Mexico’s so far undeveloped lithium industry has huge potential, with the country’s reserves estimated at 1.7 million tons of lithium. Several private companies want to start developing projects in Mexico as the demand for lithium for batteries is rising rapidly, as well as in support of a green transition. But President Andrés Manuel López Obrador (AMLO) is adamant about nationalizing Mexico’s energy sector, which has led to delays in the industry’s development. Nevertheless, we expect Mexico to become a regional hub for lithium and battery production over the coming decades.

Nationalization and Private Sector Involvement

Last year, President AMLO nationalized Mexico’s lithium deposits in a bid to let “the nation be the owner of this strategic mineral.” And in February this year, he signed a decree for the energy ministry to manage the reserves, located in Sonora in the north of the country. The decree declared 234,855 hectares in the region as a mining zone known as Li-MX 1.

12 foreign companies hold active mining concessions and hope to develop Mexican lithium reserves as part of their operations. But now ALMO is reviewing them all to ensure that the country’s reserves will not be exploited by purely foreign companies. The CEO of the state-run company for lithium production LitioMx, Pablo Taddei, said that it would be open to foreign partnerships but that the federal government must hold the majority stake in any joint venture.

However, the move to nationalize has deterred many companies from showing an interest in the region, as prospects are uncertain. We believe that the private sector could play a pivotal role in the development of Mexico’s lithium reserves, thanks to experience and expertise in the sector. Mexico is not currently producing lithium and does not have experience in the sector, meaning input from private-sector mining companies would be highly valuable. Further, it is important that any concessions that were approved for the exploitation of Mexican lithium before the 2022 reform of the mining law remain in place, to avoid legal action being taken against the Mexican government.

Production Potential

Mexico hopes to commence production of lithium-ion batteries in late 2023 and several countries are investing in this production, including the United States, South Korea and China. In late 2022, President AMLO announced a $2.5 billion plan to transform parts of the Mexico-U.S. border into a green energy hub, with major solar and wind facilities as well as electric vehicle (EV) factories. This goes hand in hand with Mexico’s aim to become a regional manufacturing hub, particularly for EVs thanks to its strong automaking industry.

A report from the Mexican finance ministry estimates that Sonora’s lithium reserves could be valued at as much as $600 billion. And the exploitation of these reserves would help reduce Mexico’s reliance on foreign powers for its lithium supply to make the batteries required for EVs and renewable energy projects. Although we expect it to be several years until Mexico can provide a steady supply of lithium.

Our Outlook

We see significant potential for Mexico’s large lithium reserves, particularly thanks to the rapidly growing global demand. However, we believe that Mexico could benefit from expertise and funding from foreign private-sector mining companies to successfully exploit its lithium. This would help Mexico achieve its aim of becoming a regional green energy and manufacturing hub, helping North America to reduce its reliance on Chinese metals and minerals, as well as manufactured goods.