The conventional wisdom in the Southern Cone is that Chile is a market-friendly economy where businesses can succeed, while Argentina is a basket case of state intervention where businesses will suffer. And there is some truth to those stereotypes.
Over the past two decades, Chile has been a place where businesses can operate in a regulatory environment shaped by steady and fair rules. In contrast, Argentina has lurched from crisis to crisis, placing extensive regulations on prices, taxes and capital controls that have made business—as well as life in general—difficult. Even from 2015 to 2018, when Chile had a nominally socialist president and Argentina had a nominally pro-market rightwing president, Chile’s regulatory environment and business culture still made it the heavy favorite for foreign investment.
However, when it comes to the lithium industry, that narrative about the two countries has just been flipped. In recent months, even as Argentina has suffered from a renewed economic crisis and hyperinflation, the country’s lithium industry has been prospering due to a relatively light touch by the government. The Argentine government has streamlined the permitting process, reduced bureaucratic hurdles and offered tax incentives to attract foreign investment in the lithium sector. Much of the regulation is managed at the state level, but many states have also made operating easy. As a result, companies are eager to jump into the Argentine market, while the companies already there—including Livent, Allkem, Ganfeng Lithium and Lithium Americas—are all making progress and likely to expand their production in the years ahead.