Bottled Lightning

by Seth Fletcher

  Named after the great South American liberator Simón Bolívar, Bolivia is one of the poorest countries on the continent. Bolivia’s gross domestic product in 2009 was $45.11 billion, roughly the same as ExxonMobil’s profit the year before. Since gaining independence from the Spanish on August 6, 1825, the country has experienced some two hundred coups, countercoups, and other governmental spasms. Much of the country’s internal conflict comes from a geographical and ethnic divide between the western Andean highlands—home to the majority of the country’s 60 percent indigenous population—and the eastern lowlands, the Amazon basin territory where the citizens are predominantly white and mestizo. Among the indigenous people, 30 percent speak Quechua, the language of the Incas, while 25 percent—including the country’s president, Evo Morales—speak Aymara, the language of the people who ruled before the Incas took over around A.D. 1450.

  As Oscar Ballivian told me in the form of his joke about the divine folly of Bolivia’s creation, this is a nation of vast natural resources. Those resources, however, have historically been plundered by foreign interests without contributing anything to Bolivians. When the Spanish conquered the Incas, one of their first acts was to drain the rich veins of Andean Bolivia of their silver. They did so using enslaved natives, hundreds of thousands of whom died in the mines. The most notorious example is found in the Bolivian city of Potosí. Potosí sits beneath a mountain that is called Cerro Rico for its once staggeringly productive silver reserves. In the early seventeenth century it was one of the richest and most important cities in the western hemisphere, a place whose name was shorthand for unimaginable riches. When Paris and London were squalid middle-size cities whose main export was bubonic plague, Potosí was like Dubai, a desert city made of money. Now Potosí is a poor town in a desolate and forgotten corner of the world, a rough place where coca-chewing prepubescent children work every day chipping at the old mining tunnels that perforate Cerro Rico, looking for any shards of silver the colonial era left behind.

  Bolivia sits atop South America’s second largest natural gas reserves, after Venezuela, but so far it has failed to develop those resources, and the story of its failure to do so says plenty about the relationship of ordinary Bolivians to extractive resources. The seeds of the Bolivian “gas wars” were planted in 2002, when the president, Jorge Quiroga, an American-educated self-described yuppie, began considering a plan to build a $6 billion pipeline to send Bolivian natural gas to Chile, where it would be processed, liquefied, and sold to Mexico and the United States. Because it involved two of indigenous Bolivians’ least favorite countries—Chile and the United States—and because it would apparently deliver only a fraction of the true value of the gas to Bolivian interests, the plan was deeply unpopular.

  The gas pipeline was still being considered during the 2002 election, which was riven by social movements that would transform the country. A charismatic coca-grower’s union leader named Evo Morales, the presidential candidate for the Movement Toward Socialism (MAS) Party, was making a surprisingly strong showing against Gonzalo Sánchez de Lozada, or “Goni,” the former president and a staunch free-marketeer.

  The Bush administration was vocal about its distaste for Morales and the MAS, which was a mistake. Three days before the election, the American ambassador raised the possibility of cutting aid to Bolivia if Morales won, and the Morales vote immediately surged, putting him a close second to Lozada. (Morales took to calling the U.S. ambassador his “campaign manager.”) Lozada and Morales were forced into a runoff election. Lozada won, but barely, and the result was a fragile coalition government.

  Officially, Lozada remained undecided about the gas pipeline, but all the while he was pursuing the Chile plan. The public hadn’t forgotten about the pipeline. It had come to represent every bit of wealth that had been stolen from the country over the centuries. On the surface, the gas pipeline debate was about the share of profit that Bolivia would get, but it wasn’t just about gas. It was about the Bolivian government participating in DEA-led coca eradication and an expression of general angst amid poverty and ethnic tension.

  In 2003, strikes and protests led to brutal government crackdowns, and in a pivotal case in September, the military killed six Aymara villagers, among them an eight-year-old girl. The Bolivian Labor Union responded with a general strike that effectively shut the country down. Protestors blocked the highway from El Alto, the slum city of 750,000 mostly indigenous people on a plateau above La Paz, to the capital, choking off La Paz’s supply of food and gas. The military responded violently in El Alto, killing sixty-seven people and wounding four hundred.

  When Lozada’s vice president, Carlos Mesa, broke with the government to protest the use of excessive force in El Alto, Lozada’s government began to dissolve. On October 18, recognizing that he had lost control of the situation, Goni resigned and fled the country on a commercial flight to the United States, where he lives now, and from where the new Bolivian government has since tried unsuccessfully to extradite him.

  Carlos Mesa took over as president, and in 2005 the government passed a law raising taxes on hydrocarbon exports, but that didn’t appease the furious masses, and the protests flared again. In June 2005, Mesa resigned, and a temporary government took power until elections were held the following year. That was the election that brought Evo Morales to power.

  Morales was the country’s first indigenous leader. Upon taking office, he declared that five hundred years of resistance against colonialism had “not been in vain,” and predicted five hundred years of rule by the country’s indigenous majority. As part of his inauguration, Morales gave an offering to Pachamama, or Mother Earth, and then in a ceremony at a pre-Incan temple he donned a Sun Priest costume and accepted a gold-encrusted baton intended to signal that the indigenous people were, at last, retaking their country. On May 1, 2006, Morales announced full nationalization of Bolivia’s natural gas industry.

  Under Morales, relations with the United States deteriorated. Morales is, after all, a coca farmer who is fond of finishing speeches with the cry “Death to the Yankees.” Yet Morales’s death cry has a surprisingly nonthreatening ring to it. He is no Mahmoud Ahmadinejad. He’s not even close to being the most radical indigenous politician in Bolivia. Still, in 2008, the Morales government stopped cooperating with the U.S. Drug Enforcement Agency; that same year Morales expelled the U.S. ambassador to his country, Philip Goldberg, accusing him of supporting separatist movements in the eastern lowlands and saying that “the ambassador of the United States is conspiring against democracy and wants Bolivia to break apart.” The next day the United States retaliated, declaring the Bolivian ambassador, Gustavo Guzman, persona non grata.

  Around the same time, foreign businesses were lining up to woo Morales for a share of the Uyuni lithium reserves. Mitsubishi, Sumitomo, the Chinese government, and others have all approached the Bolivian government about its lithium reserves.

  Perhaps the most aggressive suitor has been the French industrialist Vincent Bolloré. In February 2009, Evo Morales traveled to Paris, where he was greeted by Nicolas Sarkozy, a good friend of Bolloré’s. Morales told executives at Bolloré that he expected any foreign company given access to the Salar de Uyuni to seed an electric-car industry in Bolivia. According to the Associated Press, Morales was “surprised” at the positive reaction he got from Bolloré’s executives.

  Nonetheless, Bolivia still appears determined to develop its lithium reserves on its own, even if it takes longer than it otherwise would, which it will. This is a matter of economic security and sovereignty, goes the Morales message. Enough exploitation. Enough sending raw materials straight out of the country with only a few centavos left behind for the people of this country. What Morales wants is to first develop natural resources inside of Bolivia, in Bolivian-owned plants using Bolivian labor, and then export the value-added products at a fair market price. Bolivia’s vice president, Garcia Linera, says this approach to business isn’t communism or socialism: it’s “An
dean capitalism.”

  The man Morales put in charge of the scientific committee that oversees the Bolivian lithium initiative is Guillermo Roelants du Vivier, a fifty-something Belgian who’s lived in Bolivia since 1981. Roelants is a controversial figure in Bolivia. An engineer by training, he says he first came to Bolivia as a volunteer, working with quinoa farmers to improve the quality of their crops and to get them better prices. Within a few years he had formed Tierra, a boric acid company that extracts boron from a salar on a fifteen-thousand-foot plateau near the Chilean border. Tierra was billed as an antipoverty program of sorts—a for-profit company whose profits are all designed to “go back into the community.”

  In 2003, however, Tierra found itself in the middle of a firestorm. Government agents raided the company and accused it of diverting sulfuric acid—which, because it’s used in the production of cocaine, is a controlled substance in Bolivia—to the coca-growing Chapare region in the east. The case drew international attention for its sheer sketchiness. Tierra had been recognized by the United Nations as an exemplary poverty-elimination project. Tierra’s employees claimed that the whole operation was the work of foreign companies who wanted to eliminate the competition. Three years after the raid, Roelants and three other Tierra executives were given long prison sentences; Roelants got twelve years, and the government confiscated Tierra. The company’s employees descended upon La Paz and protested Roelants’s sentence for months on end. Eventually, Roelants was released, Tierra was handed back over, and things gradually returned to normal.

  Then in 2008 Morales made Roelants his point man on the lithium project. “President Morales asked me to give him some advice on what to do with Uyuni, because there were not any projects in twenty-five years in Uyuni,” Roelants said. “I presented him with a project for a pilot plant for lithium and for potassium, and he asked me immediately to do some design on that plant. Three months later we met again, and the government approved this project.”

  Now, as a white foreigner in charge of a much-hyped mining project in a country that is extraordinarily sensitive about the treatment of its natural resources, Roelants is a lightning rod. He’s been accused of intentionally delaying the lithium project for personal gain, to better exploit concessions he has for lithium and borax in other salars. When articles appear denouncing him, which is often, the online comments on the websites of newspapers like El Potosí fill with screeds calling him a drug trafficker (a reference to the Tierra incident) or the Belgian “Rasputin.”

  One afternoon in La Paz, I met Roelants at a café near his office. A harried-looking, casually dressed white-haired man, Roelants walked into the café and slunk into a booth, practically yelling into his BlackBerry in Spanish about lithium and potassium concentrations in some recent analysis of salmuera. He sounded pleased with the results of the tests, but he couldn’t have been having a great day. That morning in La Razón, a newspaper generally considered to be friendly to the Morales administration, a columnist lambasted the government for its continuing failure to develop the Salar de Uyuni’s mineral reserves. A few pages later another story made it clear that Bolloré was putting serious pressure on the Bolivian government to accept its proposal for exploiting the Uyuni lithium deposits.

  This was on top of several months of delays at the pilot plant and the recent collapse of a plan to create a new, quicker-moving agency called Empresa Boliviana de Recursos Evaporíticos, or EBRE, to deal with all evaporative minerals. Just weeks earlier, that plan had fallen victim to parochial politics. It was regional election time, and politicians in Potosí, Uyuni, and elsewhere were upset that the seat of this new agency would be based in La Paz. In traditional Bolivian fashion, local unions threatened to strike if the agency was based in La Paz, and the government responded by putting the plan “on hold,” as Roelants put it. Many observers of the lithium project saw the plan’s failure as the latest sign of governmental ineptitude. According to the South American business publication Business News Americas, “Bolivian President Evo Morales’ decision to withdraw Supreme Decree 444, which would have created state evaporitic resources company EBRE and put it in charge of developing the country’s lithium industry and other evaporable resources, is an indication that the government still does not have enough experience to handle projects of this size.”

  Roelants had warned me before our meeting that he could talk only about technical matters—nothing political—but in Bolivia it’s difficult to separate the two. After we ordered coffee, I asked him how lithium fits into Bolivia’s complicated centuries-long history as a mineral-producing country. He responded with a grimace. “Well, first of all it’s better to speak about evaporatives than only lithium,” he said. “The Salar de Uyuni has a lot more potassium, magnesium, boron than lithium. Lithium is the new fashion, but economically speaking, for us potassium and potassium chloride is more important than lithium carbonate. Why is that? The price of potassium chloride is about $500 a ton, and lithium chloride is about $6,000 a ton. But the volume of potassium is about twenty-five times higher in Uyuni than lithium. And the cost of making potassium is very low. Through a relatively simple plant you can achieve acceptable commercial quality of potassium chloride. So the cost is low, the price is acceptable, the volume is huge, and the demand is huge—in Brazil, in Venezuela, in Colombia, and of course in other countries.” In Roelants’s emphasis on potassium, some Bolivians detect ulterior motives: If the future is going to run on lithium, why is the foreigner in charge of developing our world-beating stash of the mineral downplaying its importance? What is the angle here?

  Roelants seems fatigued by the constant attention paid to this project, and he is quick to manage expectations. The evaporatives business, lithium and potassium combined, is “huge,” he said, “but it will not change the Bolivian state. For instance, hydrocarbons will be for many years more important for Bolivia.”

  He might be so quick to downplay the project because of the incredible controversy that it, and his involvement in it, has generated. Two weeks earlier, the villagers who live near the San Cristóbal mines—an enormous silver, lead, and zinc operation, owned by the Japanese trading house Sumitomo, that happens to be a short drive from the government’s lithium pilot plant—had staged a good old-fashioned Bolivian resource protest. Primarily they were protesting the mine’s exorbitant water usage—more than six hundred liters of water a second, which would go a long way toward hydrating human beings in the high-altitude semidesert. But there was more to it than that. The mine uses too much water, doesn’t pay taxes on its water usage, and, according to the protesters, Sumitomo hadn’t delivered on its promises to build infrastructure for the citizens of the region. Those citizens responded by seizing eighty loads of ore, shutting down the railroad that connects the mine to the Chilean coast, and threatening to burn down the mine office in the Bolivia-Chile border town of Avaroa. The protest occurred at an embarrassing moment, during the World People’s Congress on Climate Change in Cochabamba, a marquee event that drew press and delegates from around the world and provided a bright international spotlight moment for Morales. The government took its time responding to the protesters’ demands, in part, some suggested, because one of the protesters’ twelve demands was a sensitive one: that Guillermo Roelants be expelled from the country.

  Roelants told me that Bolivia will have to play a limited role even in a global lithium market vastly larger than the 120,000 tons of lithium carbonate equivalent shipped each year. “Bolivia will not be able to sell more than 30 percent of the world market,” he said. “If they do more than that, they will drop the price down immediately, and you’ll have wars on lithium prices, and that’s not ideal.” The current plan is for the country’s industrial-scale plant, which is scheduled to go online in 2014, to produce 30,000 tons per year of lithium carbonate and 700,000 tons of potassium.

  Lithium-demand forecasts get hazy starting in 2014. In early 2010, the most current forecast predicted that consumption would increase to 147,000 ton
s of lithium carbonate equivalent per year in 2013, and that there was “significant potential for increased demand from the mid-2010s as the electric-vehicle rollout gains momentum.” In other words, 2014 is the year beyond which no one really has any idea what is going to happen, except that demand is going to increase by some percentage. Everything depends on how quickly lithium-ion-powered electrified cars catch on. If electric vehicles reach a 5 percent adoption rate by 2020, according to the British research firm Roskill, whose statistics industry insiders take the most seriously, existing lithium-production capacity won’t be able to keep up with the new demand. Under that scenario, in 2020 the automotive battery market will soak up 60,000 tons of lithium carbonate, up from essentially zero in 2009.

  New production wouldn’t necessarily require new mines, however, and it doesn’t mean that the rise of the electric car is contingent upon the success of the Bolivian lithium initiative. As Keith Evans said at the Lithium Supply and Markets conference in Las Vegas three months earlier, “Large-scale EVs are not dependent on development of the Salar de Uyuni. That is the story that the press has got hold of and repeated and repeated and repeated.”

  Just as the members of the lithium Oligopoly like to scare off potential competition by boasting about the vast resources they’re already sitting on, the Bolivians also like to haul out dubiously large numbers. While the official U.S. Geological Survey estimates say that the Salar de Uyuni contains some nine million tons of lithium carbonate equivalent, Roelants told me that the number is much higher—more like one hundred million tons.