In April 2022, President Andres Manuel Lopez Obrador (AMLO) prodded Congress to fast-track approval of a mining law reform, thereby paving the way for the nationalization of the lithium industry. At the time, stinging from Congress’ rejection of his proposed energy-related constitutional amendments, AMLO celebrated an easy win by signing legislation that authorizes the federal government to control the lithium value chain. The law nationalized the industry and established reserved mining zones where lithium deposits have been confirmed; it also opened the door for a host of other minerals to be labeled “strategic” and subject to government control. In August, the president took the next step, establishing the government-owned Lithium for Mexico (LitioMX) enterprise. The company will operate with a degree of autonomy from the Energy Ministry and will conduct all activities in the mineral production chain, from exploration to marketing.
Despite the fanfare, Mexico’s lithium industry is limited to three specific concessions awarded to Chinese and Canadian companies during the previous administration. The concessions have not been canceled, allowing Bacanora Lithium (controlled by Chinese firm Gangfeng) to continue its development at the Bacadehuachi settlement. Short of delays, the project could initiate production by the end of 2023. Of note, this is the only lithium project scheduled to break ground in the foreseeable future. Recently, the Mexican Geological Service began assessing the country’s lithium reserves, casting doubt over the commercial feasibility of AMLO’s lithium aspirations in the short-to-medium term.
The government is assessing the country’s lithium potential from two vantage points. First, on the operational side, the administration seeks to consolidate its authority over the industry. Second, the sector’s potential to create trade and investment opportunities has been discussed at the highest levels, possibly outpacing initial expectations amid sustained high global lithium prices.
Meanwhile, efforts are underway to fully establish LitioMX. In August, AMLO appointed Pablo Daniel Taddei (see our Personality of the Week) to head the company. Although Taddei’s academic credentials are impressive, many question his managerial capabilities and lack of experience leading a high-profile company like LitioMX. Taddei is finishing his doctoral studies at Harvard University, leaving the president to depend on his close ally, Sonora Governor and former Security Secretary Alfonso Durazo, to advance the lithium initiative in the short term. Since the nationalization, Durazo has been exploring investment opportunities in his home state, where the largest booked lithium reserves have been discovered.
highlights
AMLO’s push to develop the promising lithium industry, coupled with the current high global prices, has fueled LitioMX’s momentum out of the gate. The administration’s optimism has also been boosted by the microchip production crisis in North America along with US President Joe Biden’s campaign to integrate and expand the semiconductor and battery industries at the regional level. Consequently, AMLO’s office has engaged stakeholders over the electrification of the transport sector and semiconductors through the High-level Economic Dialogue. According to our contacts, AMLO’s advisors have convinced him to take a personal interest in these talks, understanding that Mexico’s lithium production could play a pivotal role in accelerating the manufacture of microchips and electric cars in the region.
Following the dissolution of trade and investment promotion agency ProMexico, the Foreign Affairs Ministry’s General Direction for Global Economic Impulse and the Economy Ministry’s Economic Intelligence Unit took the lead in negotiations with private sector representatives and foreign investors. However, Horizon contacts confirm that ministry officials responsible for advancing the lithium agenda have not managed to coordinate their efforts across government agencies, adding unnecessary confusion and uncertainty to an otherwise promising initiative. Regardless, we advise that investors engage the Foreign Affairs Ministry first because of its budgetary and political leeway over the lithium agenda.
Recognizing LitioMX’s capex limits, AMLO has reassured investors that there will be significant opportunities to participate in the sector’s development over the longer term. There has not yet been any official engagement between the government and the only existing lithium project, Bacanora Lithium, but we expect AMLO to try to establish a working relationship to gain access to the Bacadehuachi reserves and the company’s technology. We believe that one of the first signposts of LitioMX’s success and Taddei’s leadership will be engaging Bacanora Lithium and striking a deal to expand cooperation. However, we caution against optimism, given Taddei’s inexperience and the possibility that LitioMX could fall victim to the administration’s excessive centralization of energy policymaking. Furthermore, on 28 October, AMLO will meet with US Special Envoy for Climate Change John Kerry, and their agenda includes discussing regional cooperation on the lithium and automotive industries.
personality of the week
Pablo Taddei
CEO of Lithium for Mexico (LitioMX). Taddei received a bachelor’s degree in industrial engineering and a master’s degree in sustainable systems from Harvard University, where he is currently pursuing a doctorate in environmental health. He worked briefly at a manufacturing plant in his home state of Sonora and as a teacher at his alma mater. Afterward, he researched sustainable development for the UN and the University of Michigan, where he nearly completed a master’s degree before deciding to pursue his graduate studies at Harvard.
In August 2022, AMLO appointed him CEO of the recently created Lithium for Mexico (LitioMX). Taddei’s appointment was questioned over his lack of organizational leadership and because he is the son of Sonora’s welfare delegate, Jorge Taddei. His father is a close ally of Sonora Governor Durazo, who has favored Taddei’s family in state government appointments. Pablo’s sister Ivana is a state deputy and member of the ruling National Regeneration Movement (MORENA). His brother, Jorge Jr., is a former director of the National Commission of Protected Natural Areas. Moreover, several of his aunts and uncles also hold local and state government positions.
If he follows his family’s political alignment, Taddei would refrain from working directly with Foreign Affairs Minister and presidential contender Marcelo Ebrard, given that Durazo has endorsed rival candidate Claudia Sheinbaum, the mayor of Mexico City, for MORENA’s presidential nomination in 2024. Accordingly, the Ebrard and Sheinbaum camps have high-profile policy initiatives.
Taddei is an academically inclined technocrat, holds strong ties to Sonora and leans to the left in politics. He is personally committed to sustainable development and hopes to make his mark at LitioMX. He collects Legos, listens to the music of Uruguayan artist Jorge Drexler and Pink Floyd, and enjoys literature and poetry.
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