Many of the raw materials needed for a transition to zero-emission modes of transport are found in nations in the region, which face a double challenge. On the one hand, they will have to move towards effective and sustainable extraction with added value of these commodities . But they will also have to implement policies that allow for adequate incentives for the use of these technologies locally.
Josefa Beltrán is 14 years old and Nicole Valdebenito is only 11. Both girls study in schools in the small town of Penco, in south-central Chile. Despite their young age, both represented their country in October at the Robomatrix Continental Junior competition in Veracruz, Mexico.
The reason? Both belong to the Robotics Academy promoted by the local rare earth company Aclara, together with the INACAP training center. As Fernando Illanes, manager of Social Value at Aclara , explains : “We promote the robotics program in Penco to diversify the educational options of young people and provide new opportunities for a future in which these technologies, linked to the application of rare earths, will be part of their daily lives.”
And although until very recently they were practically unknown to the public, these so-called "rare earths" are now attracting the attention of producers, technology companies and investors alike, given their role in electromobility.
As Aclara points out, rare earths are essential elements for the manufacture of permanent magnets, key in the development of wind turbines and electric vehicles. They are composed of 15 elements from the lanthanide group, such as dysprosium, terbium, neodymium and praseodymium, in addition to yttrium and scandium.
These, together with better-known minerals such as copper, lithium, nickel, cobalt and graphite, are key elements in the manufacture of technologies for the transition towards clean and sustainable energy sources and for electromobility, as highlighted by ECLAC in its 2023 study, 'Critical minerals for the energy transition'.
Thus, any country that produces them could benefit from the business that arises from the development of these technologies: the International Energy Agency estimates that the global demand for lithium could grow up to 42 times by 2040, that of graphite 25 times, that of cobalt 21 times, that of nickel 19 times and that of copper 2.7 times.
The role of the APEC economies in Latin America is relevant here, since as a subcontinent it is home to 51% of the world's lithium reserves, 38% of copper, 22% of natural graphite, 39% of silver, 17% of nickel, zinc and rare earth elements.
However, traditional copper remains one of the most important metals, experts say.
“It is the only critical mineral where the Latin American countries that produce it have a global production share of around 40%, which is quite similar to the reserves of all known copper minerals that could be exploited,” Juan Ignacio Guzmán, General Manager of Gestión y Economía Minera Limitada (GEM), explains to AméricaEconomía. (see chart)
The other key mineral is lithium, a significant part of which is found in Latin America, especially in the “lithium triangle” made up of Argentina, Bolivia and Chile, which accounts for more than 50% of the world's lithium reserves.
If well managed, the shipment of such commodities will be a significant source of business in Latin American economies, particularly towards APEC hubs where they are transformed into electric cars and other electromobility elements, mainly China, the United States, but also South Korea, Japan and growing economies such as Indonesia.
"The region has comparative advantages and has the conditions to develop more efficient and clean transportation systems, both in mass passenger transportation and in private vehicles (…) Likewise, it is an opportunity to promote regional productive chains and develop conglomerates within the framework of this new electric mobility industry," Andrés Rebolledo, Executive Secretary of the Latin American Energy Organization, OLADE, told AméricaEconomía.
“However, the potential of these resources has not fully translated into broad economic growth or benefits for electromobility, due to barriers such as dependence on low value-added exports and the lack of advanced industrial infrastructure,” Colombian Andrés García Giraldo, Director of Latam Mobility , a biannual event that travels around the continent promoting the advantages of electromobility, told AméricaEconomía.
To make the best use of these resources, a focus on public policies is needed to strengthen the value chain in the region, directing production towards the local manufacture of high-value products, such as lithium batteries and components for electric vehicles.
“Through a regional alliance, joint protocols for responsible and sustainable extraction could be established, which not only protect the environment, but also the rights of local communities, many of which depend on these ecosystems,” says the Latam Mobility executive.
In addition, a regional consortium would allow for the negotiation of trade agreements for the export of lithium and copper, which would strengthen its position in international markets such as China, the European Union and the United States.
However, the current outlook for metals tends to be uneven, as Juan Ignacio Guzmán highlights in his analysis.
“All these commodity prices are going through different moments. Copper, I think, is the star. Graphite is also doing quite well, but rare earths, lithium and nickel are in [some sort of] recessionary period, after having gone through a very significant boom for some years,” he says.
THE CHALLENGE OF THE TRANSITION
In the 2015 Paris Agreement, Latin America and the Caribbean committed to reducing their emissions by 11% by 2030.
Although the advantages of electromobility as a mechanism for mitigating climate change are great - given that almost half of these emissions correspond to cars and the rest to cargo vehicles and buses - there are still technological, logistical, financial and regulatory barriers or challenges that need to be overcome in order to achieve significant progress and be able to popularize the use of electric vehicles in our region.
In this region, electromobility is in an initial phase of development, but growing rapidly, as reflected in the sales statistics for electric vehicles over the last three years, says OLADE.
To accelerate this transition, however, there are regulatory and financial challenges. One proposal is to formulate laws and regulations that promote the use of efficient and environmentally friendly modes of transport.
“This is in addition to creating tax incentives for the acquisition and use of electric vehicles. Another important focus is to eliminate, focus or redirect subsidies on the consumption of fossil fuels in private transport. It is also suggested to provide financial aid and lines of credit to offset the high acquisition costs of electric vehicles, in relation to conventional combustion cars,” explains Andrés Rebolledo.
Another point to address is finding mechanisms to reduce the replacement costs of batteries and other accessories for electric vehicles.
In this regard, the Inter-American Development Bank (IDB) highlights in its study 'Towards sustainable integration: the potential of electromobility in Latin America and the Caribbean', from 2023, that it is necessary to design systems that allow the participation of zero-emission vehicles in the electrical grid, facilitating the intelligent management of charging and discharging, and taking advantage of their storage capacity to improve the stability and efficiency of the electrical system.
“Proper recycling of used batteries not only allows them to be used for secondary purposes, but also reduces the negative impact on the environment and lowers the cost of electric cars by being able to reuse them,” the document states.
Given this, adoption could take off positively in the region, according to OLADE.
"If we assume that the growth trend of recent years in the region continues, in an optimistic scenario, (…) in 2030 the fleet of light electric vehicles could reach up to 20 million units," adds Rebolledo.
Overcoming the challenges that persist, such as the high cost of vehicles, charging infrastructure, and the necessary education for users and authorities, would require focusing on innovation for local production, adopting integrated policies that take advantage of natural resources, encouraging investment in technology and promoting collaboration between countries.
“By taking advantage of available natural resources and strengthening innovation policies, Latin America could evolve from being a supplier of raw materials to a producer of products developed for electromobility, boosting economic value and competitiveness in this growing sector,” concludes Andrés García Giraldo.
