An Assessment of the Environmental and Social Impacts of Chinese Trade and FDI in Bolivia

China has become an important partner for Bolivia, both diplomatically and economically, having signed over 400 cooperation, aid and loan agreements. The country has also been a small but fast-growing partner, active in Bolivia’s mining sector and set to be Bolivia’s main partner in developing its lithium reserves. Bolivia’s exports to China have been concentrated in minerals, while imports have been concentrated in manufactured capital and consumer goods. Despite high prices for metals, Bolivia has experienced a significant trade deficit with China. Due to the high concentration in the mining sector, exports to China have put pressure on Bolivia’s water supplies.

In a new working paper, Alejandra Saravia López and Adam Rua Quiroga examine Bolivia’s mining sector in light of the participation of the Chinese firm, Jungie Mining, and offer recommendations to improve environmental and social outcomes from foreign direct investment (FDI), specifically Chinese FDI in the mining sector. 

Main findings: 

• Chinese tin mining is associated with water pollution and conflicts over water use.
• Despite being in its early stages, Jungie Mining’s activities have already been suspended due to water pollution in surrounding communities and has already clashed with local communities over water rights.
• The Jungie case indicates the Bolivian government lacks the capacity and/or willingness to enforce and upgrade existing environmental laws. 
  • For four years, the Bolivian government allowed the firm to operate without obtaining an environmental license and set a troublesome example by delaying construction of pollution remediation infrastructure in publicly run mining operations. 
• The new Law on Mining and Metallurgy, which explicitly gives mining priority to the use of water, also gives the Mining Ministry the authority to use environmental licenses. This is seen as opening potentially serious conflicts of interest. 
• On the other hand, Jungie Mining has actively engaged in community consultation processes and has respected outcomes, ensuring processing facilities are located in consenting communities.
• Furthermore, the firm is operating in a joint venture with a local cooperative, an arrangement that could bring new technology to the cooperative sector and ensure the local population benefits from mining. 

Bolivia’s relationship with China is set to deepen through the development of local lithium reserves. This prospect brings great opportunities for the national economy, but López and Quiroga’s case study on tin highlights areas of deep concern. To address these areas and prevent their repetition in future lithium projects, López and Quiroga  recommend strengthening the enforcement of environmental regulations in all contexts and fostering transparency in public concessions contracts. Furthermore, they emphasize the  need to revisit and reform the Law on Mining and Metallurgy to ensure that communities and small farms have access to sufficient water for their survival and to avoid regulatory capture in the issuing of environmental licenses.  López and Quiroga suggest supplementing the accumulating international reserves with a stabilization fund or sovereign wealth fund, if the appropriate institutional structures can be established.