Argentina was invited to participate in the first meeting of the Mineral Security Partnership, a strategic program created less than a year ago by the main global powers to guarantee the supply of what they call “critical minerals”, such as lithium.
Mining secretary Fernanda Ávila participated in the event to showcase Argentina’s potential. While the country is currently second in the global ranking of lithium resources, with double Chile and Australia’s, its reserves are only third worldwide, far from the main global producers.
The Economy Ministry led by Sergio Massa views this meeting as a US “nod” to improving trade relations with Argentina. The Biden administration will implement the Inflation Reduction Act, a historic US$400 billion plan, in which electromobility has its own chapter.
The IRA law subsidizes the purchase of electric vehicles, so there is the expectation that this could lead to an exponential jump in the country’s demand for lithium to supply the auto industry. However, subsidies will go to vehicle manufacturing that uses resources from the US, or any country they have free trade agreements with. This is a sticking point that could leave Argentina out of the deal, and that’s precisely the exception the US is trying to create with this approach.
The MSP initiative is a US-led collaboration of 13 global powers created in June of last year. In their first meeting last Thursday they decided to invite Argentina. “They could have invited a mining country like Chile, but they decided the Argentine government should participate,” said a government source as a way of stressing the importance of this meeting.
The MSP is formed by Australia, Canada, France, Germany, Japan, Finland, South Korea, Sweden, the UK, the US and the European Commission. During its creation at the world’s largest mining event, which was held last year in Canada, they stated that their goal was to achieve “supply chains for critical minerals”, as they project that demand will “significantly expand” in the next decades due to their essential use for clean energy.
The first meeting of the MSP was held online last Thursday. José Fernández, the US State Department’s Undersecretary of Economy, Energy and Environment, described the meeting as “productive” and said there were conversations about Argentina’s “potential projects” related to critical minerals.
According to a statement published on the Treasury Department website, the invitation to Argentina was intended to “advance the goals of the MSP” and discuss Argentina’s projects.
“This meeting allowed MSP partners and the private sector to get to know Argentina’s critical minerals sector as well as projects that could garner potential interest for investment and support. Engagements like these help promote the clean energy transition, further mobilizing resources towards diversifying mineral supply chains and advancing the Biden Administration’s priority of regional collaboration on securing responsible and sustainable minerals,” said the official release.
Mining Secretariat sources said that Ávila presented the sector’s potential to member nations as well as guest companies, which included mining and automotive corporations such as Stellantis, BMW, Tesla, General Motors, Panasonic, Rio Tinto and Lake Resources. While Argentina currently has only 2 operational lithium production projects, there are 6 others under construction. The last critical minerals report by the Wilson Center, a top US think tank, projected that in five years Argentina could top Chile in lithium production.
After the presentation, Ávila was asked about Argentina’s mining legal framework, tax incentives, and community liaisons. According to sources, there was no question regarding the lithium nationalization bills currently in Congress, but there was a question about access to dollars. Ávila answered that currency exchange restrictions are temporary due to balance of payment problems, and gave information about the legal “tool” that may be useful in such cases: Decree #234, a favorite these days, as it allows greater access to foreign currency for companies investing more than US$100 million.
Concerns around the dollar
According to official sources, the fact that the IRA is coming into effect at a time when Argentina doesn’t have a free trade agreement with the US does not mean that the country won’t be able to export anymore. However, it could result in Argentina losing its market share because it would be left out of the huge subsidies network. Because of this, it’s clear that they will look for a way to get Argentina to participate in the IRA. In fact, the US reached a special agreement with Japan on this subject. It will probably do the same soon with the EU, and then with Argentina.
What still remains unclear is how this bilateral agreement will come about. At the US Chamber of Commerce (Amcham) annual event, ambassador Marc Stanley showed there is political support for this initiative: “Argentina will continue to be the main lithium exporter for the US, we need to work on the IRA to make it applicable to Argentina”. In turn, the Argentine ambassador in the US Jorge Argüello replied that if “some issues are cleared out”, Argentine lithium exports could multiply by five or even seven.
Also, the analysis made on Thursday by both the public and private sectors is that the merger of giant lithium corporations Allkem (Australia) and Livent (US) —which will become one single company worth US$10.6 billion— means that Argentina’s entire current lithium production will be under one single US-based company. “They will not be left out of their own business, so if politics can’t unlock this one, the corporate lobby will,” said a top mining consultant.