CHILE'S LITHIUM BLUEPRINT

Chile is caught between superpowers competing for its “white gold.” Chile controls over 31% of the world’s lithium reserves (ICCT, 2025), while demand is projected to quintuple by 2035 (Lithium Harvest, 2025). Chile balances foreign pressure over lithium control, economic development, and domestic environmental demands, offering a framework for other resource-rich states facing hegemonic influences.

China, Chile’s primary trading partner, accounts for 38.7% of Chile’s exports and 23.6% of its imports (OEC, n.d.). Chile’s recent nationalization of its lithium industry, however, has created tension with China. These tensions trace back to 2018, when state-linked China CITIC Bank financed a majority of Tianqi Lithium’s purchase of a 23.77% stake in SQM (AidData, n.d.), Chile’s largest private miner. In 2023, Chile announced its plans for state-owned miner Codelco’s to acquire a majority stake in SQM (Bloomberg, 2023). This threatened Tianqi’s investment, prompting them to challenge it through multiple legal forums (Tang, 2024). Ultimately, China conditioned its approval of the Codelco-SQM joint venture on guarantees of stable lithium supplies to Chinese clients (Lv & Solomon, 2025). Chile traded these commercial assurances to secure a greater victory: Chilean majority control.

Meanwhile, the United States views Chile through a national security lens. Through the 2022 Inflation Reduction Act, Washington uses financial incentives to pull Chile toward American markets and away from China. The Act offers tax credits for electric vehicles made with minerals from Free Trade Agreement countries, like Chile (Reuters, 2024), provided the firms lack significant Chinese ownership (Evans et al., 2025). The Act incentivizes EV makers to source Chilean lithium over Chinese alternatives, converting Chile from a trade partner into a strategic US asset. By tying US market access to limiting Chinese investment, Washington forces Chilean miners to choose between Chinese capital and American markets.

Recognizing these pressures, Chile is diversifying. In 2023, the EU entered into a strategic raw materials partnership with Chile to access critical minerals such as lithium (SWP, 2025). This partnership offers Chile a 'third option,' limiting both Washington and Beijing’s influence.

Beyond geopolitics, Chile faces domestic opposition. The lithium extraction process involves the evaporation of brine from salt flats, causing irreversible water loss and devastating wetland ecosystems (Aylwin et al., 2024, 10). The nearly 11,000 affected residents in San Pedro de Atacama (City Population, 2025) have appealed to environmental courts and demanded that mining companies gain indigenous community consent, pressuring the Ministry of Mining to balance economic development with environmental protection (Voices NGO, n.d.).

Chile’s response has been to implement a National Lithium Strategy that establishes lithium as a strategic mineral (Government of Chile, n.d.). Under this framework, only the state or companies in partnership with state entities can develop lithium resources (Leiss & Yeluri, 2021). This forces all players to play by Chile’s rules, further limiting foreign exploitation without limiting Chile’s market access.

By leveraging competing incentives from the US, China, and the EU, Chile prevents hegemonic dominance, using its geological advantage to extract value while retaining autonomy and enforcing environmental standards. This could offer a blueprint for nations in the lithium triangle, Argentina and Bolivia, and other resource-rich nations, on how to navigate among great powers. Chile’s lithium strategy is not just relevant today, but important for understanding the future of South American growth and cooperation.

References

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City Population. (2025, December 13). San Pedro de Atacama. City Population. https://citypopulation.de/en/chile/mun/admin/el_loa/02203__san_pedro_de_atacama/

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Tang, L. (2024, July 30). China's Tianqi contests Chilean regulator's move to hand over lithium reserves to state. S&P Global. https://www.spglobal.com/energy/en/news-research/latest-news/metals/073024-chinas-tianqi-contests-chilean-regulators-move-to-hand-over-lithium-reserves-to-state

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