Mining 2023

Last Updated December 28, 2022

Bolivia

Law and Practice

Authors



Dentons Guevara & Gutiérrez S.C. is a leading firm offering comprehensive legal services. Based on the accumulated experience of more than 35 years of practising law, the firm has brought together important professionals who have the knowledge, national and international experience, academic training, and the energy necessary to create an organisation that is deeply dedicated and committed to providing highly specialised services to its clients. Dentons is the only global law firm in Bolivia, which puts it in the unique position of being able to connect clients with the leading talent of all its lawyers, in 27 countries in Latin America and the Caribbean, and in 200 locations in 79 countries around the world.

Bolivia is a country with a vast mining tradition going back to before the Inca empire, and mining is at the core of the region’s history. The “Cerro Rico” (located in the silver-rich Potosi district) is a symbol of Bolivian mining and has been producing silver for more than 400 years. It continues to hold a huge silver deposit, with a total silver endowment (production + resources) estimated to be over 117,000 tonnes (3.7 billion ounces) of silver, as well as significant amounts of tin (over 820,000 tonnes) and zinc.

Bolivia also has rich potential in unexplored areas:

  • according to the Bolivian government, more than 60% of the national territory (1,098,581 km sq) is not mapped and/or explored;
  • the highlands and the Andes area have a well-known potential for base metals;
  • the Uyuni Salt Flats are among the world’s largest lithium deposits and are rich in non-metallic minerals, along with other smaller deposits; and
  • the eastern area of the country has the Mutun iron ore deposit, the Precambrian zone has potential for gold and the southeast of the country has potential for platinum-group metals (PGM), nickel and semi-precious stones.

Based on the country's civil law system, the Bolivian mining sector is regulated by the following main statutes.

  • Due to the importance of mineral resources, the Bolivian Constitution has a chapter dedicated to mining and metallurgy, which recognises the attributions the Bolivian State has to control throughout the mining production chain, including the conduct of activities under a mining contract, mining rights or pre-existing rights.
  • The Mining and Metallurgy Law (Law No 535 of 28 May 2014) regulates mining activities, establishing the principles, guidelines and procedures by which to grant, maintain and extinguish mining rights; it also establishes the institutional structure and the attributions of public authorities within the mining production chain, among other provisions.
  • Law No 845 dated 24 October 2016 modified the Mining and Metallurgy Law, creating a new type of mining contract – the “Mining Production Contract”. It also returned to the Bolivian State those areas in which mining co-operatives had mining contracts with national or foreign companies.
  • Law No 367 dated 1 May 2013 modifies the Bolivian Criminal Code, including new criminal definitions related to mining activities. This law punishes illegal entry and trespassing in mining areas, illegal mining activities and the illegal sale and purchase of mineral resources.

According to Article 349.I of the Bolivian Constitution, aboveground and underground resources are fully owned by the Bolivian people, so the Bolivian State is prohibited from transferring the ownership of these resources. However, the Bolivian State can authorise the exploration and exploitation thereof.

The Mining and Metallurgy Law provides that any mining activity must be executed under the new legal framework of administrative mining contracts. The existing Special Temporary Authorisations (Autorizaciones Transitorias Especiales – ATE), formerly known as “mining concessions”, must be converted into administrative mining contracts by the Jurisdictional Administrative Mining Authority. This type of contract does not require the participation of the Bolivian State through the mining corporation known as COMIBOL (owned by the Bolivian State).

The role of the Bolivian State in mining includes its participation as grantor-regulator and owner-operator.

As Grantor-Regulator

The Mining and Metallurgy Law created a new supervisory entity, the Autoridad Jurisdiccional Administrativa Minera (AJAM), whose role is to grant mining rights and to oversee and control every mining activity carried out in Bolivia, as well as the Mining Registry.

In addition, one of the main responsibilities of the AJAM is to draft and propose legislation to the executive power, in order to regulate the transition of the ATEs into administrative mining contracts.

As Owner-Operator

The Bolivian State incorporated and fully owns the Bolivian Mining Corporation (COMIBOL), which has been granted exclusivity over very large areas of mineral-rich lands for mining. However, many such areas are not currently being exploited by COMIBOL. In addition, the Bolivian State has incorporated YLB (Yacimientos de Litio Boliviano) and has granted this state-owned entity control of all Lithium-rich deposits.

If an area with potential is registered under the name of COMIBOL (or under the name of another state-owned mining company), then a mining association contract may be requested and entered into with such state-owned entity. This contract is similar to a joint venture agreement, highlighting that the contract must be executed under Bolivian laws.

The following entities also have influence over the Bolivian mining industry:

  • the Ministry of Mining and Metallurgy is responsible for the mining policy and designates the president of COMIBOL; and
  • the Bolivian Geological Mining Service (SERGEOMIN for its acronym in Spanish), a branch of the Ministry of Mining and Metallurgy, is responsible for the management of the mineral titles system. It also provides geological and technical information and maintains a geological library and a publications distribution centre donated by the United States Geological Survey. Tenement maps are also available from SERGEOMIN.

Mineral rights in Bolivia derive from contracts granted by the AJAM, as described in 1.6 Granting of Mineral Rights, and do not have the status of “property”.

Article 92 of the Mining and Metallurgy Law provides that mining rights grant their holders the exclusive authority to prospect, explore, exploit, concentrate, melt, refine, industrialise and commercialise mineral resources. However, Article 93 provides that such rights do not grant ownership or possession rights over mining areas, and that holders of mining rights are not able to grant leases over the mining areas. Mining rights cannot be directly transferred, sold or mortgaged.

In addition, Article 94 of the Mining and Metallurgy Law provides that the Plurinational State of Bolivia acknowledges and respects previously acquired rights of individual or joint title holders, private and mixed companies, as well as other forms of private property rights in relation to their corresponding ATEs, subject to the transition or compliance with the regime of administrative mining contracts. As a result, ATEs continue to be valid and recognised by Bolivian authorities for the exploration and exploitation of mineral areas.

Articles 95 and 102 of the Mining and Metallurgy Law provide that title holders have ownership over their investment, the mining production, movable and immovable property built on the land, and the equipment and machinery installed inside and outside of the perimeter of the mining area. The Bolivian State guarantees conditions of mining competitiveness and stability in the legal environment for the development of the mining industry.

Articles 97 and 99 of the Mining and Metallurgy Law provide that title holders have the right to receive profit or surpluses generated by their mining activity, subject to compliance with applicable tax laws, and that the State guarantees the rule of law over mining investments of title holders who are legally incorporated.

The Bolivian granting authority, the AJAM, is a national institution with jurisdiction and offices in all departments of Bolivia.

The Mining and Metallurgy Law regulates mining contracts in Title IV, Chapter I, and provides that the administrative mining contract is the legal instrument whereby the State grants mining rights to execute mining activities.

Pursuant to Articles 134 to 136 of the Mining and Metallurgy Law, administrative mining contracts must be formalised in a public deed legalised before a public notary from the jurisdiction where the mining area is located, and must be signed by the AJAM, as representative of the executive branch.

Mining Association Contracts with COMIBOL

If an area with potential is registered under the name of COMIBOL, or under the name of any other state-owned mining company, then a mining association contract must be entered into. A mining association contract requires a board that must have the same number of representatives for each party, but the chairman of the board will always be elected from the members representing the state-owned company. The Bolivian party is a free carry party that only contributes the mining areas to the contract and no other commitments, such as further investment, are required.

In addition to mining association contracts, local or foreign companies may execute mining production contracts if they wish to perform mining activities in mining areas under the administration of COMIBOL. In these contracts, COMIBOL’s participation is a percentage of the gross sale value of the mineral/concentrate which is negotiated with COMIBOL (the concept is similar to a royalty). Ownership is not mandated as a 45%/55% participation scheme of the mining association contracts.

Mining production contracts require investment schedules and a work plan. The maximum term of a mining production contract is 15 years, with the opportunity to renew for another 15 years. For enforceability, mining production contracts are required to be filed at the Mining Registry; once the contracts are executed, signatory parties are not able to transfer or assign their rights therein.

Term Length and Renewals

Articles 142 and 159 of the Mining and Metallurgy Law provide for different length and renewal requirements, depending on the title containing the mining rights. Administrative contracts – under which the mining operator may carry out prospecting, exploration, exploitation, commercialisation and industrialisation of mining – have a term length of 30 years from the time of their registration and may be renewed for an additional 30 years, but only if the mining operator demonstrates the need to continue the mining operation.

Prospecting or exploration licences, however, only have a term length of five years. Such licences may be renewed for an additional three years, but only if the mining operator demonstrates the need to continue the mining exploration.

Rights to Progress From Exploration to Mining

Under Article 156 of the Mining Law, the prospecting and exploration licence grants the mining operator the preferential right to enter into an administrative contract for the exploitation of the mining areas being explored or a part thereof. This right may be exercised individually by the licensee or jointly with a third party.

According to the Regulation for Granting and Termination of Mining Rights, approved by Ministerial Resolution No 23/15 dated 30 January 2015, the process from exploration to mining starts with the filing of an application for the execution of an administrative contract for exploitation before the AJAM. This authority examines the validity of the prospecting and exploration licence and the fulfilment of the other requirements established by law for the execution of an administrative contract. If there are indigenous communities in the mining area, the AJAM must carry out a prior and informed consultation. Subsequently, the AJAM authorises the signing of the administrative contract and submits the contract to the Legislative Assembly (Asamblea Legislativa Plurinacional) for approval and registration in the Mining Registry.

Maintenance Requirements

According to Article 144 of the Mining and Metallurgy Law, to hold the rights granted by mining administrative contract, the titleholder must comply with two requirements:

  • pay the annual mining tax (patente), according to the scale detailed in Article 230 of the Mining and Metallurgy Law; and
  • explore and/or exploit the area granted as per the plan presented to the AJAM (mining areas granted by the Bolivian State cannot remain without carrying any activity for more than six months).

Revocation

Pursuant to the Bolivian Mining Law, mining rights (current ATEs or future administrative contracts) may be revoked by the AJAM to the extent one of the following is evidenced:

  • failure to pay the yearly mining tax right (patente minera);
  • suspension of mining activities (or failure to initiate mining activities) for one year;
  • failure to deliver the activity reports on two consecutive occasions; or
  • developing exploitation activities on exploration licences.

A resolution from the AJAM in relation to the revocation of the mining rights may be subject to administrative recourse and appeal before the Ministry of Mining, and may be subject to review by the Bolivian Supreme Court.

Operating Control, Marketing and Transferability

Under the Mining and Metallurgy Law, it is mandatory for holders of mining rights to control and manage such rights themselves. Pursuant to Article 136 of the Mining and Metallurgy Law, the mining operators may not transfer or assign their rights and obligations arising from administrative contracts or prospecting and exploration licences. However, the Mining and Metallurgy Law does not prohibit the transfer of shares of mining companies operating in Bolivia. In this case, there would be an indirect transfer of the administrative contract, obligations and liability of the entire mining project.

Mining activities are regulated by the Environmental Law (Law No 1333 of 1992), the Mining Code (Law No 535 of 2014) and more specifically by the Environmental Regulations for Mining Activities (Supreme Decree No 24782 of 1997).

The Environmental Law requires mining companies to have an environmental licence to perform their operations. At the same time, this environmental licence is connected with several environmental studies that must be followed.

The requirements differ depending on the kind of mining activity being undertaken.

Prospecting and exploration activities are exempt from filing an Environmental Baseline Audit (an audit used to determine the situation of a territory prior to the execution of mining activities) and an Environmental Impact Assessment Study (a study used to analyse the environmental impact of a certain activity). An environmental licence may be granted by the departmental government (Bolivia has nine departments) after the applicant files a description of the extent and impact of the prospecting and exploration activities.

For the exploitation and/or processing of ore (milling), the environmental licence is granted by the Ministry of Environment and Water subject to a report from the Ministry of Mining and Metallurgy. In that case, both the Environmental Baseline Study and the Environmental Impact Assessment Study are required. The Environmental Impact Assessment Study must include archaeological, socio-economic, water, air and soil studies, in addition to a chapter dedicated to the recovery of the site.

A Licence for Hazardous Substances is also required alongside the environmental licence.

If the operation requires the use of explosives, the Ministry of Defence issues a licence to purchase and use explosive materials. Purchasing, transporting and using controlled substances (such as gasoline, diesel, sulfuric acid and other chemical elements linked to narcotics production) are subject to control from the Ministry of Government through the Direction of Controlled Substances, which must grant a permit for their use.

Municipal permits are also required for the construction of a minerals/metals processing plant.

Article 220 of the Mining and Metallurgy Law allows mining activities (prospecting, exploration and mining) to be carried out in environmentally protected areas if such activities do not go against the protection objectives of these areas.

Local governments have the authority to issue an environmental licence for exploration if this activity will be performed in an environmentally protected area.

For mining operations, the Ministry for Environment and Water is responsible for issuing the environmental licence in co-ordination with the Ministry of Mining and Metallurgy.

However, the granting of a new mining area in an environmentally protected area is highly unlikely.

Although it is not a common practice for the AJAM to grant new mining contracts over environmentally protected areas, state-owned mining areas (COMIBOL’s areas) and areas traditionally known for mining activities that overlap with protected areas can be mined under the exception of Article 220 of the Mining and Metallurgy Law.

Article 207 of the Bolivian Mining Law requires that all communities are consulted through appropriate procedures before any mining exploitation activity is undertaken. As a result, the mining company typically must reach an agreement with the local community prior to proceeding with the mining operations. Although the consultation procedure and an agreement with the community is not listed as a requirement for exploratory work, it is recommended and, in certain regions, required prior to obtaining the environmental permit.

In Bolivia, the majority of rural communities (where virtually all mining projects are structured) are considered to be indigenous communities, so most regulations regarding the requirement to have an agreement with and authorisation from local communities fall within the regulations set forth in 2.4 Prior and Informed Consultation on Mining Projects.

Previous consultation, as a formal requirement, is based on the Bolivian Constitution, the Indigenous and Tribal Peoples Convention of 1989 (“ILO Convention 169”), dated 27 June 1989, and the United Nations Declaration on the Rights of Indigenous Peoples, dated 13 September 2007.

As a result, prior consultation as a right is guaranteed, must be respected and must be performed by the State in good faith, including if the consultation is related to the exploitation of non-renewable natural resources in the territory of indigenous communities.

Following the same principles, Article 352 of the Bolivian Constitution is even more specific and establishes that the exploitation of natural resources will be subject to a procedure of public consultation before the affected community. “Public consultation” is understood as a free, informed and previous consultation process, conducted by the State, regarding the exploitation of natural resources in the territory of an indigenous community. This process must follow the regulations and procedures of the indigenous community.

In addition to their right to prior and informed consultation, indigenous communities that have formed an Autonomous Indigenous organisation (Autonomía Indígena Originaria Campesina) recognised by the State have the power to govern their territory according to their own norms, institutions and procedures. These powers are exercised within the framework of the Bolivian Constitution and the Law of Autonomies and Decentralisation (Law No 031 of 2010), among other domestic rules. As a result, such Autonomous Indigenous organisations are entitled to make additional requirements from potential mining projects, typically requiring the mining operator to enter into a Community Development Agreement, as described in 2.6 Community Development Agreement for Mining Projects.

It is a requirement to have a Community Development Agreement with the local communities, prior to initiating any substantial work on a mining property. The AJAM will require evidence of Community Development Agreement having been executed with the local communities. In addition, certain departmental/regional environmental authorities require the presentation of the agreements with the communities prior to issuing the requisite environmental licence.

There are several environmental and social regulations and requirements imposed on the mineral sector in Bolivia. An environmental licence, approved by the regional environmental authority, is required, as is a Community Development Agreement and authorisation from the communities.

No specific governance regulations or guidelines have been introduced for the mining sector in Bolivia.

Bad Example

A poor strategy in community relations can impact negatively on important mining projects in Bolivia, as evidenced by the international arbitration case brought by South American Silver Limited against the government of Bolivia (Arbitral Award PCA Case No 2013-15), after the AJAM revoked its mining rights. The Arbitral Tribunal in SAS v Bolivia stated the following regarding the importance of negotiation with indigenous communities to maintain mining rights: “505. (…) What is clear for the Tribunal in connection with the Project, is that the Company undertook certain community relations activities which led to unrest in the communities directly affected by the Project and which were questioned by its own advisors, and that, as the conflict ensued, the Company adopted a strategy that contributed to increase the divisions among the Indigenous Communities, the radicalisation of the opposition groups and the practical impossibility of seeking the consensus that its advisors warned would be necessary in order to operate in the region. The documents provided by Witness X render an account of an aggressive strategy that helped worsen the conflict and that is very far from the search for consensus or agreement, and which intended to show majority support and to weaken the Project’s objectors.”

This led the Arbitral Tribunal to consider that “Bolivia sought a dialogue, proposed solutions, attempted to reach an agreement with the community members, and finally issued the Reversion Decree in response to the general violence, the social conflict – which based on the evidence was neither simply temporary nor minor – making it clear that the risk existed that the conflict would continue for as long as CMMK remained in the region. Having established the existence of the conflict, as well as its severity and consequences, the Tribunal is unable to conclude that the measure adopted by Bolivia was unnecessary or disproportionate and, much less, to speculate without any evidence on other measures that could have been implemented to resolve the conflict.”

Good Example

In opposition, there are several successful mining projects in Bolivia that have had excellent environmental and community relationship management, resulting in continued lucrative mining operations. The most notable example may be the operation of the San Cristobal mine in Potosí, Bolivia, by a subsidiary of the Sumitomo Corporation. The San Cristobal mine ranks as one of the largest deposits of zinc, lead and silver in the world and its open-pit method of extraction makes it not only unique in Bolivia, but also the largest mining operation in Bolivia. The successful community relations with the communities of San Cristóbal, Culpina K, Vila Vila and Río Grande have permitted almost uninterrupted large-scale mining operations over the last 25 years.

The initiatives adopted by the Bolivian State determine greater control by society regarding compliance with environmental protection standards in the development of mining activities. In accordance with the principles established by the Bolivian “Patriotic Agenda 2025” in its pillar on “Environmental Sovereignty with Integral Development”, the Bolivian State is implementing policies to ensure the exploitation and industrialisation of minerals in a sustainable manner. The main policies include the right of any person, individual or collective to participate in environmental management processes and to denounce violations of regulations that affect the environment.

The Law of Mother Earth and Integral Development (Law No 300 of 15 October 2022) provides general principles for environmental protection. Pursuant to this law, the Bolivian State assumes responsibility for developing sustainable processes for mineral exploitation and industrialisation. However, sustainable processes for mining activities have not yet been implemented.

The Sectorial Plan for Integral Mining-Metallurgical Development 2016–2020, prepared by the Ministry of Mining and Metallurgy, recommends that mining operators incorporate clean technologies and good practices for solid, liquid and gaseous waste management, in accordance with national or international standards.

Considering that Bolivia has one of the largest lithium reserves in the world, the State has issued a series of regulations aimed at declaring the exploration, exploitation, industrialisation and commercialisation of lithium a national priority. According to the Law of Creation of National Public Company of Bolivian Lithium Deposits – YLB (Law No 928 of 27 April 2017), YLB is responsible for carrying out all activities in the lithium production chain. In compliance with environmental regulations, YLB has an environmental licence to operate in the lithium reserves in Bolivia.

There are three sources of income for the Bolivian State as a consequence of mining activities:

  • taxes;
  • mining royalties; and
  • mining tax rights (patente minera).

General Taxes

Value Added Tax (IVA) is equivalent to 13% of the sale or purchase value, and is recoverable through fiscal credit gained with the purchase of goods or services related to the operations of the company.

Transaction Tax (IT) is equivalent to 3% of every transaction.

Company Income Tax (IUE) is equivalent to 25% of the additional utilities generated by mining companies due to favourable conditions related to the price of minerals and metals.

Company Income Tax – Foreign Beneficiaries (IUE-BE) is equivalent to 12.5% of the amount of money sent to other countries.

When goods are exported, the GAC (Consolidated Customs Tax) must be paid. The GAC is composed of the IVA, IT and an additional percentage depending on the good that is imported.

RITEX is a system for temporary importing of goods where the GAC payment is not required.

Mining Royalty

This payment does not fall into the specific category of tax. However, it implies a burden on the mining producer and is assumed as part of the government’s take on mining activities.

The mining royalty is based on the gross sale value of minerals. It varies between 3% and 7%, depending on the mineral and on international market prices.

Mining Tax Right

A special mining tax is paid by mining titleholders to maintain their mining rights. This mining tax is paid annually, at approximately USD6 per hectare.

To boost the smelting and refinery of metals, Article 224 of the Mining and Metallurgy Law provides for a 40% discount off the mining royalty if the product is traded locally or to international markets as a metal bar.

The Bolivian government has been discussing granting incentives to local and foreign companies engaged in mining exploration.

Mining rights cannot be directly transferred or sold. As a result, the transfer of a mining project must occur through the transfer of shares (either locally or abroad). The transfer of shares in a Bolivian company is exempt from Bolivian VAT or transfer taxes. The sale of shares in a Bolivian mining company may generate a capital gain that would be taxable as part of the corporate yearly income tax of the seller, to the extent the seller is subject to such a tax. Therefore, careful structuring of the transfer of a mining project must consider potential tax consequences.

The main features attracting investment in mining projects in Bolivia include:

  • the extensive and proven mineral reserves in different areas of the country;
  • a long mining tradition in several regions of the country;
  • no foreign exchange controls or limitations on the amount of capital, dividends or profits that can be transferred out of the country;
  • foreign companies may indirectly hold a 100% interest in Bolivian mining companies;
  • a stable and simple tax system with few and simple taxes that has been largely unchanged over the last 40 years; and
  • a stable currency exchange rate that has remained unchanged over the last 15 years.

Bolivia’s foreign investment regime is primarily contained in the Bolivian Constitution of 2009, the Investment Law 4 of April 2014 and the Bolivian Mining Code itself. In general, foreign persons and companies are allowed to own and operate mining operations, with very few limitations.

Restrictions on Foreign Investment

Pursuant to the Bolivian Constitution, foreign persons and companies are not allowed to directly or indirectly hold any property (including mining rights) within 50 km of Bolivia's international borders. In addition, pursuant to Article 151 of the Mining and Metallurgy Law, Mining Co-operatives (a special type of association supposedly owned and managed by the workers themselves) are expressly prohibited from entering into joint venture contracts with private companies, whether domestic or foreign.

Over the past decade, Bolivia denounced and withdrew from all its Bilateral Investment Treaties, and also from the ICSID international investment dispute resolution mechanism. However, it has remained a full member of the Andean Community (with Colombia, Ecuador and Peru) and has become an associate member of the Mercosur multilateral trade and co-operation agreements (with Brazil, Argentina, Paraguay and Uruguay). Although such multilateral agreements do not refer investment disputes to international arbitration, they do set forth some principles that protect and grant foreign investors at least the same rights as local investors in mining projects.

According to studies conducted by the Central Bank of Bolivia from 1990 to 2017, private investment is the main source of financing for metal production. This sector reached 77% of total lead production, 70% of zinc production and 68% in silver production. Another important sector is the mining co-operatives, financed with a special fund created by the state (Fondo de Financiamiento para la Minería – FOFIM), which reached 31% of total silver production.

The Bolivian securities market has not been used for the financing of mining projects, and no Bolivian mining companies are currently traded on it. However, there are tax benefits to using the Bolivian Stock Exchange as it will exempt any capital gains resulting from the sale of stock through the Bolivian stock exchange of any Bolivian listed companies.

Foreign security markets, however, have been used quite successfully in the past for the financing of exploration, development and mining projects in Bolivia. This is expected to grow as a trend in the next couple of years, with many projects currently being developed so as to be able to be listed on foreign exchanges.

As discussed in 1.5 Nature of Mineral Rights, Article 93 of the Mining and Metallurgy Law provides that mining rights do not grant ownership or possession rights over mining areas, and holders of mining rights are not able to grant leases or mortgages over the rights over the mining areas. This means the administrative mining contract with the Bolivian government or the exploration licence may not be security themselves.

However, Articles 95 and 102 of the Mining and Metallurgy Law provide that title holders have ownership over their investment, the mining production, movable and immovable property built on the land, and the equipment and machinery installed inside and outside of the perimeter of the mining area. As a result, mining operators may grant such property (ie, mining production, equipment and machinery) as collateral and security for any financing.

In addition, there is no limitation on pledging as security the entirety of the shares that the investor may hold in the mining companies that have been granted and legally hold the mining rights (licences or administrative contracts).

The Bolivian Minister of Mines, Ing. Ramiro Villavicencio, has repeatedly stated that the current government’s intention is for the Bolivian mining sector to expand and grow, and that it is looking toward foreign direct investment in order to carry forward sustainable world-class mining exploration and exploitation projects. As a result, the Minister has called on the Executive President of COMIBOL (the Bolivian state-owned mining corporation that holds mining rights to large areas of interest) and other state institutions to partner with foreign investors that can inject the necessary investment, technology and know-how for the development of large new mining projects.

In parallel, YLB (the Bolivian state-owned lithium company) has called for proposals for the implementation of lithium extraction and processing plants in Bolivia's most important reserves, including the Uyuni Salt Flats, the Coipasa Salt Flats and the Pastos Grandes Salt Flats. Six international companies have presented preliminary projects for the development, financing, operation and transfer of such lithium production plants. The Bolivian government is expected to announce that it has reached an agreement with one or more of these foreign companies for such projects within the next few months.

As a result, many important opportunities are currently being developed that could well generate several interesting new mining projects, both in the traditional mining sectors of Bolivia, such as silver, tin, lead and zinc, and in new non-traditional mining sectors, including lithium, uranium and other rare-earth minerals.

Dentons Guevara & Gutiérrez S.C.

Calle 15 Calacoto
Torre Ketal Of 402
La Paz
Bolivia

+591 2 2770808

+591 2 2796462

Jorge.inchauste@dentons.com www.Dentons.bo
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Dentons Guevara & Gutiérrez S.C. is a leading firm offering comprehensive legal services. Based on the accumulated experience of more than 35 years of practising law, the firm has brought together important professionals who have the knowledge, national and international experience, academic training, and the energy necessary to create an organisation that is deeply dedicated and committed to providing highly specialised services to its clients. Dentons is the only global law firm in Bolivia, which puts it in the unique position of being able to connect clients with the leading talent of all its lawyers, in 27 countries in Latin America and the Caribbean, and in 200 locations in 79 countries around the world.

The Difficulties of Getting the Goose to Lay the Lithium Eggs

There is no doubt, in anybody’s mind, that Bolivia has the world’s largest lithium reserves (around 21 million metric tons). However, the question in everybody’s mind is: is Bolivia ever going to be able to exploit those reserves?

What prompts the question is Bolivia’s history regarding its lithium riches. To cut a long story short, in the 1980s the country had the opportunity to enter into a contract with a company that had the technology, as well as the know-how, to develop the reserves, within the limits imposed by the international market prevalent at that time. That contract would have allowed Bolivia to be one of the first incomers to the market and, given the size of its reserves, to be a dominant player therein.

The negotiations to enter into the contract were terminated by a new administration arguing insurmountable political problems, dating from the time of the Spanish exploitation of Bolivia’s mining resources. The story behind the problems is always the same: the resources are exploited by foreigners, who profit greatly from that exploitation, while the local communities provide the necessary manpower and, in the end, are left just as poor as when the resources were discovered. It must be said that there is considerably more than a grain of truth to that oversimplified statement.

In this case, the local communities made their voices heard and their demands rendered the project unfeasible. The new administration must have evaluated the pros and cons of imposing the contract upon those communities, and must have decided that the difficulties outweighed the political and economic benefits. It is important to point out that, at that time, lithium and its global market were neither as important nor as large as they are now.

Almost 40 years later and given the new international circumstances, Bolivia’s government decided to try to develop the lithium reserves. The political problems had not changed; the local communities still harboured the same complaints and held the same historical grudges. Faced with this scenario, the government decided to address the political problems with a new exploitation paradigm.

This time, the state would retain control of the exploitation and marketing process. A government-controlled company would be in charge of developing the necessary technology and coming up with the necessary know-how. Funds would be provided by the National Treasury. If it became necessary to resort to foreign companies, these would have to enter into contracts with the government-owned company, which would be the controlling party therein.

Furthermore, if foreign companies were to be involved in the project, their mandate would include a requirement that electric cars be manufactured in Bolivia. Of course, no company ever decided to take up the government’s offer. Later, the requirements were lowered, so that the foreign companies would only be required to produce lithium batteries, with the same result: no company was interested.

The outcome, thus far, is a familiar one. Several years and many hundreds of millions of dollars later, the state-owned company has barely managed to export around USD50 million worth of lithium (during the same period, Chile exported close to one hundred times that amount, with a smaller investment). Only the basic commodity has been produced. Not a single electric vehicle or battery has been exported. In the process, two contracts entered into with Chinese and German companies had to be terminated unilaterally by the Bolivian state as a result of social unrest in the lithium producing regions.

In light of the meagre results achieved, the current administration decided to try, once again, to attract foreign investment, technology and know-how. It launched a call for bids, which resulted in proposals filed by Russian, Chinese and US companies. The usual terms of government control, very large government take and regional say on the project have been somewhat tempered, but it remains to be seen whether they will have been sufficiently tempered to actually result in a contract or contracts being executed.

In addition, it is unclear whether the current administration has taken into account the very different strategic approaches guiding each company’s proposal, resulting from the different geopolitical policy of each one of those countries. It could be, for example, that the Russian company might be willing to accept terms that would otherwise be unacceptable, primarily to deny other countries access to the largest lithium reserves. Likewise, the Chinese companies might be considering the possibility of having access to those reserves in order to extend China’s control over the world lithium market even further (it is already the largest producer), an objective that probably does not require the full development of the production potential in Bolivia.

One additional and final observation would seem to be particularly pertinent in this case. While Bolivia struggles to get its lithium industry off the ground, other neighbouring countries are already investing and developing next generation technologies – namely, green hydrogen. Hence the question: is the lithium goose ever going to be able to lay its lithium eggs in Bolivia?

Dentons Guevara & Gutiérrez S.C.

Calle 15 Calacoto
Torre Ketal Of 402
La Paz
Bolivia

+591 2 2770808

+591 2 2796462

Jorge.inchauste@dentons.com www.Dentons.bo
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Law and Practice

Authors



Dentons Guevara & Gutiérrez S.C. is a leading firm offering comprehensive legal services. Based on the accumulated experience of more than 35 years of practising law, the firm has brought together important professionals who have the knowledge, national and international experience, academic training, and the energy necessary to create an organisation that is deeply dedicated and committed to providing highly specialised services to its clients. Dentons is the only global law firm in Bolivia, which puts it in the unique position of being able to connect clients with the leading talent of all its lawyers, in 27 countries in Latin America and the Caribbean, and in 200 locations in 79 countries around the world.

Trends and Developments

Authors



Dentons Guevara & Gutiérrez S.C. is a leading firm offering comprehensive legal services. Based on the accumulated experience of more than 35 years of practising law, the firm has brought together important professionals who have the knowledge, national and international experience, academic training, and the energy necessary to create an organisation that is deeply dedicated and committed to providing highly specialised services to its clients. Dentons is the only global law firm in Bolivia, which puts it in the unique position of being able to connect clients with the leading talent of all its lawyers, in 27 countries in Latin America and the Caribbean, and in 200 locations in 79 countries around the world.

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