Bolivian President Luis Arce's biggest opponent currently comes from his own political party. Arce's predecessor, Evo Morales, who was in power from 2006 to 2019, is making life difficult for the socialist government and has repeatedly publicly questioned his former economy minister.

Now a major contract for raw material rights has come at just the right time for the current leader. The contract is indeed impressive, and the hope is that it can help solve Bolivia's ongoing economic crisis in the medium term.

According to official information, Russia's Uranium One Group plans to invest around $450 million (€405 million) in a pilot project for lithium production in the South American country.

Geologists assume Bolivia has the potential to find 23 million tons of lithium. This would make it the country with the largest reserves in the world, an important fact when considering how important the metal is for making batteries for things like electric cars.

Bolivia set to launch lithium pilot project in Potosi

For Bolivia, the agreement is more than a mining contract. After years of political squabbles — where Morales and Arce each played their part — the country is trying to present itself as a reliable partner.

Karla Calderon, president of the Bolivian state-owned lithium company YLB, outlined the project, which will be carried out in "Colcha K" in the Potosi Department in three phases.

In the first phase, the goal is to produce 1,000 tons of lithium carbonate per year, in the second phase up to 8,000 tons and a further 5,000 tons in phase three.

The focus will be on production that is as environmentally friendly as possible. This project will be used to carry out studies to demonstrate the technical sustainability of this future facility, said Calderon.

The contract is the second agreement signed with the subsidiary of the Russian state-owned company Rosatom. In June, the contracting parties agreed to build a lithium carbonate industrial complex in Pastos Grandes.

Bolivia's preference is for China and Russia

"The competition for lithium is tough," said Vladimir Rouvinski, an expert on Latin America-Russia relations at Icesi University in Colombia.

"It seems that strategic alliances are being forged that suit the current governments. The Bolivian government is showing a preference for Chinese and Russian companies," Rouvinski told DW.

"Ultimately, however, these alliances are short-lived because the logic of economics is that economic interests take precedence over temporary affinities."

China has also been able to get its foot in the door in the country with the world's largest lithium reserves. Under the leadership of the Chinese group Contemporary Amperex Technology, CATL, Chinese partners want to invest a total of $1.4 billion in the construction of lithium extraction plants.

President Arce has, however, left the door open to partners outside of Russia and China. "Our visits to the European Union, Brazil and the BRICS countries have clearly shown that there is great interest in our lithium," he said recently.

Arce knows Bolivia could be making quicker progress in the extraction of its lithium deposits, but warns against moving too fast. "The old saying applies that we go slowly because we are in a hurry," he said.

South American strategic raw materials

Lithium is needed to build batteries for electric vehicles, and the metal is therefore of strategic importance for the transformation away from fossil fuels for cars and toward electric-powered vehicles.

Five years ago, Germany was considered the nation that had the biggest advantage in Bolivia. A joint venture between Berlin and La Paz was supposed to be the starting signal for lithium production, and hopes were high in Germany and its important car manufacturing industry.

But then domestic political turmoil in Bolivia followed. The joint venture project became a polarizing election campaign issue and an instrument of a wider domestic power struggle.

The project has since died, and Germany is currently looking to Argentina and Chile, which also have large lithium deposits. To underline this, a deal with Chile was recently upgraded to a free-trade agreement that should ease joint lithium projects.

This article was originally written in German.