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IEEFA Latin America: In Asian Electric-Vehicle Boom, an Energy-Security Moment for Chile

August 25, 2017
Tim Buckley

[Editor’s note: This is an excerpt of an interview with Latin America Advisor.]

The Chilean government has identified seven companies that it wants to develop value-added lithium projects, state development agency CORFO (Production Development Corporation) said. Chile is part of South America’s “lithium triangle,” which contains more than half the known global reserves of the commodity. The short list is part of the government’s plan to diversify its exports. Chile currently must send lithium abroad in order for it to be developed into consumer goods. Is it a good idea for Chile to focus on producing value-added lithium products? Does the sector have the ability to become a bigger component of the country’s economy? Are the government policies in place sufficient to help the lithium sector grow?

Tim Buckley, Institute for Energy Economics and Financial Analysis:

Chile has an exciting opportunity to build exposure to one of the leading industries of the coming decades by leveraging its lithium ion reserves into downstream value-added industries. Global automotive consumers are rapidly and unexpectedly embracing the opportunities for zero emissions electric vehicles transport. This will not only dramatically reduce the public health costs of pollution but also enhance energy security through reduced reliance on imported oil, with all the economic advantages this entails.

IEEFA has no doubt that Chinese electric vehicle and lithium ion battery producers aim to be manufacturing and technology world leaders, both for their own burgeoning domestic auto market, but also increasingly for export. China’s Geely and BYD will no doubt challenge and match the rise of Tesla in delivering the mass market auto solutions of the coming decade.

India has this year set a target of 100 percent electric vehicles by 2030, and clearly also has in sight the self-manufacturing and opportunity to reduced oil imports that this requires. So with the three largest nations globally (China, India and the U.S.) all embracing this transformation, the convergence of technology innovation and battery storage plus deflationary economies of scale are combining to change all aspects of global energy markets.

This opens a major opportunity for Chile to be not only a key resource provider, but to add downstream processing domestically and build a high value manufacturing sector to capture more of the global investment and employment opportunities rapidly emerging.

The government should take the lead and set in place a strong plan to require downstream investment to ensure Chile gets maximum value from the opening up of a new economic sector for both domestic and export markets.

Tim Buckley is IEEFA’s director of energy finance studies, Australasia.

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Tim Buckley

Former Director Energy Finance Studies, Australasia, Tim Buckley has 25 years of financial markets experience, specializing in equity valuation, including as a top-rated analyst and as co-founder and managing director of Arkx Investment Management.

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