33 The Economics of Lithium Mining Avoiding Economic Pitfalls Argentina needs to be careful to avoid the pitfall many resource-rich countries fall into—the resource curse. A resource curse, or resource trap, is defined as “a paradoxical situation in which countries with an abundance of nonrenewable natural resources experience stagnant economic growth or even economic contraction.” Countries rich with certain resources get trapped when they focus their means of production toward mining efforts on a single resource (Fernando, 2020). Argentina needs to take preemptive steps to ensure that their economy is diverse and to avoid overdependance on lithium production and sales. Lithium mining growth is uncertain, so Argentina should be cautious to not be entirely dependent on future lithium prospects. As countries across the world divert their interests into renewable resources, they also invest more into research and development of related technologies. This means researchers are looking into, or already have found, alternatives to lithium-ion battery storage. Despite Tesla and GM’s dependance on lithium-ion batteries, some billionaire investors and venture capital firms have already begun investing in competing technologies like flow batteries (Connor, 2019). If big manufacturing companies were to decide that an alternative would better serve their needs, the expected growth in demand would be decimated; consequently, lithium prices would decline compared to current predictions. Hence, Argentina should be careful with their dependance on lithium as long-term trends in prices are not reliable. An aspect Argentina needs to be careful with is the crowding out of manufacturing. Currently, the lithium extracted in the country is transported to other countries that have the manufacturing capabilities and resources to carry out the task. The Argentine government should make significant efforts to provide incentives to private national and international companies inmanufacturing products dependent on lithium within Argentina. These products can include electric vehicles, appliances, and other products in addition to lithium-ion batteries themselves. Government efforts to promote such manufacturing can lead to a more diverse economy (Pettinger, n.d.). In fact, some local provincial governments already realize this and have taken steps to mobilize toward the future. Notably, the government of Jujuy, a province currently producing lithium, has partnered with the Italian electronics group SERI to build a local battery assembly plant (Gutman, 2019). Other provincial governments should follow suit with similar efforts. Political stability in any given country is essential for foreign direct investment (Pettinger, 2008). Argentina’s frequent leadership change and resulting political instability work to hurt the confidence of foreign investors. The nation could economically miss out on lithium-related mass production because of a lack of foreign investment resulting from their unstable government politics. Hence, it is imperative that the Argentine government seek stability to fully extract the economic possibilities lithium mining can offer. It is essential to ensure growth in local economies around lithium mines, including employment opportunities with increment in mining activities. According to a report presented by the national and provincial governments, in the town of Olaroz, located in the Jujuy province, only 162 people (42%) working in the Sales de Jujuy company come from local communities (Gutman, 2019). This level suggests that local communities are not fully benefitting from lithium mining efforts on their land. Furthermore, out of 18 companies involved in lithium mining in Argentina, including those that currently are conducting only explorative projects, none is wholly owned by Argentine investors, suggesting that foreign companies are bringing their own personnel to conduct business while the local population does not enjoy any gains from mining efforts (Secretaría de Energía, 2019). Lithium Is Not White Gold Despite the promising prospects lithium offers and its reputation as the modern century’s “white gold,” it might not be as lucrative as many believe. Even though projections anticipate an explosive growth in demand, and consequently in prices, lithium prices have been decreasing over the past few years, and by more
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