By Alicia Gutiérrez | 2023-10-31

SANTIAGO -- Chinese economic ties could bring an environmental calamity to Chile.

During the inaugural official visit of Chilean President Gabriel Boric to China from October 14 to 18, the countries announced an agreement that grants Chinese firm Tsingshan Holding Group preferential prices for lithium.

The president conferred in Beijing on economic cooperation with Xiang Guangda, the billionaire proprietor of the metallurgical conglomerate Tsingshan Holding Group.

Boric went to social media to share a video on October 16 where he unveiled the agreement, emphasizing that it would generate "hundreds of jobs in the northern regions of our country."

"The most important thing is that in terms of lithium here we are not going to limit ourselves only to the extraction of non-metallic minerals, but we are also going to create value chains and transfer knowledge," he emphasized.

Tsingshan committed to an investment nearing $235 million for the establishment of a plant to produce lithium iron phosphate (LFP), to be built in the port of Mejillones within the Antofagasta region, in northwest Chile.

The factory is slated to produce up to 120,000 tons of LFP annually, for use in electric car batteries.

Tsingshan will further source raw materials for its plant from Chile's largest lithium producer, SQM, with access to preferential pricing for a duration of five years.

The project is slated to commence in 2025 and continue through 2030.

Sacrificing the environment

While there was no information available about the existence of a bidding process to let Tsingshan develop the plant in Mejillones, observers have raised concerns about the potentially disastrous environmental impact.

On multiple occasions, Vladimir Reyes, the president of the Council of Atacameño Peoples, has voiced concerns about the detrimental consequences of mining operations in the Chilean desert region. He has also highlighted the government's lack of communication with the affected communities.

In an interview with the digital media outlet Ex-Ante, Reyes expressed his opposition to the nascent national lithium strategy put forth this year by Boric. This strategy encourages agreements with Chinese corporations for mineral extraction.

"We do not support the initiative if it leads to an increase in environmental impacts in the region. Water resources are a significant concern for us, especially in our desert environment. The allocation of water for agriculture, livestock and various other activities conducted here in the arid desert is of utmost importance," he emphasized.

Reyes pointed out that in such projects, once companies have depleted lithium reserves, they tend to depart, leaving behind water scarcity and irreversible environmental damage.

Voicing related concerns, Luis de la Torre, a sustainability and mining analyst, highlighted in his comments to El País newspaper that the Chinese supply strategy appears to be aggressive, setting it apart from the approaches of other technological powers.

For instance, Japan has adopted a strategy of engaging with nations that are essential producers of crucial industrial materials through collaborations within sectors, he said.

This approach is generally less intrusive, more widely accepted and notably less conspicuous.

"The distinction lies in Japan's historical approach of partnering with reputable companies, often without seeking a majority stake. In contrast, China's behavior in this regard is less uniform, and in many instances, its presence has led to societal or governmental opposition," remarked de la Torre.

Throughout his visit to China, Boric engaged in meetings with 36 Chinese companies, including large entities such as Huawei, Sinovac Biotech, Kuaishou, Yutong, Aisino Corporation and Chery International.