【SMM Analysis】Bolivia’s New Centrist President Sparks Cautious Hope for Lithium Sector

The election of centrist leader Rodrigo Paz as Bolivia’s president has ignited cautious optimism about the development of the country’s vast lithium resources. After decades of stalled efforts under socialist governments, the market-friendly leader could pave the way for international capital to enter the sector.

Despite holding one of the world’s largest reserves of lithium—a critical metal for electric vehicle batteries—Bolivia’s lithium industry has long been hampered by political resistance and a state-controlled mining policy. Lithium agreements signed by outgoing President Luis Arce with companies from allied nations such as China and Russia were blocked by Congress. President-elect Paz has pledged to review these contracts to ensure transparency, a move that could either unlock new opportunities or raise concerns among investors.

Notably, Paz’s campaign platform did not prioritize lithium development, focusing instead on poverty alleviation subsidies, decentralization of government, and private sector growth. Analysts suggest this approach aims to secure support from backers of former leftist President Evo Morales. Paz also vowed not to “sell off” the iconic Uyuni Salt Flat, a dazzling natural wonder regarded as a symbol of Bolivia’s sovereignty and Indigenous heritage. Although he has called for foreign investment to develop lithium resources in the Potosí region, Paz has yet to outline a concrete plan for exploiting the country’s 23 million tons of lithium reserves.

A key challenge for Paz will be whether to amend the current law stipulating that “only the state may extract lithium,” a regulation that has long deterred domestic and foreign investment. Any constitutional change would require a referendum or constitutional reform. Technical hurdles also remain, as traditional evaporation pond methods are inefficient due to high magnesium content in Bolivia’s lithium-rich brines, necessitating tailored extraction technologies.

According to data, state-owned lithium company YLB produced only 2,000 tons of lithium in 2023—the first year of operation of its inaugural plant—generating $15.6 million in revenue. In comparison, Chile, the world’s second-largest lithium producer, yielded over 200,000 tons that year, while Argentina produced 40,000 tons. Although Bolivia missed the lithium price peak of 2022, it may still capitalize on growing demand driven by electric vehicle sales and energy storage needs in the coming years.

Teague Egan, CEO of U.S. lithium firm Energy X, warned that annulling existing contracts would set a “dangerous precedent,” while Felipe de Mussy, an executive at Lilac Solutions, which previously lost a bid in Bolivia, indicated that his company would consider re-entering the market if the new government ensures regulatory stability.

The political transition in Bolivia also comes as former U.S. President Donald Trump advances a strategy on critical minerals, potentially opening a strategic window for U.S. engagement. U.S. Secretary of State Marco Rubio has already congratulated Paz and expressed willingness to promote bilateral investment cooperation.