By Waldaniel Amadis | 2023-08-15

BUENOS AIRES -- Liex-Zijin, a Chinese lithium extraction company and a subsidiary of the Zijin mining group, is under investigation in Argentina for a number of alleged violations.

They include cheating the Argentine government out of more than $5 million.

Liex-Zijin is accused of a fraud-riddled purchase of machinery, paying well above market value and pocketing more than $5 million as a result.

In Buenos Aires' view, the Chinese firm deliberately defrauded the government by obtaining US dollars at the favorable Argentine official exchange rate. Liex-Zijin then used these "cheap" dollars to buy machinery in Hong Kong, allowing the firm to pocket the difference. It amounted to more than $5 million.

Marcelo Murúa, the Catamarca mining minister, confirmed to the media last Wednesday (August 9) that he wanted customs to verify exports and imports by the Chinese company, according to Página 12 outlet.

The General Directorate of Customs of Argentina (DGA) placed Liex-Zijin under monitoring.

In May, the Catamarca government delivered documents to the central government from "primary controls" that suggest "greater supervision" of Liex-Zijin due to irregularities, such as not hiring local suppliers, unlike what was stipulated in Liex-Zijin and Argentina's agreement on tax benefits, said Murúa. The company reportedly was not complying with that pact's requirements either.

Dodging customs duties

Buenos Aires also accuses Liex-Zijin of smuggling the same machinery into Argentina through Chile without declaring it, to evade customs duties.

Chile and China signed a free trade agreement in 2006, which reduced tariffs on their trade.

Opposition senator and candidate for governor Flavio Flama, and deputy and candidate for lieutenant governor of Catamarca Hugo Ávila, lashed out August 8 against the Chinese company Liex-Zijin for not registering the machinery in the department of Tinogasta, where the Tres Quebradas project is situated.

"I have been investigating this company, and we are in the worst-case scenario in terms of mining policy," Ávila asserted in statements to journalists. "The machinery used by Liex-Zijin enters through Chile without going through customs, and it is not even registered in the province."

The company's camps in the semi-arid region of northwestern Argentina no longer can be seen on Google Maps, he said. The company "blocked it so that you cannot see what is happening," as is common in "the Chinese regime," he charged.

Breaking constitution, environmental laws

Catamarca must "respect the constitution," which establishes that 51% of this type of natural resource exploitation must be for the province and 49% for private capital, said Ávila. This division of revenue is not happening at present, he said.

Last November, authorities fined Liex-Zijin fined for violating environmental legislation in Catamarca. Argentina allowed it to resume operations after it agreed to comply with the rules established by the competent environmental authorities.

Authorities fined it for improperly disposing of hazardous chemicals, which poses a risk to the environment and public health. They also fined it for failing to comply with safety and hygiene regulations, which puts its workers at risk.

Authorities have accused the firm several times of employing workers in exploitative and precarious conditions, with low wages and poor working conditions.

Liex-Zijin plans to invest $380 million in Catamarca, creating 1,000 direct and indirect jobs and producing 20,000 tons of lithium carbonate per year from the resources of the Salar de Luna Verde.

The Chinese company acquired the majority stake in the Tres Quebradas project from the Canadian firm Neo Lithium Corp. in a transaction worth $730 million last year.

The project in Catamarca is expected to begin production by the end of 2023.