Corruption is China weapon in effort to corner lithium market in Latin America, experts say

Chinese companies seeking to gain control of Latin America’s lithium reserves, amounting to about half of the world’s total, have an edge against which American and European companies cannot compete: a general willingness to ignore international rules against corruption, experts say.

Simply put, the Chinese are using bribery and other underhanded practices to shove American and European companies out of the lithium production industry in Latin America, hoping to gain a dominant role in key electronics industries, including cell phone, computers and electric car manufacturing, said Douglas Farah, president of IBI Consultants, a national security consulting firm focusing on transnational organized crime.

“Consumers around the world will soon be subjected to the yoke of a Chinese monopoly. Obviously, it’s worrisome for the United States; lithium touches everything, batteries for computers, cell phones. Everything revolves around lithium right now,” Farah said in a telephone interview.

The situation has begun to gain the attention of policy makers in Washington amid complaints from companies saying that China’s unwillingness to comply with internationally accepted anti-corruption rules is shoving everyone else out of the industry.

“I call this phenomenon emerging in the region as ‘Geostrategic Corruption’, which is the strategy through which China has pragmatically chosen to expand massively its presence around the world, but particularly in Latin America,” said Florida International University politics and international relations Prof. Eduardo Gamarra.

“What China is doing is quite different from the standpoint of classic investors in that it seeks alliances that do not take into consideration the rules that generally govern traditional European and American investors, because they can bribe, they can hire children of presidents, they can know in advance the bidding conditions, and therefore subvert the bidding processes,” Gamarra said.

A relatively rare element, lithium has been identified as a material essential to the economic or national security of the United States. According to a 2022 fact sheet issued by the White House, it is essential for the manufacture not only of everyday products and household appliances but for the development of clean energy technologies, like wind turbines and solar panels.

As the world transitions to a clean energy economy, global demand for critical minerals is set to skyrocket by as much 600% over the next several decades, and, for minerals such as lithium and graphite used in electric vehicle batteries, demand will increase by even more — as much as 4,000%, the White House said while announcing major investments to reduce America’s reliance on the supply coming out of China.

A series of undisclosed deals signed in Argentina between autocratic governors in northern states, which has the country’s largest lithium deposits, and Chinese companies are being exposed by IBI Consultants, Gamarra and other experts as the most recent example of the questionable deals.

These are governors of the ruling party, closely aligned with vice president Cristina Fernández de Kirchner, who have been given total autonomy “to negotiate directly with Chinese companies contracts of the most obscure nature for the extraction of lithium” without allowing for any type of control, audits or transparency, IBI Consultants’ Farah said.

Argentina currently holds about 20% of the world’s known lithium deposits and its citizens simply have no way of knowing the terms under which the concessions for the extraction of the rare mineral were given to the Chinese, he said.

The governors of the Argentinian northern states have for long triggered the alarm of pro-democracy groups, given the autocratic nature of their administrations.

Some governors, like Gerardo Zamora in Santiago del Estero, and his close ally Juan Luis Manzur in neighboring Tucumán, have focused on building their own intelligence services, naming subservient judicial authorities, controlling the local media and forming a tight-knit web of alliances with the owners of provincial banks and construction contractors to gain a stranglehold on the local economy, Farah said in an IBI Consultants presentation in March.

“The fundamental pact among these governors and Kirchner is that the federal government funnels national resources to these poor regions (with no oversight or accountability) and does not meddle in any regional affairs. In return, these governors deliver massive amounts of votes to the Peronista party structures to maintain the power structure,” the report said.

While China’s dealings in Argentina are now cause of concern in the industry, they have for long been controlling production of the mineral in Bolivia, which holds about 21% of the world’s lithium deposits, according to the United States Geological Survey.

In a recent article published with fellow FIU Prof. Valeriia Popova, Gamarra said that Chinese companies achieved a major foothold in key sectors of the Bolivian economy during the 14-year rule of former president Evo Morales, including the lithium industry, where it established a monopoly despite a strong anti-mining movement in the country.

And the cozy relationship continues today under the administration of the new Bolivian President Luis Arce, Gamarra said, emphasizing that the Chinese “have hired” his son, Luis Marcelo Arce Mosqueira, to work in their favor.

Opposition deputies accused Arce Mosqueira in February of holding questionable negotiations with Chinese companies for two new lithium concessions.

China’s willingness to use corrupt practices to secure its dominance of key commodities could have long lasting negative effects on U.S. interests in the region, Gamarra and Popova said in their article.

“In Argentina and Bolivia, Chinese expansion means that sectors that are crucial for the success of the U.S.’s green energy goals are increasingly under Beijing’s hold,” they said in their article. “It also undermines U.S. efforts to counter corruption and human rights abuses in the region.”