What will the next Argentine president’s policy be on lithium?

With some of the largest lithium reserves in the world, many Argentine presidential hopefuls see the critical metal’s exploitation as an important part of their policy agendas. Southern Pulse South America Consultant Marco Bastos investigates where the leading candidates stand.

Argentina will hold general elections this year. In October, Argentines will cast their ballots for president and half of the National Congress. The primary elections for presidential and congressional candidates are scheduled for 13 August. Also this year, all 24 provinces will elect governors and legislative assemblies.

However, these elections come at a troubled time. The country has suffered a decade-long economic stagnation, with nearly 100% annual inflation this year, falling real wages, and a maze of regulations that include a complex tax system, import controls, and multiple exchange rates. Lithium, a metal key to the green transition due to its role in battery manufacture, promises to alleviate this torrid situation.

Interest in the country’s lithium industry is already apparent. In 2022, Argentina’s lithium exports were worth USD696 million, a 234% increase compared to the previous year. Moreover, the largest merger and acquisition in the country last year was the USD962 million purchase of lithium exploration rights in the northern province of Salta by China’s Ganfeng Lithium.

With awareness of lithium’s value now widespread in the Argentine political arena, we turn our attention to what different electoral outcomes might mean for the industry.

A win for the government

Within the incumbent Peronist coalition, the prevailing view is that lithium should be used to create an industry that manufactures batteries inside Argentina. Y-TEC, a subsidiary of state-owned energy company YPF, has been charged with leading these efforts, but progress has been slow to date. A pilot initiative will start in April 2023 and aims to create batteries for 50 buses each year. The spokesperson for the government’s Science and Technology Ministry, Lisandro Sabanés, told Southern Pulse that the current administration has also asked the governments of India, Japan and South Korea to bring electric car plants to Argentina. However, no deals have been publicly announced so far.

Still, there are nuances among the ruling coaltion’s most influential groups. Vice President Cristina Kirchner leads the left-wing of the coalition, which advocates for a made-in-Argentina, state-run industrial policy. While it is unclear if Kirchner will run, she will certainly have a voice in the process to choose the coalition’s candidate.

Prominent finance minister Segio Massa has a more centrist view, supporting policies to industrialize lithium, but leaving a larger role to private capital. Local press speculates that Massa wants to run for president, but he has not yet thrown his hat in the ring.

It is still unclear whether the government will choose its candidate in a primary vote or through closed-door negotiations. This makes predicting who will make the final pick difficult.

A win for the main opposition bloc

The main opposition coalition, Juntos por el Cambio (JxC), could run any of five possible candidates in the presidential race:

• Buenos Aires Mayor Horacio Rodriguez Larreta, of the PRO party, presents himself as a technocrat with a record of delivering construction projects and promises to put an end to political polarization;
• PRO’s president, conservative congresswoman Patrícia Bullrich, has a message of law and order, anti-corruption, and cutting government spending;
• Former president Mauricio Macri, also of PRO, has yet to announce whether he will compete, but has said that a new administration led by him would adopt “shock therapy” policies to deal with Argentina’s macroeconomic problems;
• The second-largest party in the coalition, the UCR, has two possible candidates: its president and governor of the lithium-rich Jujuy province Gerardo Morales, and congressman Facundo Manes, a neurosurgeon who promises to overcome political polarization with a platform of education and empathy.

Members of Larreta’s and Bullrich’s teams told Southern Pulse that the differences between them on macroeconomics and mining are minimal and mostly concern different tactics to achieve the same goals.

Bullrich’s advisor for mining, Mario Capello, wants the national government to scrap “thousands of inefficient regulations that make corruption easier and business more difficult.” Furthermore, he dismisses government efforts to manufacture batteries, saying the country lacks the necessary capital and technology.

Nicolas Gandini, editor of Argentine publication EconJournal, concurred with this view in an interview with Southern Pulse. He added that as of today, Argentina has, at best, 15 stations to recharge electric vehicles and that the goal to manufacture batteries in the country is not feasible before 2035.

Bullrich’s advisor’s skepticism over using the lithium industry to make batteries nationally seemingly puts Bullrich at odds with Larreta, who has said in the past that he wants Argentina to industrialize the country’s lithium industry to make batteries. However, Larreta’s own economics advisor, Andres Borenstein, and mining advisor, Santiago Dondo, told Southern Pulse significant battery production would be very difficult to achieve in the next four-year period. In their view, the most critical factor for attracting more investment in lithium is stabilizing the macroeconomy and maintaining the industry’s current legal framework. This might be achieved by supporting private investment in industries that offer better benefit-cost ratios, such as copper, petrochemicals, food production and mining services. Whatever the method, it would appear Larreta’s advisors are less bullish about a made-in-Argentina battery industry.

Macri’s position on lithium, if he were to run, would likely be similar to his approach in the past. During his presidential tenure, from 2016 to 2020, Macri had a welcoming policy for investors, keeping taxes low. There was also no obligation for investors to buy-local or to industrialize the lithium industry. Consequently, lithium production increased exponentially. Notably, Macri’s former mining secretary is today an advisor for Bullrich.

Among the UCR wing of the main opposition bloc, prospective presidential candidate Morales can claim the most familiarity with the critical mineral. He presides over the Mesa de Litio, an association of three lithium-rich provinces that stand for the pro-business status quo in the industry. His governorship of Jujuy, the province with the most lithium reserves, also stands him in good stead. However, local media speculate that Morales could give up on his presidential ambitions to be the vice presidential candidate on Larreta’s ticket. Like Larreta, Morales has also said in the past that he wants to produce car batteries from the extracted lithium.

The other potential UCR candidate, Manes, has said in various public events that the country needs to double-down on investments in science and technology, instead of only attracting investors due to low labor costs and raw materials. Manes has not mentioned nationalization as part of his plans for the lithium industry.

A win for the anti-establishment

Besides the Peronist-left and JxC-right blocs, the anti-establishment libertarian Milei appears to have consolidated his position as a third force nationwide ahead of the presidential elections.

Milei has said very little about his plans for the lithium industry, but his radical pro-market stance suggests his government would cut taxes on the industry and end state initiatives to industrialize it. Local analysts point out that Milei does not have a team of experts supporting him. He did not respond to Southern Pulse’s requests for comment.

Our analysis

Given the government’s high disapproval rating and poor polling figures, the baseline scenario is a victory for the opposition coalition in the presidential election. The major strength of the JxC bloc is its well-oiled political machine which goes from city counselors to four province governors.

However, a JxC victory is far from assured. The anti-establishment appeal of Milei has momentum and any announcements he makes regarding lithium should be noted. If most voters cast their ballots in anger, Milei is better positioned to be the heir of the social frustration. His chances at victory are based on the fact that recent Peronist and JxC administrations both failed to deliver economic growth to Argentines.

As for what this all means for lithium, the more centrist members of the government and opposition have similar positions on the metal’s development. Members of the JxC opposition, such as Larreta, Morales and Manes, have said Argentina should develop an industry for electric vehicles built on the back of the country’s lithium reserves. The Peronist Massa has a similar position. However, this cross-party consensus is rarely acknowledged so as to not alienate the more radical members of their coalitions, Martin Kalos of Argentine consultancy EPyCA told Southern Pulse.

There are outliers and wildcards among the candidates. If Kirchner were to run and win, a bigger role for the state could be expected. Conversely, a victory for Bullrich would see slashed regulations and no public investment in electric vehicles batteries anytime soon. Milei, who has said he agrees with Bullrich on most policy issues in the past, would likely take a similar approach.

As things stand, Argentina is likely to become more favorable to private-sector led lithium development in the next four years. Few of the candidates likely to run want the state to take a leading role in the industry’s development. Instead, what policy differences that exist largely center on whether the state should be promoting battery production, or letting the market decide where to invest.

Whether it’s Argentina or somewhere else in Latin America, Southern Pulse has the experience, network, and relationships to simplify this challenging region with honest, direct answers to your most complicated questions. Want to learn more? Let’s chat.

CC BY-ND