AMLO’s Big Bet: The Nationalization of Lithium in Mexico
When it comes to energy, AMLO has both eyes looking forward with feet firmly planted in the past. Mexico’s nationalist president has a clear vision in mind: the liberation of Mexico and its masses from exploitative international forces, such as multinational corporations. The country’s energy sector is merely one of the targets in AMLO’s sights, and his most recent win rests on one tempting metal: lithium. While the move is not abnormal in a historical sense, it might be in a practical sense. Despite this, AMLO is honed in on his vision for energy in Mexico, of which lithium is a critical component.
On April 20, 2022, the Mexican Senate approved a reform to the Mining Law that nationalized the country’s lithium reserves. The move comes at the heels of AMLO’s announcement to create a state-owned lithium company, with possible names including Amlitio or Litiomex. The reform is part of a broader effort of AMLO and his political party, MORENA, to nationalize its energy resources and production. Although AMLO has signaled courtesy for the environment, his approach to the energy question remains largely fraught with critique, with opponents calling him out for his move on increasing coal production, for example.
Concerning lithium, energy experts and international business consultants alike agree on the increasing importance of the highly reactive white metal. The demand primarily rests on lithium-ion batteries (LIBs), which are alluring for their superior capacity to store electric energy. LIBs can store up to 10% more energy than traditional lead-acid batteries. As such, it’s no surprise that the demand for LIBs has increased since 2010, and that this demand is projected to increase nearly 1,700% (as measured in gigawatt-hours) by 2030. Additionally, LIBs are critical components of electric vehicles, which have experienced a boom in recent years. An energy-storing stalwart, LIBs are also touted for their contribution to the clean energy transition, which is contradictory given the environmental damage caused by lithium extraction. Nevertheless, lithium’s ascendancy is predestined.
Speculation surrounding lithium extraction is obvious and pertinent in Latin America, especially Argentina, Bolivia and Chile. The countries are collectively known as the world’s “Lithium Triangle” for their massive contribution to raw lithium. The countries plus Peru contain 67% of the world’s proven reserves. Furthermore, they produce half of international supply. The industry was projected to reach a value of $7.7 billion by this year. Obviously, lithium is a cornerstone of these countries’ markets. If the key to a nation’s development is to participate and compete in the global market, then it would make sense for the Lithium Triangle countries to extract lithium. After all, the endeavor would fall in line with a traditional model of export-led development.
Today, however, it hardly makes practical sense for Mexico to make such a broad move on lithium. After all, the Mexican government is not a major commercial producer of the metal. Furthermore, opponent’s to AMLO’s lithium project contend that the state does not have the infrastructure and time to meaningfully contribute to the global lithium commodity chain, and that doing so will only hurt the everyday Mexicans whom AMLO claims will benefit from lithium nationalization. The project might crash and burn.
Or it might go the other direction, and AMLO wins prestige for years to come. (Alongside an award for best foresight 2022.) Currently, exploratory phase lithium projects exist in Sonora, Jalisco, Guanajuato, Nogales and Puebla. In Sonora, British Bacanora Lithium and Chinese Ganfeng Lithium had plans to begin extracting 224 million metric tons of lithium. Ganfeng Lithium seemed to have sensed and acted on lithium’s ascendancy before AMLO won the Mining Law reform, since in 2020 news circulated that the Chinese company would be constructing an LIB recycling plant in the country. Whatever Ganfeng Lithium sensed beforehand about the ascendancy of lithium, it’s obvious that now AMLO wants in on it.
When it comes to lithium, AMLO is on a fool’s journey. Or so it seems as such on the outside. Despite critique, he is intent on lithium nationalization. Following the Mining Law reform, the Mexico office of the International Chamber of Commerce commented: “[Recognition of Article 27 of the Mexican Constitution which gives the government rights to the subsoil] shouldn’t be confused with the rights of Mexican and foreign investors to participate, by way of concessions, in economic activity related to exploration, exploitation and production of mineral resources.” Reporting for Bloomberg, Shannon K O’Neil from the Council on Foreign Relations warns that North America’s “prosperity and security” will be undermined.
Even though pushback is coming from all directions, AMLO is not stopping. He realized Mexico’s marginal position in the global lithium commodity chain when he called on the Lithium Triangle countries to “do joint work” on extraction, signaling an interest to export his model of Mexican nationalism abroad and create a pan-Latin American sovereign economic nationalism. Overall, AMLO’s move on lithium is a crapshoot in a highly competitive global industry. And it’s a gamble on a project that in nearly two-years time will be at the behest of Mexico’s next president. Still, he’s shown that he won’t let up.
The move is likely a preemptive move on AMLO’s part to protect the country from excessive foreign interference in the burgeoning lithium commodity chain. During his daily morning press conference on January 2, 2022, AMLO announced the government’s plan to create a state-run lithium company, saying that, “We don’t want Mexico to be a zone of conflict between powers. Not Russia, nor China, nor the United States. Mexico [will control its lithium].” No doubt, global superpowers will want to engage Latin America and its abundant lithium resources, and international policies will arise to reflect this. Still, it’s yet to be known to what extent this engagement will be fair, or whether it will be unfairly exploitative.
This consideration need not be “controversial.” Not only is it a well studied historical trend within Latin America and the Caribbean, but also a consideration of primary concern in the region. From his comment at the press conference, AMLO seems to be aware of this, especially considering the particular history of foreign intervention in Mexico.
Concerning his approach to lithium, AMLO is ripping out a page from the annals of Mexican history. Of the various causes of the Mexican Revolution, excessive ties to foreign investments — especially in the country’s railroads — set off the movement that violently opposed the ancién regime led by iron fist Porfirio Díaz. Detractors disparaged Díaz’s reliance on foreign capital, and this ethos influenced foreign relations in the ensuing years. This reached an apogee in 1938 when a national petroleum workers strike and the ensuing international conflict impelled President Lázaro Cárdenas to nationalize the petroleum industry, much to the upset of foreign investment interests.
Such historical anecdotes are prime cuts of inspiration for a president who is devoted to a clear idea of his presidency as the “Fourth Transformation” in the country’s history, and who continually seeks to legitimize his presidential mandate. Not only that, but also in steering his strategy on lithium today. In calling on the Lithium Triangle to work with Mexico, AMLO realizes that the government cannot confront the struggle over lithium on its own. In short, lithium’s ascendancy in Mexico will not neatly mirror the ascendancy that petroleum experienced since it will not benefit from robust infrastructure and vocational schools already devoted to lithium.
Even though AMLO is in a highly precarious situation concerning lithium in Mexico, his aim is clear. He’s betting and he’s betting big. And maybe this deserves some merit for acuity, since the world is already experiencing the throes of a climate change Earth and lithium provides an outlet for acting on reversing its effects, even though extracting the metal itself is environmentally damaging. Contradictions abound in AMLO’s nationalization of lithium. Either way, it’s certain that an important chapter in the story of AMLO’s presidency will cover his ethos of “energy sovereignty” and the efforts that he undertook to actualize it.
