On 16 January, La Rioja Governor Ricardo Quintela (see our Personality of the Week) signed legislation that declares lithium “a strategic resource” in the context of the energy transition. Under the law, existing lithium permits – which the local government had given to at least one international company that had committed investments – are to be suspended for 120 days. The decision triggered a negative reaction from mining firms, business associations and from other lithium-rich provinces, which argue that it harms the country’s investment reputation.
A member of the Peronist party, Quintela is close to President Alberto Fernandez and, to a lesser degree, to Economy Minister Sergio Massa. The governor had promoted and defended the bill in the provincial assembly, where it passed on 15 December. Quintela argued that the companies who had the permits to start exploration “have done absolutely nothing so we decided to reclaim those permits and rediscuss terms.”
The provincial decision was criticized by business representatives of both the mining and manufacturing chambers. The head of the Argentine Manufacturing Association (UIA), Daniel Funes de Rioja, said that the move would give investors the wrong signal about the way the country is treating investors at a time when Argentina needs to build confidence.
Other lithium-rich provinces also criticized La Rioja’s legislation. Governors Gerardo Morales of Jujuy, Raul Jalil of Catamarca and Gustavo Saenz of Salta have declined to make similar moves in the past, saying that it would not give investors enough guarantees to move forward with these long-term projects. Notably, these three provinces are home to the four most advanced lithium projects in the country. The only two projects already in the development stage in Argentina are in Catamarca and Jujuy. Salta, in turn, has two projects in a late stage of exploration and which will soon enter their development phase. The country’s lithium exports rose by over 200% last year to total roughly $700mn, and we expect this level to increase in the coming years, given that Argentina has the third-largest reserves of lithium in the world.
La Rioja has so far only issued one exploration permit, to the Canadian firm Origen Resources for a 21,000-hectare area. That company is also moving forward with exploration in the neighboring province of San Juan. Moreover, last year, Quintela created a provincial state-run company called SAPEM to lead lithium development in La Rioja.
The province’s move is also a reaction to a larger debate underway in Argentina about how to manage lithium resources. Massa wants the federal government to guide investments along the entire value chain. Notably, his team has engaged in talks with international car manufacturers based in the country to consider making batteries in Argentina, and YPF’s technology division has kicked off a project to start manufacturing small lithium batteries using Chinese technology. Massa’s mining secretary, Fernanda Avila, disagrees with Quintela’s decision but the minister has decided not to confront him in public, hoping that the new law does not signal a trend among other lithium provinces.
In our assessment, the provincial declaration of lithium as a “strategic resource” is largely an attempt by the local government to assume greater influence in the investment and development process. It likely aims to draw foreign investors, who have both the expertise and the capital to make these projects viable, into some sort of JV with the provincial government through makeshift state-owned companies like SAPEM. However, we do not believe that La Rioja has enough political weight to change an overall investor-friendly trend in the country and we foresee its interventionist move as short-lived, especially as neighboring provinces like Jujuy, Catamarca and Salta make progress in exploration and development of their lithium resources. The next signpost will be the governor’s decision as to what will happen to the originally granted permits after their 120-day suspension. We expect Quintela to finalize his decision on the matter in Q2 2023.
personality of the week
Quintela has been the governor of the northwestern province of La Rioja since December 2019. La Rioja is a traditional Peronist stronghold and Quintela’s first public position was as sports secretary of the provincial capital at age 23.
Quintela did not go to university, instead devoting his entire adult life to politics. He behaves as a typical caudillo (strongman) of the country’s interior, seeking full control of every aspect of his province’s public life. Press reports have indicated that up to 30 of Quintela’s relatives have received positions in the provincial administration.
He is close to Cabinet Chief Juan Manzur, who previously served as governor of the neighboring province of Tucuman, and often works in tandem with another Peronist governor in the region, Raul Jalil of Catamarca. Quintela has recently elevated his profile at the national level by endorsing some controversial moves by President Alberto Fernandez’s administration, such as seeking to impeach the chief justice of the Supreme Court.
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