Environmental and Social Impacts of Chinese Trade in Bolivia

Case  Study  2:  Lithium  Industrialization  Process  at  the  Salar  de  Uyuni   In  the  context  of  these  discouraging  experiences  in  the  management  and  use  of   mining  resources  in  Bolivia,  the  country  is  currently  facing  a  new  challenge:  it   possesses  probably  the  largest  deposits  of  lithium  in  the  world,  which  are  still   unexploited.  At  the  heart  of  Bolivia’s  lithium  development  efforts  is  a  simple  goal:  to   lift  people  out  of  poverty  by  achieving  the  maximum  benefit  possible  from  a  natural   resource  that  connects  the  nation  to  the  cutting  edge  of  global  markets.  But  there  is   still  no  clear  mechanism  to  achieve  that  goal  and  avoid  a  new  Resource  Curse.   About  80%  of  the  known  global  lithium  reserve  base  is  located  in  the  so  called   “Lithium  Triangle,”  an  area  bordered  by  the  three  large  South  American  salt  flats:   The  Salar  de  Atacama  in  Chile,  the  Salar  de  Uyuni  in  Bolivia,  and  the  Salar  del   Hombre  Muerto  in  Argentina.  With  governments  around  the  globe  demanding   increased  fuel  efficiency  to  reduce  their  dependence  on  fossil  fuel,  private  foreign   firms  are  intensively  pursuing  access  to  Bolivia´s  lithium.  The  US  Geological  Survey   (USGS)  estimates  Bolivia’s  lithium  reserves  to  be  5.4  million  tons,  nearly  twice  that   of  Chile.  The  reserve  base  is  found  principally  in  the  Salar  de  Uyuni,  a  3,860  square   mile  desert  plateau  (altiplano)  area  of  the  Bolivian  Andes  located  in  the  department   of  Potosí,  the  same  department  as  in  the  Jungie  mining  case.  Salar  de  Uyuni  is  the   largest  salt  flat  in  the  world  and  the  brightest  object  on  the  Earth´s  surface  visible   from  space.     Population  and  Economic  Activity   The  Salar  de  Uyuni  basin  occupies  approximately  61%  of  the  Department  of  Potosí   in  Bolivia.  The  2011  estimated  population  of  the  basin  was  42,098  people.  The  most   populated   towns   in   the   study   area   are   Uyuni   and   Colcha   “K”.   The   most   common   employment   sectors   in   the   basin   are   quinoa   agriculture   (only   10%   of   the   land   is   suitable   for   agriculture,   but   the   activity   occupies   80%   of   the   population)   and   camelid  livestock  (which  occupies  60%  of  the  land  use).  The  Salar  de  Uyuni  is  also   one  of  Bolivia's  main  tourist  centers,  attracting  some  50,000  visitors  a  year,  as  well   as   being   a   fragile   eco-­‐system   with   many   indigenous   species   (Revenga   and   Kura   2003).  Tourism,  which  provides  a  living  for  23%  of  the  population,  relies  on  these   untouched  landscapes.  In  addition,  a  further  12%  of  the  population  makes  a  living   directly  from  the  salt  harvest.  Usually  land,  climate,  water  and  vegetation  conditions   force   the   communities   to   combine   these   economic   activities   to   cover   their   basic   needs.   The  Bolivian  Lithium  Industrialization  Strategy   Bolivia’s  lithium  strategy  dates  to  1974  when  the  government,  through  Supreme   Decree  (SD)  11674,  highlighted  the  importance  of  natural  resources  at  the  south   east  of  Bolivia  and  declared  the  Uyuni  Basin  to  be  a  Fiscal  Reserve.  This  status,  still   in  place  today,  gives  the  Bolivian  State  ownership  of  the  Salar  and  the  legal  right  to   exploit  and  administer  all  of  the  natural  resources  within  the  reserve’s  boundaries.   Legislation  in  2008  (SD  29496)  declared  the  development  of  natural  resources  from   the  Salar  de  Uyuni  to  be  a  national  priority,  with  the  specific  goal  of  supporting   economic  and  social  development  in  Potosí.  In  the  same  vein,  COMIBOL  created  then   the  National  Directorate  of  Evaporitic  Resources  (renamed  in  2010  to  the  National   Management  Committee  for  Evaporitic  Resources,  GNRE).  This  body  will  manage   around  $5.7  million  USD  for  natural  resources  development  at  the  Salar  de  Uyuni.     Within  GNRE  a  Scientific  Advisory  Committee  was  created,  bringing  together   experts  from  universities,  private  companies,  and  governments  to  share  knowledge   without  having  to  commit  to  any  long-­‐term  partnerships.   Box  1.  Bolivian  Lithium  Industrialization  Strategy   The  strategy  consists  of  three  phases:   Phase  1:  Pilot  Plants   Development   of   infrastructure,   installation   and   setup   of   the   state   pilot   plants   for   lithium   carbonate  (LCE)  and  potassium  chloride:   • • • • The   pilot   LCE   plant,   located   in   Llipi,   was   initiated   in   September   2012   and   opened   on February  3,  2013,  with  a  projected  capacity  of  40  tons  per  month. Infrastructure  was  built  for  30  pieces  of  equipment  in  2600  square  meters. 2013.18  km  of  roads  were  built  between  Llipi  and  the  evaporation  pools. Production  of  LCE  is  now  being  concentrated  for  future  sales,  and  in  particular  for  the pilot  plant  of  lithium  ion  batteries  in  la  Palca. Phase  2-­‐  Industrial  Production   Industrial  Plants  design:   • • • Financing  will  be  provided  by  the  Bolivian  Central  Bank  (BCB). Evaporation  pools  will  be  built. The  lithium  industrial  plant  is  expected  to  produce  40,000  to  60,000  tons  per  year  of LCE  starting  in  2014  (COMIBOL,  2008;  La  Razón,  2009). Phase  3.  Production  of  Ion  Lithium  Batteries  (with  LCE  as  a  main  ingredient)   • • • • • • • • • Training,   experimentation   and   production   of   lithium   ion   batteries   and   other   lithium products,  performed  by  qualified  Bolivian  workers  trained  in  China  and  elsewhere  (21 workers  as  of  this  writing). Completed:  Purchasing  of  turnkey  technology. Contract   with   the   Chinese   firm   Lin   Yi   Dake   Trade   Co.   Ltda.   to   buy   a   pilot   plant   for lithium  ion  batteries,  to  be  installed  at  La  Palca  in  an  area  of  1600  square  meters.  This contract  was  signed  in  May  2012,  with  10  technicians  working  in  the  installation. Production  capacity  of  the  Pilot  Plant:  1200  Ah/day. Expected   production:   1,000   cellphone   batteries   per   day,   40   batteries   for   use   in   electric vehicles. Total  cost:  USD  3.7  millions. Job  creation  expected:  35  direct  and  100  indirect  jobs. Partnership  or  association  with  foreign  enterprises  will  be  sought  in  order  to  generate technology  transfer. January  17,  2014:  Inauguration  of  Pilot  Plan  of  Batteries  in  La  Palca. Since  2006,  foreign  corporations  and  governments,  including  Brazil,  Canada,   Japanese  automakers,  and  the  French  electric  car  manufacturer  Bolloré,  have   lobbied  the  Bolivian  government  for  access  to  the  lithium  resources.  Bolivia’s   current  diplomatic  tensions  with  Washington  have  left  American  companies  on  the   sidelines  as  other  foreign  enterprises  continue  to  actively  negotiate  lithium  deals  in   Bolivia.   The  Net  Benefits  Approach  applied  to  the  Bolivian  Lithium   Industrialization  Process.   Local  Acceptance  of  the  Lithium  Industrialization  Process   The  main  towns  involved  in  the  lithium  industrialization  process  are  the  ones   bordering  the  Uyuni  Salt  Lake:  Colcha-­‐K,  Uyuni,  Tahua  and  Llipi.  Their  high  poverty   rates  are  the  worst  in  the  department  of  Potosí:  in  LLica  and  Tahua,  89%  and  99.7%   of  population  living  in  poverty,  respectively,  according  to  the  unsatisfied  basic  needs   method  (CNPV  2001).   This  context  has  promoted  a  mixed  reaction  to  lithium  development.  Some  groups   and  communities  in  the  region  openly  support  lithium  development  as  an   opportunity  for  increased  income  and  development.  But  there  are  also  important   local  groups  with  serious  objections  to  such  development.  Quinoa  producers  and   tourism  operators  have  expressed  concern  about  supposed  benefits  that  the   Bolivian  government  has  promised  from  lithium,  claiming  that  the  benefits  are   irrelevant  to  local  needs  and  could  easily  damage  the  three  key  activities  in  the   region  –  agriculture,  cattle  rearing  and  tourism  (Ströbele-­‐Gregor,  2013).  Moreover,   many  different  international  actors  have  tried  to  exploit  the  Salar  de  Uyuni’s  mineral   riches  in  the  past.  But  each  time,  local  communities  have  mobilized  to  fight  what   they  see  as  giveaway  by  corrupt  political  interests.  One  of  the  foreign  players  forced   out  of  the  Salar  (by  the  communities  and  by  a  proposed  new  national  tax  on  the   company)  was  Bolivia’s  first  serious  foreign  lithium  suitor,  the  U.S.  company  Food   Machinery  Chemical  (FMC)  formerly  known  as  Lithco.     In  this  context,  and  after  conducting  surveys  in  the  surrounding  towns  and   interviewing  key  actors  (such  as  the  Comite  Civico  and  local  authorities)  our   conclusion  is  that  the  willingness  to  accept  the  project  in  the  area  is  very  low,  for   two  main  reasons:  first,  potential  negative  social,  economic  and  environmental   impacts;  and  secondly,  the  reluctance  for  foreign  investors’  participation  given  the   history  of  exploitation  of  national  natural  resources.     Economic  Benefits   According  to  Meridian  Research  Group  (MRG)  estimates,  the  concentration  of   lithium  varies  widely  across  the  Salar,  so  production  would  be  concentrated  in  small   areas.  The  MRG  report  finds  that  the  structure  of  the  Salar  de  Uyuni  is  very  different   to  the  Salar  de  Atacama  (Chile),  the  quality  of  lithium  available  per  unit  surface  is   much  lower  and  a  correspondingly  greater  area  of  the  Salar  would  have  to  be   exploited  for  an  equivalent  lithium  production  (Meridian  Research  2008).   The  report  concludes  that,  considering  the  real  grade  and  distribution  of  lithium  in   the  Uyuni,  its  lithium  might  not  be  a  particularly  attractive  resource  and  that  the   real  exploitable  reserve  could  be  only  approximately  300,000  tons  rather  than  the   estimated  millions.  Moreover,  the  available  methods  for  mining  could  be  highly   environmentally  damaging.     Royalties  And  Taxes   Enormous  expectations  have  been  generated  regarding  possible  future  profits,   together  with  demands  for  their  redistribution.  However,  neither  the  Bolivian   government  nor  the  Chinese  company  has  reported  on  the  income  from  the  pilot   plants.  It  is  also  important  to  highlight  that  the  yearly  contribution  of  the  mining   sector  to  the  public  revenues  has  already  increased  significantly  between  2006  and   2011,  from  0.9  to  2.1  percent  of  GDP,  as  shown  in  Table  2  above  (Ministry  of  Mining,   2013).     The  positive  impact  of  lithium  development  on  human  wellbeing  is  mainly  due  to   employment  opportunities  and  the  general  contribution  to  economic  activity  in  the   municipality  and  the  country.  However,  with  regard  to  the  former  point,  it  should  be   noted  that,  the  workforce  available  in  the  municipalities  are  mainly  unskilled  so  the   potential  for  their  participation  in  mining  activities  is  uncertain.    At  the  pilot  plant  of   ion  lithium  batteries  installed  by  the  Chinese  company  Lin  Yi  Dake  in  La  Palca,   currently  21  qualified  Bolivian  professionals  work  in  diverse  areas;  GNRE  estimates   that  the  projected  activities  at  this  plant  will  support  35  direct  and  around  100   indirect  jobs.   There  are  no  documented  plans  for  social  investments  at  this  stage,  by  either  the   private  enterprise  or  the  Bolivian  government.  It  is  also  well  known  that  with  regard   to  the  exploitation  of  lithium  reserves  in  Potosí,  the  history  of  resource  conflict  in   Bolivia  indicates  strongly  that  the  potential  for  conflict  is  indeed  major.  The  local   indigenous  population  and  the  mine  workers  in  Potosí  are  well  organized,  but   looking  for  shortp term  rewards.   Environmental  Risk   Serious  potential  environmental  problems  stemming  from  lithium  mining  in  Bolivia   cannot  be  ignored.  Bolivia´s  ecologically  fragile  Salar  de  Uyuni  could  become  an   environmental  disaster,  if  sufficient  precautions  are  not  taken.  Also,  lithium   development  could  seriously  damage  three  main  activities  –  agriculture,  cattle   rearing  and  tourism.  There  is  already  information  that  in  Southwest  Potosí,  the   legally  protected  Eduardo  Avaroa  Reserve  has  already  been  contaminated  by   evaporitic  resource  operations  (Aguilar  2009).   Many  Bolivian  and  international  environmental  organizations  question  the   adequacy  of  Bolivia´s  environmental  strategy  for  lithium  development  in  southwest   Potosí.  The  effects  of  lithium  production  on  the  ecosystem,  apart  from  the   destruction  of  natural  habitats,  would  come  primarily  in  the  form  of  water  use  (due   to  the  creation  of  evaporation  pools)  and  pollution  of  water  and  air  by  the  chemical   processing  of  the  lithium.  The  water  reserves  of  the  Salar  de  Uyuni  are  classified  as   non-­‐renewable,  as  the  groundwater  regenerates  only  extremely  slowly.  Moreover,   there  is  already  a  shortage  of  water  in  the  region  today  (Aguilar  2009;  Hollender   and  Shultz  2010).   Already,  there  is  clear  evidence  of  the  competition  for  water  in  southwest  Potosí   between  mining  operations  and  crop  irrigation  (Aguilar,  2009).  Another  competing   force  is  the  tourism  industry,  though  its  water  demands  haven’t  been  directly   analyzed.  Even  more  alarmingly,  there  are  90  active  mining  concessions  around  the   Salar  that  already  rely  on  the  region’s  water  resources.  The  most  exploitative  of   these  concessions  is  the  San  Cristobal  Mine,  concentrated  on  extracting  tin,  silver   and  zinc;  which  will  be  a  certain  competitor  for  fresh  water  and  salt  water  from  the   Rio  Grande.   In  the  face  of  all  of  these  risks,  the  Chinese  company  Lin  Yi  Dake  has  not  published   any  measures  or  plans  to  affront  environmental  deterioration.  Thus,  after  describing   the  main  components  of  the  Net  Benefits  Approach,  the  results  shows  that  the   lithium  industrialization  process  does  not  meet  the  standard  of  weak  sustainability;   the  expected  social  and  economic  benefits  are  low  and  unlikely  to  outweigh  social   and  environmental  costs.   4. Policy  Recommendations Currently,  the  Bolivian  economy  is  very  dynamic  and  in  good  health.  Especially   noteworthy  is  that  the  Net  International  Reserves  (NIR)  of  the  country  amounted  to   $14.43  billion  USD  December  2013.  For  2012,  the  last  year  for  which  the  World   Bank  has  this  data,  Bolivian  reserves  amounted  to  14.6  months  of  national  imports   (placing  Bolivia  in  6th  place  worldwide)  and  201.5%  of  national  debt  (placing  it  in   8th  place  worldwide).  The  IMF,  ECLAC  and  World  Bank,  among  others  praise  the   strong  economic  performance  of  the  country.     Certainly  the  Bolivian  economy  has  been  benefited  from  high  world  fuel  prices,   mainly  through  exports  of  natural  gas  to  Brazil  and  Argentina.  Moreover,  the   increase  in  the  price  of  raw  material  exports  allowed  the  income  of  the  public  sector   to  increase  significantly.  At  the  same  time,  Bolivia’s  policy  of  income  redistribution   has  also  been  relevant,  since  it  ensures  that  these  benefits  are  broadly  shared,   through  an  improvement  of  the  minimum  wage  and  social  programs  that  have  an   impact  on  poverty  reduction.  FDI  flows  seem  to  continue  coming  to  Bolivia  given  the   confidence  created  by  the  economic  scenario.  However  the  weak  institutional   framework  is  still  a  deep  and  remaining  problem.   For  example,  in  relation  with  the  important  NIR,  they  certainly  provide  the   economic  and  financial  stabilization  to  the  country,  support  the  confidence  in  its   currency,  guarantee  its  imports,  prevent  external  imbalances  and  maintain  the  trust   to  honor  the  external  debt.  But  why  not  create  a  Stabilization  Fund  to  manage  these   important  natural  resources´  revenues  as  in  Chile  or  Norway?  That  is  a  recurrent   suggestion  but  the  mechanisms  of  savings,  spending  or  even  determining  which   entities  will  be  responsible  for  its  management  are  not  easy  to  define.  Overall,  the   lack  of  an  institutional  framework  in  the  country  is  the  main  problem.  Indeed  having   strong  public  institutions  would  allow  the  State  to  earn  a  reputation  of  credibility   for  its  management  of  fiscal  policy,  and  guarantee  a  successful  management  of  the   stabilization  fund.  However,  Bolivia  is  not  institutionally  ready  for  such  a  step.  In   this  weak  institutional  context  the  presence  of  increasing  Chinese  trade  flows  and   investments  imply  opportunities  but  also  important  threats  and  challenges  for  the   country.     Overall,  the  growth  of  China’s  exports  and  its  uneven  commercial  relationship  with   Bolivia  create  threats  to  Bolivian  industries  such  as  textiles  and  footwear,  which   face  stiff  competition.  Bolivia  should  apply  preventive  measures,  protecting  its   product,  but  also  applying  proactive  measures,  such  as  the  promotion  of  production;   imitating  some  policies  of  China,  such  as  creating  the  conditions  for  greater  FDI  and   promoting  productivity  to  defend  the  spaces  of  the  domestic  market.   Turning  now  to  Chinese  investment  in  Bolivia,  this  FDI  is  highly  concentrated  in   natural  resource  intensive  sectors  -­‐  hydrocarbons,  mining,  transport,  and  basic   services  -­‐  with  scarce  labor  requirements  and  domestic  input  demand.  In  this  aspect   Chinese  FDI  is  not  much  different  from  general  trends  of  FDI  inflows  into  Bolivia,  in   further  promoting  the  deindustrialization  of  the  economy  mainly  due  to  the  high   profitability  that  the  development  of  raw  materials  offers  today,  despite  the   environmental  and  social  impacts  and  the  limitations  in  oversight  and  enforcement   of  human  and  worker  rights.  The  Canutillos  Mine  study  case  illustrates  clearly:  even   though  the  Chinese  company  Jungie  SRL  just  recently  started  activities,  it  has   already  faced  recurring  environmental  and  social  troubles.     One  of  the  most  basic  truths  of  the  resource  curse  is  the  prospect  that  when  a   government  suddenly  has  a  great  deal  of  financial  resources,  there  is  no  guarantee   that  the  people  will  end  up  any  better  off.  New  revenues  become  an  incentive  for   corruption  and  unsustainable  exploitation  on  natural  resources  to  those  allied  with   the  nation’s  leaders.  Bolivia,  unfortunately,  is  still  an  example  of  this,  especially   concerning  the  potentially  devastating  impact  that  mining  activities  may  have  on  the   region’s  environment.  This  is  a  concern  that  the  Bolivian  government  is  not  treating   seriously;  environmental  issues  are  taking  a  back  seat  to  political  alliances  like  that   with  the  cooperative  mining  sector,  which  is  exempt  from  most  of  the  taxes  and  has   a  bad  record  on  environmental  issues.  The  recent  contamination  of  Pilcomayo  River   by  mining  operators  in  Potosí,  (including  Jungie)  shows  that  the  government  does   not  have  the  institutional  capacity  or  the  political  will  to  monitor  these  activities.     Our  case  study  of  Jungie,  still  in  its  testing  stage,  already  shows  significant   environmental  problems.  First  the  mine’s  high  water  demand  threatens  the  natural   and  human  future  of  the  surroundings.  Moreover,  if  industrial-­‐scale  mining  is  the   objective,  the  result  will  likely  be  permanent,  contaminated  tailings,  threatening   local  soil  and  water  quality.  The  environmental  impact  of  mining  also  affects  the   local  socio-­‐economic  activities  in  the  production  areas,  through  negative  effects  on   the  productive  activity  of  local  communities  near  mining  operations.  Canutillos,  one   of  the  oldest  mining  locations  in  Potosí,  is  still  one  of  the  poorest  and  more   environmentally  degraded  towns.   How  can  we  improve  environmental  outcomes  from  FDI  and  Chinese  FDI  in  the   mining  sector?  In  particular:   • National  incentive-­‐based  mining  policy  for  environmental  protection. • A  participatory  process  to  identify  and  formulate  measures  for  production improvement  and  environmental  mitigation. • An  environmental  adjustment  program  adapted  to  the  socio-­‐economic  reality  of small-­‐scale  mining,  including  pilot  projects  of  design,  construction  and  operation of  dams. • Promotion  of  sustainable  technologies,  raising  environmental  awareness through  transparency  of  the  results  of  environmental  diagnosis  studies  and  the communication  of  environmental  regulations. On  the  other  hand,  Chinese  FDI  also  represents  an  opportunity  for  the  Bolivian   economy.  Three  factors  explain  why  the  Government  gives  special  prominence  to   China  as  a  potential  investor.  First,  the  government  identifies  ideologically,   economically  and  socially  with  China,  in  its  process  of  economic  transition,   especially  since  Bolivia  changed  its  economic  and  social  policy  under  President  Evo   Morales.  Secondly,  the  Bolivian  government  considers  China  to  be  a  country  that   does  not  only  invest  but  also  transmits  knowledge,  training  Bolivians  in  the   productive  processes.  Finally,  Bolivia  looks  to  China  as  a  potential  market  enabling   the  economy  to  diversify  their  production.   Once  again,  a  strong  and  transparent  institutional  framework  is  the  key  to  driving   Chinese  FDI  towards  a  more  diversified  economy,  through  technology  transfer  and   training  of  human  capital,  which  means  requiring  generation  of  value  added  as  a   pre-­‐requisite  for  any  FDI.  Moreover,  solid  and  transparent  institutions  are  crucial  to   guarantee  that  FDI  does  not  threaten  the  environment.   Thus,  to  promote  a  better  long-­‐term  outcome  for  the  Chinese  FDI  and  promote  a   better  environmental  outcome  of  mining  activities,  Bolivia  needs  to  work  on:     • Anti-­‐corruption  measures  and  good  governance  in  the  mining  sector. • Ensuring  a  conflict-­‐sensitive  approach  to  mineral  development. • Building  bilateral  and  multilateral  clean  technology  cooperation.  For example,  in  Bolivia,  the  Center  for  the  Promotion  of  Sustainable  Technologies has  proposed  the  introduction  of  processes  and  technologies  for  cleaner production,  which  not  only  allows  mining  operations  to  improve  its environmental  performance,  but  also  to  gain  savings  in  material,  water  and energy,  resulting  in  a  double  benefit. • Learning  from  the  experience  with  Stabilization  Funds  in  Chile,  Colombia, and  Norway. • Adopting  an  integrated  approach:  given  the  complexity  of  the  socio-­‐ environmental  problem  of  mining  in  Bolivia,  a  more  comprehensive approach  is  needed,  to  analyze  and  confront  the  problem  under  a  framework of  integrated  watershed  management,  since  one  of  the  main  environmental problems  of  mining  activity  is  water  pollution. Turning  to  the  tax  regime  for  mining,  there  are  important  flaws,  such  as  the  bias  in   favor  of  the  mining  cooperative  sector,  based  on  political  alliances,  which  has   achieved  clear  preferences,  such  as  extensive  tax  exemption,  institutional  support,   and  recently  in  the  new  mining  law,  preferential  concessions.  These  advantages   recognize  the  sector  for  its  social  function,  but  it  paradoxically  turns  out  to  be  the   least  productive,  and  in  environmental  terms  the  most  polluting,  given  the   precarious  nature  of  its  technology.  Thus,  this  system  of  preferences  should  be   reconsidered,  and  must  be  based  on  the  incentives  for  best  practices  in  terms  of   production,  tax  payments,  and  environmental  performance.   The  new  Law  of  Mining  and  Metallurgy  marks  an  important  setback  in   environmental  policy  in  Bolivia.  It  has  caused  great  concern  in  the  population,  with   the  main  criticisms  as  follows:   • The  law  was  debated  by  mining  stakeholders  and  approved  by  the  Plurinational Legislative  Assembly  without  considering  the  participation  of  the  rest  of  civil society  -­‐  indigenous  peoples  of  the  lowlands  in  particular  -­‐  although  that minerals  are  of  basic  domain  from  the  Bolivian  people  as  a  whole  and  that  the impacts  of  mining  reach  mainly  to  indigenous  and  native  peoples. • It  puts  preferential  rights  for  miners  over  individual  and  collective  rights  of indigenous  peoples  and  of  all  the  Bolivian  people,  towns,  rivers,  lagoons, irrigation  systems  of  drinking  water  which  are  means  of  livelihoods  of communities  and  protected  areas.  For  example,  Articles  108,  109  and  110  give mining  activities  priority  access  to  water,  over  the  agrarian  and  household  use. Furthermore,  the  law  expands  mining  from  its  traditional  territory  in  Potosí,   Oruro  and  in  general  the  highlands  to  include  lowlands,  indigenous  territories   and  natural  parks,  without  considering  the  adverse  effects  on  the   environment.(Tejada,  2012).   • The  law  establishes  the  specific  use  of  surface  water  and  groundwater  in  favor  of mining  operators  and  does  not  specify  the  replacement  of  the  water  used,  nor does  it  refer  to  plants  for  wastewater  treatment.  So  the  future  of  the  coming generations  runs  the  risk  of  not  having  access  to  water. • It  abolishes  the  role  of  the  Competent  Environmental  Authority  for  the  provision of  licenses  to  the  mining  sector,  causing  a  noticeable  weakening  of environmental  management  in  order  to  deepen  the  extractivist  developmental model.  Article  132  states  that  "the  Ministry  of  Mining  and  Metallurgy,  as  a sectorial  authority,  grants  the  environmental  license...  for  mining  activities,  and must  send  a  copy  to  the  Ministry  of  environment  and  water  for  the  purpose  of registration". • The  Law  does  not  establish  either  civil  or  criminal  sanctions  for  mining operators  who  contaminate  and/or  produce  environmental  damage. For  all  of  these  reasons,  we  recommend  that  the  Law  of  Mining  and  Metallurgy  be   re-­‐visited  and  reformed.   5. Conclusions Even  though  Chinese  participation  in  the  Bolivian  economy  is  still  marginal   compared  with  other  trading  partners,  it  must  be  highlighted  that  during  the  last   years  China  has  shown  an  impressive  presence  in  the  country  in  terms  of  exports   and  also  as  debt  creditor.  Moreover  the  government  considers  China  as  one  of  the   most  important  and  strategic  allied  for  the  next  government  period.  Relations  with   China  are  in  general  geared  toward  trade  and  FDI  in  raw  materials  and  agriculture,   which  implies  damage  to  the  environment.  In  this  sense,  China  is  not  a  very  different   partner  in  comparison  to  the  trading  partners  with  whom  Bolivia  has  relationships   in  the  present.     FDI  produces  economic  benefits  in  the  recipient  countries,  because  it  can  provide   capital,  currency  exchange,  technology,  and  improve  the  possibilities  of  access  to   foreign  markets;  but  also  has  impacts  on  the  type  of  development  financed  through   their  flows.   Bolivia  still  faces  deep  institutional  problems;  the  country  does  not  have  an   industrial  or  investment  promotion  strategy,  consistent  and  in  line  with  the  national   limitations  and  restrictions  -­‐  objectives,  policies,  programs,  actions  and  perspectives   of  clearly  defined  results.     The  country  is  currently  recognized  by  its  sound  economic  management  expressed   in  increasing  GDP  growth  rates.  However  this  good  economic  performance  is  mainly   due  to  the  high  international  prices  of  raw  materials.  China  has  been  decisive  in  this   outcome  given  its  significant  demand.  Thus  Bolivia  must  take  advantage  of  this   temporal  event  and  put  in  place  suitable  measures,  such  as  the  creation  of  a   Stabilization  Fund,  and  the  design  of  policies  towards  economic  diversification,  like   building  human  capital  and  promoting  competitive,  emerging  labor-­‐intensive   sectors.     Relating  with  the  Stabilization  Fund,  its  management  will  require  policies  and   regulations  that  go  beyond  a  political  cycle.  More  complex  is  how  to  regulate  the  use   of  the  fund  to  avoid  a  bad  management.  The  challenge  Bolivia  faces  is  once  more  the   lack  of  institutional  maturity  and  an  independent  management  of  governmental   power.   The  study  cases  analyzed  shows  that  Chinese  FDI,  which  is  concentrated  in  raw   materials,  minerals  and  lithium,  has  not  fulfilled  environmental  regulations.   However,  as  Bolivia  has  a  weak  institutional  framework,  the  government  also  has  a   joint  responsibility  in  this  outcome.  The  government  system  in  place  to  protect  the   environment  is  inadequate  at  best.  Public  institutions,  such  as  Bolivia’s  Ministry  of   the  Environment  and  Water,  which  are  responsible  for  ensuring  compliance  with   environmental  requirements,  clearly  lack  the  capacity  or  authority  to  intervene  in   an  effective  way.   With  regard  the  mining  sector,  one  major  environmental  problem  that  mining   activities  under  the  present  Bolivian  context  could  cause  is  a  major  water  crisis.  The   south  of  Potosí  where  Canutillos  mine  is  located  already  suffers  from  a  serious   water  shortage,  impacting  agriculture  and  drinking  water.  Foreign  entrepreneurs   can  easily  take  advantage  of  the  weak  institutional  framework  and  develop   unsustainable  mining  activities.  So  Bolivia  is  operating  under  the  framework  of   short-­‐term  economic  rewards  and  long-­‐term  environmental  costs.   Finally  the  recently  enacted  Law  of  Mining  and  Metallurgy  marks  a  major  setback  in   oversight  of  the  environment  and  the  harmful  effects  of  mining  activities,  as  it   greatly  relaxes  the  possibility  of  expansion  and  mining  without  prior  environmental   and  social  considerations.  This  new  framework  could  deepen  the  attraction  of  FDI   into  mining  given  the  economic  benefits  that  these  companies  could  obtain.   However  the  result  for  the  country  might  be  detrimental  to  the  environment  and   livelihoods  of  surrounding  towns,  which  leads  us  to  conclude  that  even  the  weak   sustainability  criterion  would  ne  be  achieved.