Fresh Takes

The electric car race hampered by… bureaucracy?

With all major car makers now on board with electric vehicle production, demand for lithium has sent prices rocketing 750% since 2021. Lithium production is concentrated largely in South America, Australia, and China, and in 2021, Chile alone accounted for almost 49% of the world’s lithium reserves. The world’s largest producer a few years ago, Chile, hasn’t opened a new mine in about 30 years and now trails Australia.

According to a source, “If lithium regulation in Chile was like copper regulation, I can assure you there would be a lot more mines.” But even with production already mired by regulatory red tape and risk of government mismanagement, some officials are angling for even more state control.

One does not need to look far for a cautionary tale: Bolivia, with ample reserves, has failed to capitalize on its resources due to government commitment to maintain full state control of the metal. Indeed, Bolivia nationalized their mineral resources 15 years ago, and has been paralyzed trying to recover lithium since. Indeed, Bolivia produced in 2021 what Chile produces in under two days.

Nationalizing mines, expropriating foreign investors, and denying permits are destructive policies that simply stop economic development. There are ways to exploit mining resources that create wealth for local populations while being respectful of the environment and the rights of indigenous populations, as other jurisdictions in the world have shown.

If global climate policy and net-zero targets are to be met, lithium production will undoubtedly need to be ramped up. The Chilean government should take heed and rethink its nationalization. Governments more broadly must not adopt policy that stifles private investment and innovation.

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