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How Electric Vehicles Could Save Mexico

Electric Vehicles
The electric vehicle market has grown fast. With more people opting to purchase environmentally friendly modes of transport. According to IEA, electric vehicle sales “reached a record high in 2021.” In 2021, around the world, there were up to 6.5 million electric vehicles sold. Sales nearly doubled the numbers set in 2020. J.P. Morgen has estimated that by 2025, “30% of all vehicle sales will be electric vehicles.” The shift from combustion engines to battery-powered vehicles is becoming more of a reality every year. General Motors has announced its plan to “exclusively offer electric vehicles by 2035.” The growing electric vehicle market may appear like a victory for consumers and even car manufacturers. However, the real winner may just be Mexico. This is how Mexico may gain from the exploding electric vehicle market.

How “White Gold” Could Be a Potential Savior

Often referred to as “white gold,” lithium is an essential material for the production of electric vehicle batteries. With the increase in the manufacturing of electric vehicles, Investing News (INN) has stated that lithium has caught the eye of Elon Musk, CEO of the electric car manufacturer Tesla. As lithium becomes an increasing priority for car manufacturers, its prices have hit an all-time high.

Fortunately for Mexico, it has the ninth-largest lithium reserve in the world. The country estimates its Sonora lithium deposits value at more than $600 billion. Mexico’s total national debt amounted to $838 billion in 2022. According to Mexico Business News, the country could benefit from the growing demand for lithium.

With the demand for lithium only growing, Mexico could potentially change its fortune. The revenue gained from extracting lithium and selling it could hugely boost Mexico’s “stagnant economy.”

Potential Problems

Mexico has nationalized lithium. The reform effectively bans “all direct private investment and production in the lithium sector and creates a state-owned entity to extract, process and sell lithium.” The Mexican government was divided over the nationalization of lithium, some believing that the country would be unable to successfully extract and commercialize the metal itself.

President Andres Manuel Lopez Obrador has suggested private investment may be necessary due to the huge cost it will take. However, investors seem to show more interest in already established lithium markets, Reuters reports.

Whilst lithium prices have risen to $70,000 per tonne, Reuters understands that the clay deposits have largely trapped lithium in Mexico, making it difficult and expensive to mine. As a result, the lithium in Sonora has yet to see mining on a commercial scale.

Mexico in Crisis

Mexico is a country with high levels of corruption and drug trafficking. Council on Foreign Relations (CFR) states that the drug cartels in Mexico are “fuelling the rampant corruption and violence in Mexico.”

According to a 2023 article, roughly 52% of Mexican citizens live in poverty. This amounts to 57 million people. This largely attributes to a “lack of access to education, health care and well-paying jobs.”

As a result, some of the public in Mexico resort to joining drug cartels or engaging in corruption to improve their lives. Since 2006, CFR believes there to have been more than 360,000 homicides in Mexico, many of which link to cartel activity.

If Mexico can capitalize on its lithium reserves, the financial gain could help fund improved access to education and health care, and improve the availability of well-paying jobs. By doing so, Mexico could start to improve its large poverty issues.

Benefits to Mexico

El Pais suggests the Mexican administration has taken steps to take over control of lithium in the country. By nationalizing lithium, the objective is to make it a strategic resource such as oil.

If the Mexican government can invest and learn how to efficiently mine lithium, the revenue it generates from the sale of lithium would be part of the national revenue. Therefore, benefiting the entire country by being able to redistribute a larger source of income to the areas most important.

The government could use the revenue to improve access to education. There is a clear link between “increased educational provision and decreased poverty.”

There is also a link between poverty and crime. “In Mexico, 27% of people between the age of 25 and 34 had a tertiary qualification in 2021, compared with 47% on average in OECD countries,” OECD reports. In 2019, the country spent a total of “$3,577 per full-time student through primary to tertiary institutions compared to $11,990 on average in OECD countries.” By improving access to education, Mexico may begin to decrease the levels of rampant crime and corruption in the country.

Foreign Investments

Mexico has allowed China’s Ganfeng Lithium to massively increase its lithium mining operation in Mexico. Ganfeng Lithium, a major supplier of Tesla’s lithium, is one of the world’s biggest miners of lithium, accounting for 24% of global output. With this increase in investment in Mexico, there is a chance for long-term sustainable jobs for many in Mexico.

The increased investment could help improve the average wage within Mexico with a larger amount of well-payed jobs on offer. Thus, reducing the desire for many to join illegal drug cartels that fuel the extreme levels of corruption in Mexico. According to Quartz, 5% of Mexico’s GDP is lost to corruption, this amounts to $53 billion. The Mexican Institute for Competitiveness stated that this would cover three times the amount Mexico spends on its Department of Education.

The Future

Whilst it is clear that Mexico’s troubles will not vanish overnight, the discovery of an in-demand material such as lithium in Mexico could be a glimmer of hope. The link between poverty and the ongoing corruption and violent crime in Mexico is apparent. Should Mexico start to exploit the significant amount of lithium the country possesses, the government has the ability to make real change to the lives of many Mexicans who lack access to education, health care and the ability to find a well-payed job. Doing so potentially limits the power of drug cartels who continue to make life in Mexico insufferable for many.

– Josef Whitehead
Photo: Unsplash