Chile’s attempts to move up the lithium value chain are not working | Hacker News Reader

Chile’s attempts to move up the lithium value chain are not working

economist.com

80 pointss_Hogg49 comments

Cluster effect in action:

1. If refining lithium only required local input, it would've made sense to refine it locally, and ship to China after that.

2. In real life, you need to import plant equipment and chemicals by tonnes from China, that makes the final product of local refinement too expensive for Chinese.

Chile should focus on exploiting their solar resource. The best area on the planet for solar energy is in their country (and Peru).

It's hard to export electricity though. Probably better for economic development to focus on industries that can export.

So what? If you make electricity cheap, somebody will put it to good use, and whether it's exported or not, you are improving people's lives.

They should at least be a major international proponent of CO2 taxes and improve their chances of becoming a valuable relocation target for energy-intensive industries.

Iceland already has those industries.

But if you have plenty of cheap electricity, you can export energy-intensive goods, like aluminum, where the cost of production is dominated by energy consumption

>> The best area on the planet for solar energy

Passes my Global Solar Atlas check. The problem could be the panels must be high up on Andes mountains and moving electricity or goods could be a problem.

Mountains with low temperatures, frequent storms and rough terrain might not be the best place for chinas-cheapest solar panels.

The Atacama desert is extremely dry. Storms are not frequent at all. And low temperature is a great thing for PV.

The low temperatures are a good thing for the semiconductors.

Another advantage is the short distance between a production source (solar panels in the desert) and a storage solution (Andes Mountains, ideal for a Hydroelectric energy storage. there is aproyect looking to exploit this fact (http://valhalla.cl/)

This is kind of interesting, because import substitution was what Latin America tried more or less as a whole back in the 80s. It didn't work particularly well then, which leaves the question of what to do now?

Didn't that also involve lots of tariffs?

> It didn't work particularly well then, [...]

Yes, the government (or some other institution) picking winners doesn't really have a good track record in general.

> [...], which leaves the question of what to do now?

Basically the same as always: simplify local regulations, lower barriers to entry both to foreign people, ideas and capital, and also to local outsider who want to break into existing industries.

Or to make it shorter and more pragramatic: look at what Singapore did when they were at the same stage of development.

> Didn't that also involve lots of tariffs?

That's how import substitution works.

> Yes, the government (or some other institution) picking winners doesn't really have a good track record in general.

Import substitution isn't about picking winners, it's about forcing local industry to pick up the demand.

> look at what Singapore did when they were at the same stage of development.

A city-state is a completely irrelevant comparison to an entire continent.

PS I don't know if import substitution was a good strategy for south american contries to follow. As pointed out, it didn't work very well for them. It did work in other places at other times.

Tariffs, subsidies or the State taking on equity in private corporations.

Or just starting state-owned companies (wololo). As long as you can distribute the costs of propping up unprofitable business lines throughout a large unorganized mass that doesn't even know why they're poor.

Import substitution is when the local population creates competitors for some steps on a production chain, replacing a foreign industry piece by piece. The process is caused by relative advantages that say that an industrializing population must create something, so a mature market is the most likely place to go.

Tariffs have no direct relation to it, and are a large indirect hindrance, since the entire process requires a mature importing market.

I was trying to use 'import substitution' like that as well. And that is a useful concept.

But since eg Wikipedia (https://en.wikipedia.org/wiki/Import_substitution_industrial...) only uses the term in the other meaning, I'm going to concede the term.

Let's find a different term to describe the process 'local population creates competitors for some steps on a production chain, replacing a foreign industry piece by piece. [...]'

> A city-state is a completely irrelevant comparison to an entire continent.

Well, breaking the countries on the continent up into city states might be one way to go, if you think that a smaller scale is more conductive to good policy.

Or look at what China, the US, or basically any other industrialized nation did at the same stage of development. The government levied tariffs and gave out subsidies to support local industry even when it was less economic to do so.

Chile has almost twice China’s gdp/capita already (15k vs 8k). Granted, Chile has been stuck in the middle income trap for a very very long time, but China could always get stuck there as well.

The argument is that those countries (e.g. Taiwan) with lower tariffs were more successful, compared to their peers at the same time.

Government having barriers up to foreign products and protecting industries seems to have worked out for China.

China has a massive population (and arguably better location than Chile) so it could provide cheap labor during this most important moment in the late 20th century when economies became global

And it did so by reducing local regulation so that said labor could remain cheap

It's funny that we have people in this thread arguing that the same policy worked for both Singapore and China and others arguing that Singapore is too small to be relevant to Chile's experience while China is too large.

Many countries have low-to-no regulation and cheap labour, and they remain poor. China also made a concerted effort to keep its currency artificially low so that Chinese labour would remain cheap and Chinese people would be discouraged from buying foreign-made goods. While more subtle than tariffs, the effect was protectionist.

Many countries have higher tariffs and trade barriers, and they remain poor.

> Many countries have low-to-no regulation and cheap labour, and they remain poor.

Please name some. And to be clear, it's the amount and _complexity_ of interference in practice that counts.

Ie both in India and China bribes were common, but from what I heard in China your company actually got what they were promised after paying the bribe.

China's economic rise began when barriers were removed and foreign companies and products (machines, materials) were allowed into the country. Shenzen, the most open of all Chinese regions, has become the richest. The decades before, when China had isolated itself from the outside world, did not work so well.

Singapore is a small completely urban city state that had plenty of capital and human resources and almost no natural resources. How did it resemble anything about Chile today?

> Singapore ... had plenty of capital

Citation needed. Singapore was GDP per capita <$300 poor country without capital in 1960s.

They had a lot of rich Chinese refugees from the time along with a British colonial legacy. It isn’t that different from Hong Kong’s rise.

> Look at what Singapore did

So, establish state-owned enterprise for oil industry, like Singapore National Oil Corporation. Chile did follow this lesson and established Codelco.

This of course partially lead to economic sanctions, and a coup. Chileans initially were made to pay dearly for such insolence.

Codelco was the right choice, even after counting sanctions.

Agreed. That's why I said "initially." Sanctions ended when the Chicago Boys were in charge of economic policy, but still did not convince the military dictatorship to hand Codelco to private control.

How much has the SPC contributed to Singapore's economy? How much have foreign oil, chemical and electronics companies contributed to Singapore's economy?

The comparison that comes to mind is Brunei, which had much more oil and did much better than Singapore up to the 1970s, but was mostly closed to outsiders.

Singapore's success mostly rested on inviting foreign companies.

I suspect Singapore got away with some state owned companies for a few different reasons. Partly, because Singapore is so small, they can not afford to run too many inefficient state owned companies. So there's skin in the game. Partly also, because they seem to have had unusually competent administration.

Also keep in mind, that even with all the state owned companies and government added together, the public share of GDP is much lower than in most western countries.

I said somewhat flippantly that you should look at Singapore for a guide. After their sudden independence, Singapore itself looked towards Hong Kong for guidance.

Import substitution is what Asia countries did to become rich. Latin America countries adopted the name as propaganda for our protectionist programs (one of the necessary components of import substitution is imports). Chile did some of the real thing, but for the most part, Latin America never practiced it.

This could also be plain bad timing.

There has been some breakthroughs for using aluminum in high voltage applications. That could have had a negative impact on investments.

It's the guano story all over again!

South America has always had a brain-drain problem. The best universities in SA are... not globally notable. Widespread suspicion of academia, fostered by both conservative Christian parties and populist socialist ones, makes it difficult for South American universities to thrive and compete internationally. Many people draw comparisons to Southeast Asia and Korea, major recent success stories — there, scholarly professions and institutions are more respected, which, I think, has helped high-tech industries catch up to the OECD more rapidly than their South American counterparts.

https://outline.com/HBFgk3

I thought Bolivia and Afghanistan were the leaders in lithium

According to [1] Australia and Chile prduce most lithium.

[1] https://en.wikipedia.org/wiki/Lithium

It's important to note the difference between the two main sources of lithium. Chile and Bolivia has lithium in the form of brines (mainly Lithium Cloride, high concentration, relatively easy to extract) and ores (pegmatite, hard to extract, as requires mechanical work to grind the rock). the region of the north of Chile, Bolivia and Argentina has the mayority of reserves of the world, following by Afghanistan. Australia has a lot of pegmatite.

Thank you, and seriously; how the heck do you this?

(I just want to know how someone learns this information to begin with)

i'm a chemical engineer from chile, so at least i have to know something about local minery, right?

What do you engineer, I want to know more abt you

Reply on news.ycombinator.com