07/19/2022: The growing demand for scarce minerals has generated interest for the Bolivian Government, specifically because of its essential nature for the technology industry (medical equipment, radars, LED screens, microprocessors, batteries, etc.).
In this sense, through Supreme Decree 4721, the structure of the Ministry of Mining and Metallurgy is modified by incorporating the Vice Ministry of Technological Minerals and Metallurgical Mining Productive Development, an entity that will implement development strategies for the productive chain of technological minerals and rare earths for its industrialization.
07/12/2022: As of June, this year, tax collection in the domestic market from the metallic and non-metallic minerals sector rose by 1,277 percent compared to the same period in 2021. The amount exceeds tax collections from the crude oil and natural gas sector (without considering the Direct Tax on Hydrocarbons – IDH) at 173 percent, according to information from the Tax Service.A rebound in mining is seen due to high international prices and the greater volume of production. During the first half of 2022, 2,392 million bolivianos were collected in the domestic market from the metallic and non-metallic minerals sector. With this figure, what was collected in this sector throughout the past year has been surpassed: 891 million. In 2020, the collection was 129 million.
The National Statistics Institute (INE), reported that 96.5% of La Paz’s exports in 2021 were minerals; 85% corresponding to metallic gold and jewelry. In 2021, the department exported 2,484 million dollars, of which 92 percent corresponds to the manufacturing industry (gold, as well as other metals and metal derivatives).
The main destination countries for La Paz exports are India (51%), the United Arab Emirates (15%), Italy (10%), the United States (6%), and China (4%), among others.
Figures reveal that the Gross Domestic Product (GDP) of La Paz grew by 5.3% in 2021 after an 11.1% drop in 2020, the year the pandemic began. As of May 2022, exports reached 1,088 million dollars.
08/30/2022: The Bolivian government is executing an exploration project in the salt flats of Coipasa in Oruro and Pastos Grandes in Potosí with the main objective to identify and quantify new lithium reserves. The areas of major concentration of lithium reserves will be appointed for the commencement of industrialization processes executed using technology for the direct extraction of lithium.
08/31/2022: During a presentation to the President of the State, Luis Arce, the Civic Committee of Potosí (Comcipo) explained a proposal for the treatment of evaporite resources. Through the proposal, Comcipo seeks a change in the national policy, seeking the participation of private foreign or national companies in mining activities related to the exploitation of lithium. Additionally, Comcipo intends a change in the policy on lithium and departmental royalties that would be between 11 and 20% of exports based on two variables: profitability and price in the international market.
The Environmental Regulation for Mining Activities approved by Supreme Decree No. 24782 (DS 24782) provides that every company that carries out mining activities must have an environmental license for this purpose. Failure to comply with this provision generates administrative and, in certain cases, criminal responsibility. Not having an environmental license, as well as the omission of the environmental obligations contained in the environmental license and those imposed by current environmental regulations, can cause the reversal of the holder´s mining rights in favor of the State.
Environmental licenses for mining companies are beneficiated by a prerogative that differentiates them from other licenses granted to companies engaged in non-mining activities, since environmental licenses are indefinite for the duration of the mining activity. Given the scope and environmental impact of mining activities, they must comply with environmental remediation obligations even in the closure and post-closure phases once the mining activities are completed.
It is worth questioning whether the provisions established by the regulation are sufficient to guarantee the correct environmental remediation of the areas and adjoining areas affected by mining activity. In short, the answer is no. Mining is one of the most polluting activities with a direct impact on the environment, but, at the same time, it implies substantial income for both the public administration and the actors (private, cooperative, and state) directly involved in mining. Historically, mining has been a fundamental pillar in the Bolivian economy, which once again acquires the relevance of yesteryear due to the strategic nature that has been given to lithium reserves in Bolivia.
Currently, mining plays a preponderant role in the Bolivian economy and attracts the interest of private, national and foreign mining productive actors, willing to invest in the activities of the mining production chain. The actors involved in mining activities must take into account the importance of complying with environmental regulations, since their omission can lead to the imposition of sanctions by the Competent Environmental Authority (AAC), which, in most cases, is the Secretary of the Environment dependent on the corresponding Departmental Autonomous Government.
According to Supreme Decree 26705 (DS 26705), the sanctions for committing environmental infractions are: (i) written reprimand, when the infraction is for the first time, as long as it does not cause severe impacts on the environment; (ii) written reprimand and fine equivalent to a figure of 3 per 1,000 of the total amount of declared equity or assets of the company, project or work, in the event that the work or project causes severe environmental impacts or entails imminent danger to the human health or the environment; (iii) a fine equivalent to the figure of 3 per 1,000 of the total amount of declared equity or assets of the company, project or work, in the event that the infraction is not corrected, and revocation of the environmental license in the event of recidivism of the infraction that generates impacts on the environment, until the environmental conditioning is complied with. Likewise, the AAC can order the suspension of activities of the mining company until it complies with the environmental conditions.
The responsibility for non-compliance with environmental obligations does not end with the imposition of administrative sanctions by the AAC. As previously mentioned, the mining regulation obliges the mining productive actors to strictly comply with the environmental regulation. Failure to comply with environmental obligations is a cause for the extinction of mining rights prior to the resolution of the administrative mining contract or the revocation of licenses (for prospecting and exploration, aerial prospecting, or others). In the case of administrative mining contracts, it is common that one of their clauses provide that non-compliance with environmental legislation is grounds for termination of the contract, for which the Mining Jurisdictional Administrative Authority (AJAM), at the express and duly justified request of the AAC, by means of a substantiated, firm and stable administrative act, may initiate the mining rights reversal procedure.
The reversal of mining rights is a cause for the extinction and suspension of mining rights prior to substantiation of the corresponding administrative and judicial procedure which, in the event that the cause for resolution is declared proven and the legal means of challenge exhausted, provides for the reversion of mining areas to the domain of the State. The loss of mining rights for any reason does not release the holder from compliance with its environmental remediation obligations in accordance with the respective Environmental License and applicable regulation.
Strict compliance with environmental obligations by mining companies is coercive and its omission implies administrative sanctions by the AAC that can paralyze the project. The current environmental regulation (enacted in 1997) strives to ensure that mining companies have suitable operation, application, and remediation plans for their activities. Today, there are instruments such as carbon credits that could allow the raising of funds for environmental remediation purposes that would allow mining companies to contribute directly to the preservation of the environment to the extent that they generate pollution, however, these are inapplicable in Bolivia since the Political Constitution of the State establishes a ban on the securitization of natural resources, and government institutions interpret this as a direct ban on the issuance of carbon credits in Bolivia. In this sense, there is room for legislative reform so that environmental regulation seeks to generate conditions that are truly favorable for the ecosystem, considering that mining activities are going to prevail in Bolivia given their impact on the economy.
Lithium plays a fundamental role today, since it allows massive energy storage in small spaces. Lithium is necessary for the manufacture of mobile phone batteries, solar panels, electromobility, among others, which is why it is one of the most coveted metals today. Three of the countries with the best prospects for benefiting from lithium are Argentina, Bolivia, and Chile, since they concentrate the eighty-five percent of the world’s known lithium reserves.
Bolivia is among the world’s leading lithium exporters. According to data from the Bolivian Institute of Foreign Trade (IBCE), between January and June 2022, Bolivia exported 434 tons of lithium carbonate worth 23.5 million US dollars, which were exported to the markets of China, Russia, and the United States.
Bolivia, through Law No. 535 on Mining and Metallurgy (Law 535) establishes that the Bolivian State may reserve minerals that it considers strategic for their exclusive exploitation by state companies. Law 535 establishes as reserved areas the salt flats and lagoons of Uyuni, Coipasa, Chiguana, Empexa, Challviri, Pastos Grandes, Laguani, Capina, Laguna, Cañapa, Kachi, Colorada, Collpa, Lurique, Loromayu, Coruto, Busch or Kalina, Mama Khumu, Castor, Coranto, Celeste, Hedionda, Kara, Chulluncani, Hedionda Sud, Salares in Saucarí, Sajama and Sajama Sabaya. Additionally, it declares lithium, as well as potassium, as strategic elements whose development will be carried out through state mining companies exclusively.
For such reason, through Law No. 928 of April 27, 2017 (Law 928), a strategic national public company called Yacimientos de Litio Bolivianos – YLB was created. According to it, YLB is exclusively responsible for conducting prospecting, exploration, exploitation, benefit, refining, and commercialization activities on lithium, with one hundred percent state participation. However, Law 928 allows subsequent processes of semi-industrialization, industrialization, and residues processing to be carried out through association contracts with national or foreign private companies, maintaining the majority participation of the Bolivian State.
It is evident that the Bolivian State is cautious about its interests in lithium, which is why it has insisted on concentrating practically all the activities of the mining production chain in a state company -YLB-, with the only exception that, for the processes of industrialization, may rely on private, national, or foreign productive mining actors. This situation is often in the history of Bolivia, which has one of the most important lithium deposits in the world but does not have the technology, the professionals, or the necessary resources to face the industrialization of lithium without the participation of private companies. Unfortunately, there are still legal loopholes in the regulation that do not allow the collaboration between the State and the private sector to materialize, being necessary a regulatory update to proceed with the industrialization of lithium in Bolivia.
Considering all this, the Bolivian State, through the Central Government, promulgated Supreme Decree No. 4721 of May 18, 2022 (DS 4721), which establishes modifications in the structure of the Ministry of Mining and Metallurgy, which allow the implementation of mining development and industrialization strategies for technological minerals and rare earths, but leaving lithium outside the scope of the regulations. Recently, during a presentation to the president of Bolivia, Luis Arce, the Potosinista Civic Committee (COMCIPO) presented a bill that proposes a change in the policy on lithium and departmental royalties that range between 11 and 20% of exports based on two variables: profitability and price in the international market, and that also allows the participation of private companies in lithium production activities.
Given the interest of the Bolivian State in the exploitation and industrialization of rare earths and technological minerals and the entire current situation surrounding lithium and its development, it is essential that the necessary regulatory framework continue to be developed so that the industrialization of lithium becomes a reality throughout short-term, in which both Bolivian State and private actors participate.
If you require more information, the PPO team remains at your disposal.
Currently, mining plays a preponderant role in the Bolivian economy. It is worth questioning whether the provisions established by the regulation are sufficient to guarantee the correct environmental remediation of the areas and adjoining areas affected by mining activity.