two-hour drive over a bumpy dirt road from the town of Uyuni, which has become a popular jumping-off point for backpack travelers to see the salt flats, unique rock formations and odd-colored lakes.

A few travelers even go to San Vicente, several hours away by car, to see the remote mining town where Butch Cassidy and the Sundance Kid met their end 100 years ago.

At the lithium facility, workers from the state mining company, Comibol, are midway through their first task: erecting two-story barracks. Later, they'll build evaporation ponds to separate the lithium from the brine of the salt flats.

At the lunch break, the workers line up for bowls of soup followed by bowls of rice, chicken, and vegetables. They sit on rocks and try to keep the wind from blowing dust into their food.

They're a discontented lot.

"We work 21 days, and then get seven days off," said Oscar Crespo. "They take us to Uyuni in the back of a dump truck, packed together like sardines."

"We don't have any medical care here," added David Bautista, who, like the other workers, wears sunglasses and a woolen face mask to protect him from the sun at 12,000 feet above sea level.

Angel Calcina said the coveralls and hard hat he was wearing came from the private company where he previously worked.

"I don't understand it," he said. "Private companies treat us better than the state company."

In La Paz, Bolivia's capital, mining minister Mr. Echazu still brims with confidence. He said that foreign companies are welcome, but they must follow the government's orders.

Francisco Quisbert, who heads a powerful local union in Uyuni, fondly recalls the street protests and hunger strikes that prompted Lithco to abandon plans to invest in Bolivia more than a decade ago.

Mr. Quisbert thinks that Bolivia's lithium will lift thousands from poverty, but he warns that foreign companies must come only on Bolivia's terms.

"We consider ourselves to be the owners of the salt flats," Quisbert said.

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