Lithium instead of loyalty: Latin America's balancing act between the US and China

An international expert commission led by former Chilean President Michelle Bachelet and former Colombian President Iván Duque has recommended that Latin American states not take sides in the competition between the USA and China. Instead, the region should strategically use its reserves of lithium, copper and other strategic raw materials as negotiating leverage. The report was prepared by a high-level, bipartisan committee that includes former heads of state and government as well as economic experts from several countries.

Raw materials as a factor of power

Latin America has around 60 percent of global lithium reserves, concentrated mainly in Chile, Argentina and Bolivia, the so-called Lithium Triangle. Chile is also the world's largest copper producer with a share of around 24 percent of global production. These raw materials are considered key components for batteries, electric mobility and semiconductor production, areas in which both the USA and China are investing heavily.

The commission argues that this concentration of resources gives the region a negotiating position that goes beyond mere raw material supplies. Instead of binding themselves exclusively to one partner, countries such as Chile, Peru or Argentina could weigh investment offers from both economic spheres against each other and thus negotiate better conditions for processing and technology transfer.

Limits of independence

At the same time, the report acknowledges that room for maneuver is significantly smaller in more sensitive areas. On security issues, technology standards and critical infrastructure, such as 5G networks or ports, many states are more tightly bound to existing partnerships and supply chains. Here, maintaining strict equidistance between Washington and Beijing is hardly feasible in practice.

Over the past two decades, China has continuously expanded its economic presence in Latin America. Bilateral trade between China and the region reached a value of around 489 billion US dollars in 2023 according to Chinese customs authorities, many times the level of 20 years ago. At the same time, the USA remains the most important security and financial partner for many countries in the region, including through multilateral institutions such as the Inter-American Development Bank.

Diversification as a strategy

The report proposes concrete steps to strengthen the negotiating position: expanding regional value chains so that raw materials are not only exported but also processed locally, as well as closer coordination between governments in the region to act jointly towards external investors. Individual states have significantly less negotiating power than a coordinated bloc.

As an example, the commission cites Chile's lithium policy, in which the state has been seeking stronger control over the value chain since 2023, including through stakes by the state-owned copper corporation Codelco in private lithium projects.

For Europe and thus also for Austria, the debate over Latin America's raw materials policy is not an abstract far-away question. The EU has been negotiating a free trade agreement with the Mercosur bloc for years and, like the USA and China, depends on reliable access to lithium and copper, for example for the domestic battery and automotive supply industry. Should Latin America actually pool its negotiating power, Europe would also need to make greater efforts for independent partnerships instead of relying on traditional trade relations.

Austrian companies in the supply industry, for example in the field of battery technology, are monitoring these developments with economic interest, regardless of the geopolitical competition between Washington and Beijing.

Source: China – South China Morning Post | Original Article