This chapter examines the structure and dynamics underpinning the global lithium supply chain. It identifies key challenges to responsible production and processing, as well as tracing lithium products along value chains. It then outlines the regulatory and operational environment, as well as associated risks, in Argentina and Chile.
Enhancing Resilience Through Traceability
Insights from Lithium and Nickel Supply Chains in Latin America and Southeast Asia
Abstract
Lithium is among the most strategically important critical minerals for economic and energy security. Latin America's Lithium Triangle holds more than half of global lithium resources, meaning that operational and governance performance in the region will significantly shape investment dynamics and the reliability of global battery supply chains. Addressing operational and governance risks while improving traceability is therefore a priority for policymakers seeking to de-risk investment and support responsible sourcing along lithium supply chains.
Lithium is a critical input for EVs, electronics and energy storage, with demand rising faster than any other energy-transition mineral (IEA, 2024[1]; Ahmad, 2020[2]) (Ngoy et al., 2025[3]). Widely used for consumer electronics and EVs, lithium demand is expected to more than double between 2025 and 2030 as EV production increases (Jaber, 2025[4]; OECD & IGF, 2023[5]). EVs and battery storage are projected to account for over 90% of total lithium demand by 2030 (IEA, 2024[1]). Mined lithium (from mineral ores or brines) is further refined into chemical compounds, such as lithium carbonate, lithium chloride and lithium hydroxide. Lithium carbonate and lithium hydroxide are typically used for lithium battery manufacturing for EVs and storage systems. Lithium carbonate is used in multiple battery chemistries as well as other uses such as ceramics and glass, as well as steel and iron casting. Lithium hydroxide is a key element in nickel-rich batteries, but also in lubricants and glasses (Brady, 2022[6]).
Lithium production remains highly concentrated. In 2024, the top three producing countries – Australia (36.7%), Chile (20.4%) and China (17.1%) – accounted for nearly 75% of global lithium mining output (USGS, 2025[7]). Brine-based production is highly concentrated in the Andean salars1 found in Latin America’s ‘Lithium Triangle’, with smaller operations also present in China and the United States. Chile’s Salar de Atacama is the world’s most productive brine deposit due to high lithium concentrations and favourable climate conditions (Cubillos et al., 2018[8]). Chile holds more than twice the lithium reserves of Argentina (9.3 Mt and 4 Mt respectively), producing roughly three times as much (USGS, 2025[7]). Australia’s hard-rock spodumene lithium mining consists of large, open pit mining operations such as those that use conventional mining approaches to produce spodumene concentrate. As with brine operations, hard-rock lithium production can be used to produce both lithium carbonate and lithium hydroxide. Hard-rock projects can quickly increase production relative to brine-based equivalents, but typically operate with higher capital and energy intensity (Wood Mackenzie, 2025[9]). The vast majority of lithium concentrate produced in Australia is exported to China (96% of Australia’s total domestic output was exported to China in 2022) for refining (Australian Institute of International Affairs, 2023[10]), while Argentina and Chile refine a greater share of the production output locally into technical and battery grade lithium chemicals.
Processing is further concentrated, with China accounting for 70% of total processing worldwide, and up to 95% of lithium sources from hard-rock ores (IEA, 2025[11]) (Australian Institute of International Affairs, 2023[10]). Brine and hard-rock lithium require distinct, multi-stage refining processes to produce lithium carbonate or hydroxide (IEA-OECD, 2025[12]). Notably, the initial processing of lithium-rich brines typically takes place near their production sites and is therefore more geographically distributed than other types of production. As of 2020, Chile and Argentina were the second and third largest producers of refined lithium, accounting for 17% and 7% respectively of global LCE output (JRC, 2023[13]). Hard-rock production is more geographically diverse, with production taking place in Australia and China. Africa accounted for roughly 30% of new lithium mining output in 2024, with countries such as Zimbabwe, Nigeria and Mali increasing production (IEA, 2025[11]). While some diversification efforts are underway, with several refineries somewhat increasing production in Germany, Indonesia, Japan and the United States in 2024, these developments have not yet materially reduced geographically concentrated processing (IEA, 2025[11]).
Existing trade data and supplier mapping already capture these dependencies well, making continued monitoring a low-burden step towards verifying the material impact of diversification efforts. For example, should the nascent refinery activity in Germany, Japan and the United States expand, this monitoring could provide policymakers with the necessary baseline to assess progress without requiring new data collection infrastructure.
Lithium can also be sourced from secondary sources through recycling. Key feedstock for lithium recycling includes battery manufacturing scrap and end-of-life lithium-ion batteries, in particular from electric vehicles (EV). Lithium recycling rates have been historically low. Lithium is one of the least recycled metals owing to its high reactivity, solubility, and low abundance (Yan, Sattar and Li, 2023[14]). Its recovery is technologically difficult and often uneconomical mainly due to a lack of economies of scale and volatile lithium prices. Recycling is currently estimated to contribute to just 3% of supply, with China currently leading the sector with more than 80% of global EV battery recycling capacity (IEA, 2024[15]). Recycling rates are expected to grow significantly in the next decade as more EV batteries reach their end-of-life. However, major obstacles such as complexity and economic viability of lithium recycling must first be overcome.
A Sankey diagram for global flows of lithium that available data suggest are involved in battery material supply chains.
Source: (Cheng et al., 2024[16])
3.2.1. Water use and environmental impacts
Typically concentrated in arid regions, water use is perhaps the most prominent environmental concern. Water consumption estimates per unit of lithium produced from brines are difficult to measure and can vary significantly depending on life cycle assessment method used, as well as the brine concentration and grade. For example, recent research estimates that for an average brine concentration of 0.17wt% lithium content, approximately 220 m3 of water per tonne of lithium carbonate needs to be evaporated to produce a 6wt% brine for the refining step, while if the brine grade decreases to 0.02wt%, this number approximately increases to 1 900 m3 per tonne (Gallagher et al., 2025[17]). Brine pumping may also disrupt groundwater levels by potentially drawing potable water toward extraction wells (Souza et al., 2025[18]) (OECD, 2024[19]) (Vera, 2023[20]). Since lithium production is not the only economic activity in the region that generates impacts on water, their cumulative impacts are especially concerning. At the same time, brine-based extraction has a relatively low carbon footprint relative to other types of lithium production due to its reliance on solar energy (Souza et al., 2025[18]).
3.2.2. Social impacts and community engagement
Social impacts in areas with brine-based lithium production are predominantly related to Indigenous rights, community participation and the capacity to leverage mining wealth to address communities’ needs, including quality access to healthcare, education or drinkable water (OECD, 2023[21]). Consultation with local communities and Indigenous Peoples is another shared challenge. Despite formal provisions for free, prior and informed consent (FPIC), communities in both countries have criticised consultation processes as inadequate, which has instigated public opposition and protests in some cases. These tensions have, in some cases, created uncertainty for project continuity, and reflect asymmetries in negotiation processes in which some parties have limited access to information.
3.2.3. Emerging risks
These risks are likely to evolve as lithium production expands to new countries and different modes of production. Unlike many other critical minerals, lithium saw production diversify to new producing countries such as Zimbabwe, Nigeria and Mali in recent years. As production is increasing rapidly, ASM is estimated to have accounted for almost two-thirds of African supply in 2023. This volume alone was nearly equivalent to the global lithium market surplus in 2023, highlighting the significance of these operations to the battery value chain (CRU, 2024[22]). Past experience in other mineral supply chains shows that challenges related to ASM differ from those associated with large-scale mining and therefore require an adaptation of responsible sourcing and traceability frameworks. Given the often informal nature of the ASM sector, this may involve tailored engagement with producers to establish realistic and progressive milestones for improvement, combined with economic and market incentives and support to formalisation. Local buyers and concentrators, often linked by commercial relationships to traders and processors, play a key role in integrating ASM production into formal supply chains. As such, they require particular attention in terms of engagement and due diligence.
3.2.4. Battery manufacturing and recycling risks
Lithium-ion battery manufacturing and recycling also pose risks. Lithium-ion battery manufacturing generates significant environmental impacts associated with material and energy consumption. Battery production also consists of energy intensive processes, including cell production, formation/aging, and cell assembly (Yuan et al., 2017[23]). The source of electricity used in manufacturing plays a crucial role in the amount of GHG emissions, depending on plant location and its access to renewable energy. If used incorrectly or damaged, lithium-ion batteries can pose significant fire risks. The treatment of end-of-life batteries requires adherence to strict environmental and safety standards along the entire recycling route from collection, transport to recycling facilities, discharging, dismantling and recycling. Poorly managed battery recycling, and especially disposal practices such as landfilling, can result in fire risks but also leakage of toxins and heavy metals into the environment, creating local environmental and health risks. Informal recycling processes of batteries can also involve the release of various chemicals, and sometimes the use of child labour in certain countries (World Health Organization, 2024[24]).
Despite stronger regulations, few battery manufacturers disclose their actual corporate governance and operational risk profile, sometimes overstating achievements to attract investors or downplaying problems to protect their reputation (Zhao et al., 2025[25]). Additionally, existing research rarely considers operational and governance standards within battery recycling supply chains. This may need to change as secondary lithium supply chains are expected to become critical post 2030s when end-of-life battery feedstock will become available for repurposing or recycling at large scale.
3.2.5. Lithium pricing and other related party transactions
Mispricing of mineral transactions is a widely observed risk in countries endowed with critical mineral resources. Mineral pricing plays a central role in revenue mobilisation, as key fiscal instruments, including corporate income tax, royalties and withholding taxes, are directly or indirectly linked to the value of mineral transactions. Where minerals are sold to related parties at below market value and subsequently on-sold at market prices, profits may be shifted out of the producing jurisdiction, eroding the domestic tax base. Safeguarding fiscal revenues therefore depends on the accurate determination of the price at which minerals are sold.
Lithium pricing presents specific challenges due to the diversity of product forms, the absence of transparent exchange-based pricing, and the importance of quality and processing characteristics in determining value. Lithium pricing is highly dependent on the chemical form of the product, including spodumene concentrate, lithium carbonate and lithium hydroxide, as well as its purity and contaminant profile. Battery-grade products typically command a premium over technical-grade outputs. Unlike exchange-traded commodities, lithium prices can be derived from price-reporting agencies (PRAs) and negotiated contracts, requiring robust comparability adjustments.
As outlined in the general pricing framework in Annex 3.A., determining the price of a mineral requires careful consideration of all the comparability factors. These include product characteristics, contractual terms, functional profile of the parties, business strategies and market conditions. These factors are particularly complex in lithium value chains. Key pricing considerations relate to product quality, including lithium content, moisture levels and impurities. Lithium concentrate is typically priced based on lithium content on a dry basis, although variations in contaminant profiles and physical characteristics, such as particle size, may influence pricing. A recent publication provides a framework to identify the primary economic factors that can influence the pricing of lithium brines and lithium minerals (OECD/IGF, 2024[26]).
Logistics-related factors, including freight and insurance costs, further influence pricing depending on Incoterms, transport routes and destination markets. BEPS risks arise where these pricing elements, particularly in early-stage exports of concentrate, are not aligned with observable market conditions or are insufficiently substantiated. As outlined in Annex 3.A., excessive debt levels and interest rates linked to intercompany loans may result in excessive interest deductions, while mispricing of logistics, procurement and marketing services may further erode the tax base in producing countries.
Addressing these risks requires both accurate pricing and the effective application of domestic legal frameworks, including transfer pricing rules, interest limitation provisions and documentation requirements. In this context, traceability systems play a critical role by providing reliable data on production volumes, mineral quality, shipment routes and transaction conditions. This strengthens the ability of tax administrations to apply these legal tools and verify whether reported transactions reflect economic reality.
The following sections examine how these risks manifest in Argentina and Chile, the two largest brine-based lithium producers and the focus of this report’s site visits and stakeholder consultations.
3.3.1. Argentina: lithium production and processing
Most lithium production in Argentina is concentrated in the northwestern Puna region, which spans the provinces of Catamarca, Jujuy and Salta. A number of new projects have come online in recent years, leading Argentina to more than double its national lithium production between 2023 and 2024 (USGS, 2025[7]). As of 2025, there were six brine operations active in Argentina with five sites under construction and ten undergoing (pre)feasibility or preliminary economic assessments (Ministry of Economy, 2025[27]).
Argentina’s decentralised approach to mining has contributed to a largely concession-based and investor-driven model for lithium production in which private mining companies hold controlling stakes in project companies, with a handful of provincial SOEs holding small equity stakes in some operations. This approach facilitates the entry of new investors but can lead to varied environmental, social and governance outcomes across different provinces. Though lithium production in Argentina remains modest compared to Australia and Chile, a number of major mining companies such as Eramet, Ganfeng Lithium, Lithium Argentina, and Rio Tinto, among others, are quickly scaling up production as well as some domestic processing. Often, foreign companies provide capital and technology while provincial SOEs leverage minority stakes to secure information and revenue sharing. As outlined below, the sector is underpinned by foreign capital originating from Chinese, American, Anglo-Australian, French, Japanese and Korean investors. Argentina has notably developed export taxes on lithium, which have helped raise tax revenue but may have reduced overall exports (Andrenelli et al., 2025[28]).
Some regional governments operate companies involved in lithium development. Since 2008, four provinces have established companies active in the minerals sector: Jujuy Energia y Mineria Sociedad del Estado (JEMSE), Recursos Energéticos y Mineros de Salta (REMSa), Catamarca Minera y Energética (CAMYEN), and Energía y Minerales Sociedad del Estado (EMSE) in Rioja (Deberdt et al., 2026[29]; Shale24, 2026[30]).
Joint ownership of lithium projects by investors from OECD and non-OECD member countries is relatively common in Argentina. A prominent example is the Cauchari-Olaroz project: operated by Minera Exar in Jujuy, the project features co-ownership by Chinese (Ganfeng), Swiss (Lithium Argentina) and Argentine (JEMSE) companies in a single project company. Similarly, stakeholder consultations held in Salta, Argentina revealed that Eramet’s Centenario-Ratones operation was initially launched as a joint partnership with Tsingshan Holding Group before Eramet bought out Tsingshan’s 49.9% stake to become sole owner in 2024.
3.3.2. Argentina: Regulatory environment
Regulations in Argentina are set by both national and provincial legal frameworks and government bodies, which can lead to a somewhat fragmented regulatory environment. Broadly speaking, the national government sets broad investment and environmental guidelines while provincial governments manage issues related to mineral rights and developing sub-national regulations (Deberdt et al., 2026[29]). Provincial authorities establish procedures to grant exploration permits, collect royalties and other fees and allocate concessions (Arias Mahiques et al., 2024[31]). Furthermore, in addition to playing a frontline role managing environmental and social regulations, regional governments play an important role negotiating directly with investors.
General environmental regulations are established at the federal level, which sets baseline standards for issues such as environmental protection or public consultation. The General Law of the Environment is a key piece of federal legislation that outlines procedures for environmental impact assessments as well as mandatory public consultation processes. To obtain an exploration or exploitation permit, a mining company must carry out an Environmental Impact Assessment (EIA), comprising, among other components, an Environmental Impact Report and a public consultation process, which must be approved by the public authority (Arias Mahiques et al., 2024[31]). However, although public consultation is mandatory, the company is neither required to obtain public consent nor forced to address the observations or concerns raised during the public hearings (Kramarz et al., 2024[32]). This is further supplemented by the Environmental Protection Law for Mining Activity and the Mining Code, which include mining-specific environmental regulations (Kramarz et al., 2024[33]).
In June 2024, Argentina adopted the Large-Scale Investment Incentive Scheme (RIGI), which is an investment promotion regime that provides 30-year tax, trade and foreign exchange benefits for projects valued over USD 200 million (Secretaria de Minería, 2024[34]). The RIGI provides a combination of income-based and expenditure-based incentives such as reduced corporate income tax rate and dividend withholding as well as stabilisation provisions and accelerated depreciation and amortisation for qualifying assets. The initiative covers eight sectors, including mining, but may be inconsistently applied across the country depending on subsequent decisions by provincial legislatures to ratify RIGI or not.
Tax incentive design should limit unnecessary costs and distortions and their impact should be evaluated regularly (IMF-OECD-WB-UN, 2025[35]; OECD, forthcoming 2026[36]). Tax incentives should only be used when their expected benefits outweigh their costs, with a preference for incentives tied to expenditures (e.g. investment, employment), such as accelerated depreciation, or enhanced deductions and credits, as they are expected to deliver more additional investment per unit of revenue foregone than income-based incentives.
Income-based tax incentives, such as the tax holidays or income exemptions provided under Argentina’s RIGI regime will reduce a multinational enterprise (MNE)’s effective tax rate, and this could give rise to potential top-up taxes under the Global Minimum Tax (‘GMT’) which reduces the benefit of those incentives. Expenditure-based tax incentives which are directly tied to payroll, or investments in tangible assets in the jurisdiction will be less affected by the GMT. Such incentives may also be more resilient and more consistent with the direction of international tax reform (IMF-OECD-WB-UN, 2025[35]; OECD, forthcoming 2026[36]). Further details are in Annex 2.A.
Beyond the GMT and tax incentives, Argentina has implemented key OECD BEPS measures that are particularly relevant to mitigating mining-related BEPS risks, notably Action 4 (Limitation on Interest Deductions) and Actions 8-10 (Aligning Transfer Pricing Outcomes with Value Creation) and Action 13 (Transfer Pricing Documentation) (OECD, 2026[37]). This enhanced transparency and traceability strengthens Argentina’s audit capacity and risk assessment in the mining sector, particularly for lithium given the opaque publicly available quoted prices.
3.3.3. Argentina: Operational and governance risks
The increase in overall output as well as the number of lithium operations across Argentina has raised additional challenges. These are primarily related to water scarcity, environmental protection and impacts on local communities, including Indigenous Peoples. Indeed, evaporative methods employed to extract lithium from brines often necessitate substantial quantities of water to further concentrate the brines (Baspineiro, Franco and Flexer, 2020[38]). These practices may compete with local agricultural communities for freshwater resources, especially in dryland areas where wetlands are scarce and serve as vital sources for both biodiversity and human activities—an example typical of the Andean plateau ecosystem (Marconi, Arengo and Clark, 2022[39]). As all economic activities in a region generate certain environmental impacts, their individual as well as cumulative impacts need to be better understood. Reported direct effects of lithium mining on wetlands are habitat loss, soil and water salinisation, contamination, changes in water flow, and land subsidence, impacting local plants and animals such as the altiplano’s flamingos (Marconi, Arengo and Clark, 2022[39]; Kaunda, 2020[40]). Lithium mining also impacts human activities, including pastoral activities for local communities, tourism and recreation (Marconi, Arengo and Clark, 2022[39]).
Driven by the federal structure of mining governance in the country, researchers have highlighted the risks of inconsistent application of environmental and social standards across regions (Kramarz et al., 2024[32]). While lower standards are sometimes attributed to competition for investment, there is also evidence that high turnover in provincial governments and varied institutional capacity in regions can pose challenges to the effective design, monitoring and enforcement of lithium-related policy frameworks (Deberdt et al., 2026[29]). Argentina’s federal structure introduces additional challenges for public regulations applicable to the mining sector, as these are determined by the interplay of national and provincial regulations. This results in heterogeneity across provinces regarding the expectations imposed on companies, and failure to leverage mining projects for skills development and co-ordination on infrastructure investment (see Box 3.1).
Salta’s lithium production began in 2015, when the Rincón Project (now owned by Rio Tinto) and the Mariana Project (Ganfeng) entered the construction phase. By 2026, the region had around six approved lithium projects (five producing lithium carbonate and one producing lithium chloride), and dozens in advanced exploration.
Despite the advances in policy and governance frameworks, regional authorities and institutional actors have identified ongoing challenges in la Puna to translate mining activity into long-term local development. These can be grouped into four main areas:
Transport infrastructure for goods and people. The Puna region, where many mines are located, is a high-altitude area reaching up to 4 000 metres. Roads are narrow and steep, and there is limited rail infrastructure. Transport infrastructure remains a major constraint for moving products competitively vis-à-vis neighbouring economies and enabling workforce mobility. Site visits indicated that this has inhibited the development of locally-owned companies and employment opportunities.
Provincial and local government capacity. Rapid growth in mining activity has increased demand for skilled public servants, leading to high staff turnover and difficulties in recruiting and retaining specialised personnel for planning and monitoring.
Local skills and workforce development. While lithium mining has generated significant employment, especially during the construction phase, local workers often lack the specialised skills required for operational roles. Managing expectations is also important, as construction phases can employ up to six times more workers than operations and many workers join during construction phases, but now struggle to find jobs with comparable pay.
Governance to link lithium mining with local development. Unlike employment, lithium mining has generated limited opportunities for local business development. Many suppliers remain specialised companies from outside the region, including neighbouring mining areas in Chile. In addition, Indigenous communities near mining sites continue to face structural well-being challenges, particularly in access to public health services, mental health support, and addiction care.
Companies’ local community engagement activities and related reporting are not always visible or adequately integrated in local policy making nor in community governance. This creates missed opportunities in gaining scale in efforts to improve operational and governance performance, as well as to improve monitoring of the impact of mining.
Source: Government of Salta Province. (2023). Plan de Desarrollo Minero Sustentable 2030.
Some Indigenous communities in northern Argentina have mobilised against lithium extraction projects, arguing that large-scale brine pumping threatens scarce water resources, fragile salt-flat ecosystems and ancestral land rights, with claims that consultation processes have been inadequate (Reventós, 2023[41]). For example, in Jujuy, constitutional reforms designed to facilitate resource extraction were perceived to weaken environmental assessments and protection safeguards, triggering mass demonstrations, with reports of excessive police force, injuries and intimidation against protesters opposing lithium expansion and restrictions on the right to protest (Barber, 2024[42]) (COP de Cambio Climático, 2025[43]). Indeed, despite provisions for public consultations related to mining projects at both the federal and provincial level, studies have reported gaps in the regulation of public participation at the national and provincial levels, as well as lack of guidelines to implement FPIC, when operations affect Indigenous territories (Arias Mahiques et al., 2024[31]).
The limitations of the current regulatory environment to consistently address operational and governance risks, as well as concerns by communities located in mining regions not only creates risks of environmental and social harm, but has created reputational risks and other sources of uncertainty for companies operating in the country. For example, in 2025, Galan Lithium secured approval under Argentina’s RIGI initiative, granting long-term fiscal and regulatory incentives, and obtained financial backing from the Clean Elements Fund to support construction, with initial output scheduled for 2026 (Galan Lithium, 2025[44]). These developments followed a significant legal development in 2024, in which a Catamarca court ordered the suspension of new lithium projects in the Hombre Muerto Salar pending updated environmental assessments and community consultation (Aida Americas, 2024[45]). The injunction highlights that projects with existing permits and support from the central government may face risks to operational continuity if environmental and social safeguards are found lacking. As such, while strategic projects may proceed under supportive national policies, unresolved environmental and social impacts could delay output and impact investment and purchasing decisions. Conversely, the precedent created by this ruling may help to strengthen the sector’s resilience should it encourage more rigorous environmental impact assessments and credible community engagement.
Some protests and social unrest towards operations appear to have emerged from gaps in communication and engagement in decision-making around mining, including policy reforms and monitoring systems. Beyond this, there are other structural factors affecting the impact and the credibility of environmental protections and public consultations in local development. They include provincial and municipal government capacity to enforce, monitor and communicate about adoption of responsible mining practices as well as local conditions to leverage community well-being activities and mining projects for relevant development such as skills and coordination on infrastructure investment.
Formal agreements help to improve perceptions of mining. It is worth noting that opposition to lithium production and processing projects varies across all communities in Argentina. For example, stakeholder consultations in Puna region indicated relatively low social opposition towards mining. Some surveys have accounted for more than 70% of the population in La Puna who support mining (Batallánez, 2025[46]). Additionally, the Salta province ranked first among Argentine provinces in the 2024 Fraser Institute survey for mining policy perception and investment attractiveness (Mejía and Aliakbari, 2025[47]).
Argentina, like most Latin American countries, lacks specific regulations for the recycling of lithium-ion batteries, increasing the risks associated with their unsound or no end-of-life management. Consequently, lithium-ion batteries are either exported to countries with more developed recycling systems or are not recycled at all. However, to export end-of-life batteries for recycling, local waste management companies must have the legal capacities to comply with the requirements of the Basel Convention on the Transboundary Movements of Hazardous Waste, which is often not the case in the region (López Hernández et al., 2024[48]). A pilot recycling project has been set up in the province of Mendoza, following the development of a recycling technology by the Scientific and Technical Research National Council (CONICET) and the National University of Cuyo (UNCUYO) (Obaya, López and Pascuini, 2021[49]).
The provincial government mining development strategy, adopted in 2011 and updated in 2021, identifies ten areas of action, with particular emphasis on supporting local skills, linking local suppliers to mining projects, and modernising government through improved project information and digitalised permitting processes. Positive aspects of mining governance in Salta include:
Third party monitoring systems: the University of Salta is responsible for monitoring the implementation of the mining strategy, which supports long-term delivery of strategic goals. There is also a law for community-led environmental monitoring, where the University of Salta provides capacity-building for community participants.
Policy structures to identify priorities of mining communities and link them with companies’ social activities:
Social working groups meet twice per year to review the priorities of mining communities. These meetings have connected employment needs with job opportunities and identified areas for workforce and local business upskilling.
A database on local mining value chains, including information on suppliers, the share of local workers in mining projects, and the origin of non-local workers.
A resolution allowing the government to require cumulative impact assessments from companies.
The only Indigenous Chamber of Commerce in Argentina. The Chamber of Mining and Tourism Service Providers of the Argentine Puna (CAPROSEMITP) works to develop and strengthen local providers for mining and tourism, providing capacity building on areas of quality, safety, and environmental responsibility. It helps to create economies of scale among providers, connect new companies with industry needs and incentivises entrepreneurship among Indigenous peoples.
Source: Government of Salta Province. (2023). Plan de Desarrollo Minero Sustentable 2030. https://cessalta.org.ar/files/biblioteca/plan-desarrollo-minero-sustentable-2030.pdf
3.4.1. Chile: lithium production and processing
Lithium production is concentrated in the northern province of Antofagasta. The region hosts Chile’s two active lithium mines, both of which are located on the Salar de Atacama, in addition to lithium processing facilities located in Antofagasta city (OECD, 2023[21]). An OECD Member since 2010, Chile enjoys the lowest lithium production costs worldwide (OECD, 2025[50]). The mining sector forms a key pillar of the Chilean economy, accounting on average for 10.9% of national employment and 10.5% of GDP over the past decade, approximately 58% of total exports, and around 6–8% of fiscal revenues (EY, 2025[51]). In 2024, Chile was the largest producer of copper and second largest producer of lithium worldwide (USGS, 2025[7]). While copper accounts for roughly 50% of all exports by value, Chilean lithium production has trebled since 2015, and exports of lithium grew from 0.9% of total exports of goods in 2020 to 7.1% in 2023 (Bednarski, 2021[52]) (OECD, 2025[50]). As such, lithium has emerged as a significant export commodity for Chile and an increasingly important driver of growth and fiscal revenues, particularly during periods of elevated lithium prices.
Chile has developed a distinctive governance framework for lithium. Lithium is categorised as a strategic mineral in Chile’s Constitutional Organic Law of Mining Concessions, which states that lithium can only be exploited by government entities, SOEs, which may establish lease-based agreements or via Special Lithium Operation Contracts (CEOLs) with private operators that enforce production quotas, royalties, and environmental standards. This state-centric regime has slowed the development of new projects, resulting in a highly concentrated production structure. Currently, only two companies, Albemarle and SQM, are commercially producing lithium in Chile, with a few other projects under development (OECD, 2025[50]).
In 2023, Chile developed a National Lithium Strategy intended to increase lithium production through state-led public-private partnerships (National Lithium Strategy, 2023[53]). While the Strategy preserves legacy contracts with SQM and Albemarle, it mandates majority state ownership in new projects via Codelco, ENAMI or a proposed National Lithium Company and doubled the number of exploitable sites (National Lithium Strategy, 2023[53]).
SQM operates in the Salar de Atacama under a 1993 lease agreement with CORFO, valid through 2030, which grants rights to extract and commercialise lithium and potassium from brines (SQM, 2022[54]). As the 2030 expiration approached, SQM and state-owned Codelco renegotiated the framework for continued operations, culminating in a 2024 Partnership Agreement aligned with Chile’s National Lithium Strategy and the establishment of Nova Andino Litio SpA, or Novandino. Under the new structure, Codelco holds 50% plus one share, ensuring majority state control, while SQM retains the remaining stake. SQM will manage operations until 2030, after which Codelco will assume operational leadership (SQM, 2024[55]). This arrangement marks a transition from SQM’s prior fully controlled operating model under CORFO lease terms to a majority state-owned partnership structure with expanded fiscal and governance participation by the Chilean state. The second major leaseholder in Chile’s lithium sector, Albemarle, holds concessions in the Salar de Atacama with contractual rights extending to approximately 2043 (Villegas and Scheyder, 2023[56]). Unlike SQM, Albemarle has not been incorporated into a new majority state-owned joint venture; its exploration and production activities continue under its existing concession framework, although they remain subject to the broader policy direction of Chile’s National Lithium Strategy.
Beyond the Atacama salt flat, Chile is advancing efforts to diversify production through new state-led partnerships. At the Salar de Maricunga, Rio Tinto has committed roughly USD 900 million to acquire a 49.99% stake in a joint venture with Codelco, which retains majority control (Faulker, 2025[57]). The project, located at one of the world’s richest lithium brine deposits, will be majority owned by Codelco (50.01%) and positions Rio Tinto alongside Albemarle and SQM as a key player in Chile’s expanding lithium landscape (Financial Times, 2025[58]). Similarly, the Altoandinos project, developed through a partnership between state miner ENAMI and Rio Tinto, is projected to begin production around 2032, with an initial contribution of USD 425 million for project development and securing a 51% stake (Zadeh, 2025[59]). An overview of lithium operations in Chile is displayed in Table 3.2.
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3.4.2. Chile: Regulatory environment
Chile’s National Critical Minerals Strategy sets out investment and diversification objectives, as well as a commitment to advancing traceability and alignment with national and global RBC standards (Peña and Zabala, 2026[63]). The 2023 National Lithium Strategy notably includes requirements to formalise protection of 30% of salt flats, assess biodiversity and hydrogeology impacts of new projects, reduce water consumption, and enforce ILO 169 consultations with Indigenous communities (National Lithium Strategy, 2023[53]).
Under Chile’s general income tax law, mining companies can utilise accelerated depreciation rules particularly for capital-intensive investments. Given the scale of mining projects especially copper and lithium, accelerated depreciation materially reduces taxable income and improves early cash flow in initial years, during the investment payback period. Accelerated depreciation or immediate expensing limits revenue foregone compared to other tax incentives and increases the likelihood of generating additional investment. It can be particularly beneficial for longer-lived assets, projects with high-upfront costs and liquidity-constrained firms. Accelerated depreciation is also treated favourably under the GMT, as the deferred tax mechanisms do not give rise to a top-up tax liability. In Chile, they could promote investment from MNE entities to develop systems and infrastructure that can track and trace the production of minerals along the mining value chain, thus promoting the adoption of traceability systems.
An effective traceability system can complement the legal measures implemented under the BEPS Actions by reducing the information asymmetries that companies might otherwise exploit. The application of the arm’s length principle, for example, requires accurate and reliable data on the volume and quality of minerals produced, as well as on the physical form in which those minerals are sold across borders along the mining value chain. To achieve this, Chile has implemented many of the BEPS Actions, such as BEPS Actions 8-10 and Action 13 (See Annex 2.A. for information on transfer pricing documentation requirements).
3.4.3. Chile: Operational and governance risks
In Chile’s Atacama region, the expansion of lithium extraction has intensified environmental, water management and governance challenges, particularly in areas inhabited by Indigenous communities (Marchegiani, Hellgren and Gómez, 2019[64]) (OECD, 2024[19]). Similar to Argentina, Chile’s brine-based extraction methods require significant volumes of water, adding pressures into an already water-scarce desert ecosystem (OECD, 2023[65]). This has raised concerns about impacts on hydrological systems, wetlands and local livelihoods (Villa, 2025[66]; Leiss, 2025[67]). Research has indicated some correlation between lithium mining operations in the Salar de Atacama of Chile and vegetation decline, increased daytime temperatures, as well as a decreasing trend in soil moisture levels (Liu, Agusdinata and Myint, 2019[68]). Since brines are not considered as a water body in Chilean regulation, companies are not subject to standard reporting requirements for brine water extraction (Kukulis Montes, 2025[69]). Despite this, lithium operations in key areas such as the Salar de Atacama, governed by CORFO-administered lease agreements, establish detailed extraction limits, stringent reporting obligations. Additionally, while consultation processes have been a central component of recent developments in Chile’s lithium governance framework, for example the recent consultation led by CORFO on the SQM - Codelco partnership, some stakeholders have questioned whether existing consultation and participation mechanisms adequately safeguard the right to free, prior and informed consent (FPIC) and ensure equitable benefit-sharing under Chile’s evolving regulatory framework.
There is also room to further strengthen environmental impact assessments (EIAs) in Chile. Although a full EIA is required where a project may pose significant risks to public health or the environment, most projects undergo the simpler environmental impact declaration (DIA). While DIA can be appropriate in some cases, the underlying issue is that selection of the type of assessment (EIA or DIA) relies on the project owner, rather than an independent party, Oversight of this initial screening and the justification of the selection of assessment remains limited, due to lack of capacity in the government entities. Such a validation process is important to ensure that the screening process is not used as a loophole to avoid a full EIA. NGOs have alerted that EIAs may not be completely insulated from political influence (Marchegiani, Hellgren and Gómez, 2019[64]) (OECD, 2024[19]).
Indigenous organisations have pursued legal remedies, including a request to suspend the community review process for the proposed Codelco-SQM lithium partnership, citing procedural concerns (Daina Beth Solomon, 2025[70]). This partnership process has also triggered opposition to lithium operations in some communities, including road blockades near the Salar de Atacama in protest over the nature and timing of Indigenous engagement during negotiations between SQM and Codelco (Reuters, 2024[71]). At the same time, proposed developments like Rio Tinto’s Maricunga project have prompted debate over water use, ecosystem impacts and the balance between mineral production and resource management in one of the world’s most water-limited regions (Livingstone, 2026[72]).
Antofagasta has been at the forefront of efforts to better link lithium mining with long-term local development. This includes the joint development of a regional mining strategy involving the regional government, mining companies, civil society and Indigenous Peoples, which aims at strengthening governance of mining-related investments to improve public services, training opportunities and infrastructure for local communities, while also securing commitments from mining companies to reduce environmental pressures, particularly in lowering continental water consumption and emissions (OECD, 2023[21]).
Despite this progress some challenges persist in the region:
Economic dependency: The region’s economy remains heavily reliant on mining, which contributed 72% of its GDP in 2023, making it highly susceptible to boom-and-bust cycles driven by global commodity price fluctuations. This dependency creates volatility in the local labour market, creating uncertainty for workers and can have ripple effects in communities such as fluctuations in housing prices.
Persistent inequality: Despite having the highest GDP per capita in Chile, Antofagasta suffers from structural inequalities, including an unemployment rate (9.6%) and income inequality (Gini of 0.51) that both exceed the national averages. Communities lag in some basic quality-of-life dimension against the average of the country, including the lowest life expectancy in the country.
Environmental pressures and water management: As one of the most arid regions in the world, Antofagasta faces challenges in securing water supplies for residents and industry.
Governance and trust towards mining: There is a historic lack of trust between local communities (particularly Indigenous peoples) and the private sector, often due to the historically limited management of the negative environmental and social externalities from mining and the inequitable distribution of its economic benefits. This is compounded by an overly centralised and bureaucratic land management and decision-making system that makes it difficult for local governments to obtain land or approvals for community or industrial projects that could improve quality of life or diversify the local economy.
© James Hermanson, OECD, all rights reserved
In terms of recycling, Chile has started to develop a draft decree in 2023 under the scope of the Law 20.920 that establishes a Framework for Waste Management, Extended Producer Responsibility and Promotion of Recycling. The objective of this decree is to set goals for the recollection, valuation and other duties related to batteries, including lithium batteries (Ministerio del Medio Ambiente).
Although there is a lack of large-scale recycling facilities for lithium batteries in Latin America, some companies are carrying out limited lithium-battery-related recycling activities (López Hernández et al., 2024[48]). In addition, some agreements have been made between the mining company SQM and other actors to promote the recycling of batteries and the development of the appropriate infrastructure (López Hernández et al., 2024[48]).
Both Argentina and Chile adhere to EITI, signalling ambitions to improve overall transparency and public oversight for the mining sector. Through regular reporting, adherents to EITI disclose information on revenues generated from the extractive sector as well as on contracts and beneficial ownership, among other disclosure.
In Argentina’s lithium sector, third-party benchmarking has been emerging at the level of individual operations and company reporting. The most visible example is Rio Tinto Lithium’s Fenix Mine in Catamarca Province, which became the first lithium operation in Argentina to release an audit under IRMA (Kramarz et al., 2024[33]). The Fenix Mine audit results meet the requirements for at least an IRMA 502 performance level, and is pending a final assessment of the relevant Free, Prior and Informed Consent provisions (IRMA, 2025[76]). With respect to mineral supply chain due diligence, the Fenix operation is listed in the Responsible Minerals Initiative (RMI) database as having completed a Conformant Assessment under the Responsible Minerals Assurance Process (RMAP) (RMI, 2026[77]). The publication of IRMA audit findings, including community and water management criteria, has potential significant implications for transparency and stakeholder dialogue in such environments where lithium extraction intersects with Indigenous communities and water-scarce ecosystems.
The two principal lithium producers in Chile, SQM and Albemarle, have publicly engaged with external benchmarking through the IRMA. Albemarle’s Salar de Atacama lithium brine operation completed an independent IRMA audit and received an IRMA 50 performance rating in June 2023 (Albemarle Corporation, 2023[78]). In 2023, SQM’s Salar de Atacama lithium operation completed its own independent IRMA audit and achieved an IRMA 75 performance level, indicating that it met all ‘critical requirements’ of the standard and at least 75% of applicable criteria (IRMA, 2023[79]). Despite SQM’s strong performance in its IRMA audit, a revision of this audit has indicated areas for further improvement in terms of more comprehensive water management indicators, as well as in the implementation of transparency measures under the framework of EITI (Balcázar M․ and Argento, 2026[80]). SQM also includes disclosures under frameworks such as the Global Reporting Initiative (GRI) and incorporates SASB performance indicators as part of its annual reporting (SQM, 2025[81]). SQM Salar S.A. (Planta Química Litio Carmen) is also conformant under RMAP for its lithium processing operations in Chile (RMI, 2026[77]).
At the same time, both lithium companies have also implemented individual actions to reduce environmental impacts, especially water consumption, and enhance benefits in local communities. SQM’s Salar Futuro Project aims to eliminate consumption of inland water and achieve carbon‑neutral lithium by 2030, while Albemarle operates a detailed water‑monitoring and early‑warning system (PSAH) under Chilean environmental permits. Both companies have also established agreements with Indigenous communities and supported the regional government of Antofagasta in the elaboration and goals of the 2050 mining strategy of Antofagasta. Overall, these findings largely align with the survey data, which indicated strongest overall uptake of RMI and IRMA for companies operating along lithium supply chains, with a prevalence of RMI membership among downstream companies using lithium products in the survey.
Growing uptake of third-party benchmarking in the lithium supply chain is a positive development, although it cannot replace government and community oversight. Ultimately a more systematic assessment is needed to measure any reductions in operational and governance risks on the ground. As noted in Chapter 5, the majority of RBC metrics across major rating products measure company policies and processes rather than direct impacts. Understanding the relationships between initiative participation and actual risk outcomes is an important area for further research, to which the site visit and survey evidence in this report provides a baseline.
The Responsible Minerals Initiative is the most commonly cited multi-stakeholder and industry initiative in the lithium supply chain, both in terms of initiative audits and assessments as well as membership.
Note: This figure presents responses to survey Question 32 (“Have you been audited or assessed by one or more of the following sustainability initiatives?”) and Question 33 (“Are you a member of one or more of the following sustainability initiatives?”), for key company types and respondents active in the lithium supply chain. Multiple responses were permitted. “Other” write-in responses were reviewed and mapped to standardised initiative categories; one response could be mapped to more than one category where relevant. Survey data was collected between late 2025 and early 2026. Please refer to the methodology section for further detail.
Source: OECD-IEA Survey on Traceability in Critical Mineral Supply Chains
Despite some favourable conditions for traceability, its uptake remains in early stages among sample countries. Though production is relatively concentrated in a handful of countries, the rest is spread out across a large number of small producers (IEA-OECD, 2025[12]). Similarly, while refining capacity is concentrated in China, and there is a lower number of companies involved in lithium refining, the top three producers account for only 30% of refining (IEA-OECD, 2025[12]). Lithium recycling is also currently highly concentrated in China. Close to 90% of lithium demand came from a single end-use market, batteries (USGS, 2025[7]), which may be advantageous compared to minerals with highly dispersed end-use markets.
Data limitations, in particular with regard to trade and production data in downstream segments of the supply chain could present an obstacle to tracing lithium. Material flows are networked rather than linear, with diversion into non-battery uses, unobserved international flows, and gaps in trade data (Cheng et al., 2024[16]) (Andrenelli et al., 2025[28]). Cathode and lithium-ion battery manufacturing stages are in particular challenging for accessing data as such data is typically not publicly available and both of these stages are dominated by China, which further complicates data access (British Geological Survey, 2021[82]). Further downstream, the traceability in the recycling segment is constrained by limited data of lithium flows from collection of end-of-life batteries (and other products with lithium content) to recycling processes and secondary uses of recycled lithium.
Consultations undertaken during site visits in Argentina and Chile indicated that the uptake of traceability in lithium supply chains remains in early stages in both countries, but steps have been taken to improve visibility over mineral production. Mine operators were broadly aware of growing interest in traceability systems, but noted that these were driven by customers based in countries that account for a relatively small portion of demand for lithium. Some noted that the uptake of traceability systems largely depend on stronger demand by these jurisdictions or the development of a price premium for responsibly produced lithium. These sentiments were broadly shared with policymakers, who emphasised the need to reward responsible environmental and operational practices through enhanced market access, price premia, or preferential financing. Moreover, lithium supply chains in Latin America present specific traceability challenges. In Argentina, decentralised governance of the mining sector creates challenges for scaling traceability. Nonetheless, the country has taken important steps to improve overall visibility over mineral production. For example, the federal government developed the Argentina Mining Information System (SIACAM), which is a digital platform designed to centralise information on extractives production and other indicators.
Chile maintains a public registry of permitted mining sites that can potentially be used by third party certifiers as to whether natural resources such as those included in EV batteries come from sanctioned and legal sources (Deberdt et al., 2026[83]). In Chile, SQM partnered with a private sector traceability provider to track physical flow of lithium to battery cells and packs manufacturing (techUK, 2023[84]).
Taken together, the lithium supply chains in Argentina and Chile present favourable conditions for traceability due to formal production structures, concentrated ownership and existing national data systems. Yet uptake remains in early stages, constrained by limited demand from major importing markets and the absence of price premia. The most pressing gaps are in downstream processing and the physical characterisation of exported minerals, where even small differences in grade carry important fiscal implications. For more sensitive end-uses, existing traceability efforts may need to be supplemented by more intensive approaches. In particular, lithium used for energy storage systems used by the defence sector may warrant a stronger response. These findings inform the targeted recommendations for lithium in Chapter 6.
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Mispricing of mineral transactions is a widely observed risk in countries endowed with critical mineral resources. Mineral pricing plays a central role in revenue mobilisation, as key fiscal instruments, including corporate income tax, royalties and withholding taxes, are directly or indirectly linked to the value of mineral transactions. Where minerals are sold to related parties at below market value and subsequently on-sold at arm’s length prices, profits may be shifted out of the producing jurisdiction, eroding the domestic tax base.
Safeguarding fiscal revenues therefore depends on the accurate determination of the price at which minerals are sold. As highlighted in OECD Transfer Pricing Guidelines (OECD, 2022[211]), both the determination of mineral quality and the pricing of related-party transactions, particularly at the point of the cross-border sale, pose material BEPS risks where prices deviate from arm’s length conditions. Ensuring that mineral transactions reflect market-based pricing is thus not only a technical transfer pricing exercise, but a fundamental component of fiscal governance and domestic resource mobilisation in mineral-producing countries.
The OECD Transfer Pricing Guidelines emphasise the application of the arm’s length principle, with a preference for the Comparable Uncontrolled Price (CUP) method where reliable data is available. Under this approach, the price of a mineral in a controlled transaction is benchmarked against prices observed in comparable transactions between independent parties, often using publicly quoted prices as a reference point.
Where necessary, adjustments are made to account for differences so that the resulting price approximates the conditions that would have been agreed between independent parties. The application of these principles varies across minerals depending on their physical characteristics, market structure and pricing mechanisms. In particular, lithium and nickel present distinct pricing challenges due to differences in product forms, market transparency and processing stages.
Additional BEPS risks beyond mineral pricing
While mineral pricing represents a primary channel for profit shifting, BEPS risks in the mining sector extend beyond the pricing of the mineral itself. These include:
Mispricing of other related-party transactions associated with the mining activities
In addition to mineral sales, companies may misprice other transactions along the value chain, including freight, offshore services, procurement and marketing arrangements. These transactions may be structured in a way that shifts profits away from producing jurisdictions where value is created, particularly where charges are not aligned with the underlying economic activity or lack sufficient supporting documentation.
Financing structures
Mining and associated infrastructure investments are typically financed through a combination of internally generated funds, debt and equity. From a tax perspective, interest payments on debt are generally deductible, whereas returns on equity are not. Multinational enterprise (MNE) groups may therefore structure financing arrangements to maximise interest deductions.
Where financing is provided by related parties, two key BEPS risks may arise. First, capital that is economically equivalent to equity may be arranged as intercompany debt in order to generate deductible interest payments. Second, such debt may carry non-arm’s length terms and conditions designed to increase the level of deductible expenses i.e. an excessive interest rate. Both practices can result in excessive interest deductions in the producing jurisdiction, with profits effectively shifted to the jurisdiction where the lender is located.
To address these risks, the OECD BEPS Action 4 framework recommends limiting net interest deductions by linking them to an entity’s level of economic activity, typically through earnings-based rules (e.g. a percentage of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)).
Information gaps and enforcement challenges
The effectiveness of measures to address BEPS risks depends critically on the availability of reliable and timely information. In many cases, tax administrations face significant information asymmetries, limiting their ability to identify risks, assess compliance and enforce relevant legislation.
Addressing these challenges requires that tax administrations and other relevant government bodies have access to data that enables them to understand MNE group structures, detect potential non-compliance and verify the economic substance of transactions. In this context, traceability systems and other data collection mechanisms can play an important role by improving visibility over production volumes, mineral quality, transaction flows and supply chain relationships.
Role of transfer pricing documentation and information exchange
Transfer pricing documentation under BEPS Action 13 provides a key tool for addressing information gaps. The Action 13 framework requires MNEs to provide a standardised set of documentation comprising the Country-by-Country (CbC) report, Master File and Local File. Together, these documents provide tax administrations with a comprehensive overview of an MNE’s global operations, value chains, transfer pricing policies and allocation of profits. Effective use of this information is further supported by mechanisms for the exchange of information between jurisdictions. These include the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), bilateral tax treaties and tax information exchange agreements, which enable jurisdictions to share confidential taxpayer information in a secure manner.
Taken together, improved access to information through transfer pricing documentation, exchange of information frameworks and traceability systems strengthens the ability of governments to identify BEPS risks, apply relevant legal provisions and ensure that profits are taxed where economic activities take place.
← 1. A salar is a high-altitude salt flat formed in a closed basin where ancient lake water evaporated and left concentrated saline deposits. Beneath its hard, white crust lies brine enriched in lithium, which is pumped into shallow evaporation ponds and concentrated by intense solar radiation and low humidity.
← 2. The IRMA 50, IRMA 75 and IRMA 100 levels reflect increasingly higher levels of performance across the four sections of the IRMA Standard. At the 50, 75 and 100 levels of achievement, mines must also meet a set of critical requirements, although at IRMA 50 and IRMA 75 some minor non-conformity is allowed as long as there is a corrective action plan to fully meet them by the next 3-year cycle full verification audit. To reach IRMA 100, all of the critical requirements must be fully met.