Analysis of the impact of the National Lithium Strategy on foreign investments and on expansion potential of the Chilean lithium industry
SONAR|HES-SO
- Christe, Maxime
- Aliyev, Nazim (Degree supervisor)
- Genève : Haute école de gestion de Genève
87 p.
Bachelor of Science HES-SO in International Business Management: Haute école de gestion de Genève, 2024
English
On April 26, 2023, Chile introduced a roadmap to develop its vast lithium reserves, aiming to capitalise on the increasing demand driven by the growth in electromobility and energy storage markets. This thesis seeks, to answer the following research question: “How does Chile's National Lithium Strategy impact the sector's attractiveness for Foreign Direct Investments and its potential for expansion amid the global shift towards electromobility and energy storage?”
From the analysis of the Chilean lithium model, the author highlights several factors that contribute to its appeal for foreign investors. The National Lithium Strategy aimed to attract investment and capabilities from the private actors through public-private partnership or Special Lithium Operating Contracts, gives the government more control over the national mineral without deterring private investors’ attractiveness.
While the legal framework surrounding lithium is somewhat unclear, and partnering with state-owned companies reduces decision-making power, the country provides a level of economic, political, and legal security that fosters trust among private companies considering investment. Furthermore, by engaging in Chilean lithium, private companies get access to some of the highest quality brines and to a wide network of FTA which increases downstream opportunities. In fact, Western companies could reduce reliance on China, meanwhile Chinese companies could expand their dominance in the lithium supply chain.
To complete this research the author recommends conducting a financial evaluation of various projects and assessing which concessions and trade-offs are worth making to develop successful operations. Additionally, the author recommends lithium companies to invest in DLE projects. This technology, with capital intensity comparable to evaporation ponds, significantly reduces water usage and environmental impact. This aligns not only with the highest ESG standards imposed by the Chilean government and contributes to higher public acceptance for new lithium projects, but also has the potential to lower financing costs and improve companies’ corporate image.
The author is convinced that, if consequently implemented, the National Lithium Strategy can lead to sustainable industry growth which will ultimately lead to long-term benefits for both, investors, and the Chilean economy. To achieve it, efficient processes and clear contractual agreements must support the implementation to reduce mismanagement risks and ensure mutual understanding among stakeholders.
From the analysis of the Chilean lithium model, the author highlights several factors that contribute to its appeal for foreign investors. The National Lithium Strategy aimed to attract investment and capabilities from the private actors through public-private partnership or Special Lithium Operating Contracts, gives the government more control over the national mineral without deterring private investors’ attractiveness.
While the legal framework surrounding lithium is somewhat unclear, and partnering with state-owned companies reduces decision-making power, the country provides a level of economic, political, and legal security that fosters trust among private companies considering investment. Furthermore, by engaging in Chilean lithium, private companies get access to some of the highest quality brines and to a wide network of FTA which increases downstream opportunities. In fact, Western companies could reduce reliance on China, meanwhile Chinese companies could expand their dominance in the lithium supply chain.
To complete this research the author recommends conducting a financial evaluation of various projects and assessing which concessions and trade-offs are worth making to develop successful operations. Additionally, the author recommends lithium companies to invest in DLE projects. This technology, with capital intensity comparable to evaporation ponds, significantly reduces water usage and environmental impact. This aligns not only with the highest ESG standards imposed by the Chilean government and contributes to higher public acceptance for new lithium projects, but also has the potential to lower financing costs and improve companies’ corporate image.
The author is convinced that, if consequently implemented, the National Lithium Strategy can lead to sustainable industry growth which will ultimately lead to long-term benefits for both, investors, and the Chilean economy. To achieve it, efficient processes and clear contractual agreements must support the implementation to reduce mismanagement risks and ensure mutual understanding among stakeholders.
- Language
-
- English
- Classification
- Economics
- Notes
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- Haute école de gestion Genève
- International Business Management
- hesso:hegge
- Persistent URL
- https://sonar.ch/global/documents/330875
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