By Aurora Lane | 2024-11-27

LA PAZ -- A new contract between Bolivia's state-owned YLB and the Russian firm Uranium One Group for lithium extraction is raising concerns and frustration in Bolivia.

Critics point to a lack of transparency and the minimal income the South American nation is expected to gain from the deal, all while the country grapples with a foreign currency shortage and a steady decline in gas production.

The contract for constructing a Direct Lithium Extraction (DLE) plant in the Salar de Uyuni, signed on September 11, was made public in early November after being submitted to the Bolivian Congress for review.

The document outlines plans for building the DLE plant with a $976 million investment. The project is expected to progress through three phases, culminating in July 2027 with an annual production capacity of 14,000 tons of battery-grade lithium carbonate.

YLB's profits would begin only after surpassing 8,000 tons of annual production, the contract stipulates.

This delay has been met with little optimism in Bolivia, a nation grappling with an economic crisis marked by shortages of dollars and fuel.

Bolivia especially needs fresh foreign currency as its natural-gas production and revenues keep plummeting.

Tempering expectations

Bolivia's aspirations of replacing gas revenues with lithium "are beginning to fade," the Rodríguez Baudoin consultancy said in an article in November.

The firm highlighted the sharp decline in international lithium prices and noted that Bolivia's "integration of lithium into the market" could take anywhere from five to eight years.

YLB estimates that the project's annual sales revenue would reach $415 million, a figure significantly lower than Bolivia's gas export revenues, which at their peak (2014-2015) almost reached $6 billion per year.

Even during the recent decline, they have exceeded $2 billion.

Energy analyst Mauricio Medinacelli highlighted this disparity in a blog post on November 3: "This project is 10 to 15 times smaller than natural gas exports at their peak, and expectations in Potosí regarding potential royalty income should be tempered."

The royalties allocated to Potosí, the producing department, are expected to be about 3%, as stipulated by the Mining Law and outlined in the contract with the Russian firm. The Potosinista Civic Committee (COMCIPO) has decried this percentage. It had anticipated a minimum of 11%.

The contract highlights yet again how Bolivia "falls into the trap of surrender," granting foreign companies preferential treatment over its production potential, José Carlos Solon, a researcher at the Solon Foundation, said in an interview with Entorno.

Russia is positioned by contract as the primary buyer of the plant's output, putting Bolivia at its mercy.

Uranium One Group will recover its initial $976 million investment, along with operational costs, under the agreement.

Solon raised concerns about ambiguity over the deal's terms. It remains uncertain whether the Russian firm will pay market or discounted prices for the lithium.

Four other contract details between Bolivia and Russia have not been explained, Solon continued.

These include contracts for "transfer of ownership of the pilot plant"; on "operation and maintenance of the pilot plant," with a duration of 20 years; on sales of battery-grade lithium carbonate to Uranium One; and on "conciliation."

Government officials must provide legislators with a clear explanation of the details of the YLB-Uranium One Group pact, an opposition lawmaker from Potosí, Juan José Tórrez, told Entorno.

He demanded transparency on a previous $1 billion investment aimed at industrializing Bolivian lithium -- a venture involving Chinese companies that has yet to deliver any tangible results.

Impact on Indigenous populations

In response to objections from Bolivian organizations, a hearing took place November 15 at the Inter-American Commission on Human Rights (IACHR) in Washington, DC.

During the session, the Bolivian Documentation and Information Center (CEDIB) accused the Bolivian government of opacity in lithium extraction projects with Chinese and Russian companies.

CEDIB highlighted numerous irregularities and raised concerns about the impact on Indigenous populations.

During the past 11 years, the Bolivian government has invested more than $1 billion in lithium projects, Oscar Campanini, director of CEDIB, stated during the IACHR hearing, echoing Solon's remark.

However, only in 2024 did an actual project begin -- one that has yet to deliver effective results and has violated fundamental community rights.

"There's a project that started only this year, operating at just 20% capacity, plagued by corruption … and tied to new contracts with Chinese and Russian companies," Campanini explained.

Although lithium extraction formally began in 2024, the Bolivian government has been infringing on community rights for over a decade, he continued.

Campanini noted informal complaints from local communities of significant declines in water levels in springs and wells.

He urged the IACHR to press the government to establish mining-free zones, avoid altering regulatory frameworks that protect the environment and Indigenous rights, and protect the right to a healthy environment, among other key demands.