Mexico's President López Obrador nationalizes his country's lithium deposits

López Obrador continues the policy of nationalizing Mexico's energy resources. In doing so, he continues to pursue one of the most important political goals of his government: the power to dispose of the mineral resources should belong to the Mexican state and its people.

In his speech to the government decree of February 18, Mexican President Andrés Manuel López Obrador (also known as AMLO) said:

"Oil and lithium belong to the nation, they belong to the people of Mexico, they belong to everyone who lives in the Sonora region."

The president also designated 234,855 hectares in the northern state of Sonora, near the border with the United States, as a lithium reserve zone.

Mexico has a large lithium deposit. The material is indispensable for the production of batteries for electric vehicles and numerous technologies. According to information from the Sonora state government, 1.166 million tons of metallic lithium can be produced there from 8.83 million tons of lithium carbonate. The estimated value of the deposit is estimated at 600 billion US dollars – almost half of Mexico's annual gross domestic product.

A state-owned lithium company

A purpose-built state-owned lithium company called LitioMx is tasked with controlling geological surveys, extraction and processing of the mineral, while ensuring the greatest possible benefit to citizens. The Mexican Secretariat for Energy is also jointly responsible for the extensive reserves.

Basically, the same criteria are applied to the lithium issue as to Mexican oil: The state has the majority of shares and tries to transform the raw products into more valuable export goods through industrial processing. In the case of crude oil and now lithium, the state is said to own at least 54 percent of the shares, while foreign companies are relegated to second place with a maximum of 46 percent.

However, the president assured that private companies will certainly play their role, as the state-owned company LitioMx can join forces with private partners to meet the complex requirements. To what extent foreign capital and technologies are needed and could go beyond the planned scheme will only become apparent in development.

Model against exploitation

With this model, López Obrador opposes the exploitation of Mexico's natural resources by foreign corporations that have long imposed their interests on the country.

Similar strategies have been discussed in Latin America for decades, and practiced with varying degrees of success. Progressive governments, in particular, have long sought to counter the pure "extractivismo" of mineral resources with their own industrialization model based on local resources.

Already in April 2022, the Mexican parliament had cleared the way for a corresponding amendment to the law on the extraction of mineral resources. At that time, the head of state stated:

"Lithium is declared a non-profit organization, so no concessions, licenses, contracts or permits are granted in this regard. Those areas where there are lithium deposits are considered mining reserves."

AMLO is promoting plans to build a renewable energy industrial center in the state of Sonora, with the goal of boosting electric vehicle production in Mexico. They want to use the solar energy from the "Puerto Peñasco" project and the lithium produced in the state together to secure a good position in the field of environmentally friendly technologies.

Solar power for the production of lithium

The huge plant for solar cells in Puerto Peñasco / Sonora extends over 2,000 hectares in a desert-like plain. The state-owned electricity company CFE began a year ago with the construction of the photovoltaic power plant Phase I, with an installed capacity of 420 MW alternating current. In a first phase, 120 MW are to be delivered and in the second 300 MW. At the end of 2023, the plant should then be fully operational and have a thirty-year term.

About a dozen foreign companies now have active mining concessions in Mexico to develop potential lithium deposits. Now the President insists on legal review of all treaties, while respecting existing agreements.

In addition to these privately held concessions, four mining contracts are currently underway under the responsibility of the Mexican Geological Survey (SGM) to conduct exploration work as part of the Mexican government's strategy to maintain control of these deposits.

Chinese company largest lithium producer

However, only three companies have made progress in lithium production. Above all, the Chinese company Ganfeng Lithium, which produces and distributes the largest amount of lithium worldwide, and can contribute a lot of technical experience to the project. The other two lithium pioneers are the Canadian companies One World Lithium and Organimax Nutrient Corp.

The United States today is completely dependent on foreign markets for lithium carbonate and industrialized lithium. Although until before the pandemic 90 percent of its lithium imports came from Argentina and Chile, Mexico could now become a direct supplier to the U.S. due to its geographical proximity.

In addition, the new trade agreement (T-MEC) between the governments of Mexico, the United States and Canada indicates that lithium batteries are an "essential" component for the regional automotive industry.

Electric cars are only partially environmentally friendly

It should not go unmentioned that electric vehicles with lithium batteries are only environmentally friendly if natural energy sources (wind, water, solar radiation, geothermal energy, gas, etc.) are sufficiently available in a country to meet the electricity needs of the population as a whole. Large-format lithium batteries should be able to compensate for the volatility of wind and solar energy through their storage capacities and would perhaps be a necessary additional element in such systems. However, lithium production itself also causes environmental damage under certain geological conditions due to the mining methods, mainly due to extremely high water consumption.