Category Archive: Uncategorized

1. Missed Opportunities

   December 5, 2025 3:07 pm Comments Off on Missed Opportunities

   Argentina has one of the largest supplies of lithium worldwide and a unique potential to harness it. The northwestern provinces of Salta, Jujuy, and Catamarca account for 13 percent of proven reserves globally. In the salt flats of this long neglected region, four mines produced 72,000 tons of lithium carbonate equivalent (tLCE) for export last year. With two extra mines now ramping up production and five others under construction, this figure is projected to increase to 600,000 tLCE—transforming Argentina into the second largest lithium exporter on earth. 

   So far, Argentina has predominantly been a passive supplier of the resource: producing it primarily for export without industrial promotion or value addition. The country’s mining and business laws have helped to ensure this subordinate role in the global economy. But with demand for lithium surging thanks to the energy transition, there is now an opportunity to boost industry and create quality jobs. This key metal, which is essential for the expansion of green technologies, could provide a lever for growth and productive diversification in a nation historically afflicted by dependency, poverty, and unemployment. The state could pursue active policies aimed at developing the value chain in new strategic sectors such as batteries and their components.

   But not all that glitters is gold. Along with these vast reserves, Argentina also has a government with a deep ideological opposition to internal development. Rather than using lithium to set in motion a process of reindustrialization, President Javier Milei’s hardline neoliberal project aims to attract foreign investment by repealing regulations and imposing austerity, thereby paving the way to “green extractivism.” Its effect will be to reinforce the dynamics of underdevelopment, leading to more primarization and deindustrialization, and aggravating the social problems that flow from them. 

   Growth prospects

   Argentina mainly produces lithium carbonate from brines extracted from these northwestern salt flats. Of the four active mining projects, the two oldest, Olaroz and Fénix, were recently acquired by the multinational mining giant Rio Tinto. The newer ones are the Cauchari-Olaroz mine—whose domestic owner, Minera Exar, is partnered with Ganfeng, the largest lithium mining company in China—and the Sal de Oro mine, owned by South Korea’s Posco. Current production levels may seem modest compared to Chile’s 260,000 tCLE, Australia’s 468,000 tCLE, or even Zimbabwe’s 117,000 tCLE. But what sets Argentina apart is its growth prospects. In addition to the eleven mines that are either fully operational or still in progress, there are also fifty additional projects, from exploration to feasibility studies, at various stages of development, plus reserves vast enough to sustain extraction for decades. 

   Another factor that distinguishes Argentina is the high grade of the resource. In economic terms, the country is not a marginal producer; its salt flats are one of the lowest-cost sources of extraction in the world. According to various estimates, the average pre-tax cost of lithium extraction in Argentine projects is below USD $4,000/ton: only slightly higher than extraction costs in Chile’s Atacama salt flat, and far below the current world price around $9,000/ton.1Cochilco (Chilean Copper Commission) in its 2024-2025 Market Report, Benchmark Minerals Intelligence, corporate reports from mining companies, and Liu and Domenech Aparisi (2025). The price of lithium is highly volatile. This is the average value for the month of September 2025. Lithium in these South American nations is worth only a fraction of its price in places such as Australia, Brazil, Zimbabwe, or China.

   

   It is not just about the quantity of the resources, however. Argentina has other capacities that could underpin a more strategic approach to the lithium sector: a robust scientific and technological system, strong national universities and research centers, a sophisticated industrial apparatus in manufacturing (including the chemical, metalworking, and automotive industries), skilled workers, and labor organizations committed to the goals of industrial development. All this makes it possible for the state to make active interventions in the lithium value chain, particularly in storage applications.

   Over the past decade, a group of actors within these networks has explored such avenues for development. They have created centers near the salt flats with the aim of researching technologies such as direct lithium extraction and extraction methods that minimize environmental harm. They have also supported advances in battery chemistry, cell manufacturing, recycling, and battery safety. In 2022, the National Institute of Industrial Technology (INTI) and the Chamber of Metalworking Companies (Adimra) received funding from the Ministry of Science and Technology to create a lithium battery quality control center—CENBLIT—aimed at building capacity in battery quality regulation.

   This research has led to advances in direct lithium extraction technologies, studies on the hydrogeological characteristics of Argentine salt flats, and the continent’s first battery cell manufacturing plant. The manufacture of lithium iron phosphate (LFP) batteries2These are the fastest growing batteries in the last five years and do not require cobalt. The use of this chemistry has led to a significant reduction in battery prices, while the expansion in production scale has resulted in multiple improvements in performance (stability, energy density, charging speed, etc.). by the company Y-TEC, and the installation of a plant (UNILIB) to manufacture battery cells in association with the National University of La Plata, are two salient examples. 

   Between 2012 and 2021, the state invested $5.7 million in projects related to lithium and its value chain through competitive public funding. If we add the work carried out through national universities, the CNEA, the INTI, and the UNILIB plant with funding from Y-TEC, the monetary efforts are multiplied several times over. Such state-led ventures were not always adequately funded, nor could they bring about a decisive transformation in the sector’s development prospect, but they were nonetheless effective in expanding the country’s technological capabilities, and signaled a clear intention to seize this developmental opportunity. 

   Obstacles

   Yet there was a much wider range of actors with little interest in this project. In the private sector, the dominant multinational mining companies cannot be expected to revive the country’s industrialization or improve its geoeconomic position. They base their calculations on the quality of the resource and ease of access to mining properties, rather than any broader considerations. Today, mining firms such as Rio Tinto, Minea Exar, and Ganfeng have one primary aim: to guarantee the supply of critical minerals in the face of growing fragmentation of supply chains, trade wars, and disputes over productive hegemony in critical sectors such as batteries and electromobility. 

   Nor are many politicians willing to pursue a long-term industrial strategy. Argentina’s 1994 constitutional reform defines the provinces as the owners of the natural resources in their territories and gives them authority over their use: a provision which gives provincial leaders significant power to resist national government intervention in fiscal, environmental, and industrial matters.3For example, in terms of environmental or fiscal control, some provinces did not support the EITI (Extractive Industries Transparency Initiative) initiative, whose adoption was promoted by the national government with the aim of increasing transparency in the operations of extractive companies. Since they stand to benefit from attracting foreign investment in the exploitation of new salt flats, many of them oppose the kind of state policies that would incorporate local added value or develop suppliers and technology transfer. They argue that such development planning would discourage investors and help the productive center more than the extractive provinces.4 For example, they strongly criticized the installation of the YTEC battery plant (see below) in the province of Buenos Aires. Their position aligns with that of national politicians who similarly favour capital inflows—used to develop salt flats and expand exports of lithium carbonate, chloride, or hydroxide—over creating higher value-added links in the chain that stretches from natural resources to battery production. 

   Moreover, the severe constraints on the Argentine economy, which have only gotten worse as Milei has deepened the country’s external indebtedness, give politicians an extra incentive to attract mining companies—as a means of generating foreign exchange and thereby loosening the stranglehold of debt. Yet this is ultimately a self-defeating strategy whose aggregate effect is to deepen such financial instability. Historical experience shows that foreign investment, when concentrated in the production of raw materials and the creation of export enclaves, tends to accentuate structural problems with the balance of payments rather than resolve them. Once investments mature, the foreign exchange balance can even become negative—creating a situation of volatility that is compounded by changes in international commodity prices.

   Enter Milei

   Despite the urgent need for an expansion and diversification of Argentina’s exports, the policies of the Milei government, which came to power in 2023 on a right-wing libertarian platform, are now pushing in the opposite direction. Contrary to the prevailing global trend of active industrial policies and protection of strategic resources, Milei last year implemented the Large Investment Promotion Regime (Régimen de Fomento a las Grandes Inversiones, or RIGI), which provides extraordinary incentives for extractivist projects—consolidating a liberal regulatory framework that works in their favour, and militating against previous attempts to build a different model. Precursors to the current law include the Mining Code and the Mining Investment Law: the former regulates the conditions for granting concessions and is specifically aimed at protecting the extractive business from state “discretion,”5The provinces can dictate their administrative procedures and grant concessions. However, the law requires provincial administrations to accept applications that comply with the law. Once granted, these concessions can be transferred without prior authorization. This situation encourages the proliferation of projects and a high degree of fragmentation of the mining cadastre, leading to significant real estate speculation. while the latter, in addition to providing fiscal stability and tax exemptions, sets a ceiling on royalties of 3 percent of the value at the mine mouth, which translates into less than 2 percent of the export value. 

   Along with the Basic Law—Milei’s Omnibus bill of December 2023, aimed at deregulating the economy and privatizing public companies and agencies—the RIGI represents the relinquishment of all sovereign capacity to define industrial development objectives around extractive projects. It encourages investment in mining (especially lithium) as well as hydrocarbons,6Seven projects have so far been approved: two related to hydrocarbons, two related to renewable energy, one related to steel, and two lithium projects belonging to the Australian companies Galán and Rio Tinto. It is important to note that the lithium project presented by the Chinese company Ganfeng was not approved. offering tax exemptions and tax and customs stability, while allowing projects under its purview to avoid bringing foreign currency from exports into the country.7 In other words, income from strategic exports is exempt from being deposited and settled in the foreign exchange market in the following proportions: during the first year, 20 percent of exports will be freely available; during the second year, 40 percent; and from the third year onwards, 100 percent of export income will be freely available. It curtails the prospect of an effective industrial policy, closing off strategic paths to onshore higher stages of lithium’s value chain—for instance by preventing the national government from implementing quotas or export bans. It also limits local content requirements, local supplier development, and even R&D or technology transfer. Finally, the bill cedes sovereign powers by giving different international bodies the authority to settle commercial disputes, with investors able to choose between the Arbitration Rules of the PCA (Permanent Court of Arbitration), the Arbitration Rules of the International Chamber of Commerce, or the ICSID (International Centre for Settlement of Investment Disputes) of the World Bank. 

   The RIGI thus transforms Argentina into one of the countries in the region with the most lax mining regimes. This makes for a stark contrast with neighbouring Chile, where the National Lithium Strategy ensures that only joint ventures with state-owned companies, such as Codelco and Enami, are granted access to Special Lithium Operation Contracts (CEOLes) in new salt flats. Whereas Rio Tinto is the sole actor in a lucrative RIGI project, for example, just across the mountain range it must partner with Codelco to access the resource—giving the state a more central and strategic role. Existing projects in Chile meanwhile face sliding royalties of between 6.8 and 40 percent of the sale value, as well as being required to contribute to the communities in which they operate and to invest in R&D requirements. In order to sell at a preferential price on the domestic market, they must make 25 percent of their production available. With this value-added policy, the Boric government hopes to dramatically increase national capacity for the production of battery materials and components.  

   Another example of greater interventionism from outside the region is Zimbabwe, which since 2022 has been promoting restrictions on exports of unprocessed minerals with the aim of increasing export value and improving local industrial capabilities. The government recently announced that it will ban the export of lithium concentrates from January 2027, extending its value-added strategy in a similar vein to that which Indonesia is pursuing with nickel. Such policies have not stopped investment or undermined production in either Chile or Zimbabwe. Chile went from exporting 114,000 tCLE in 2020 to 261,000 tCLE in 2024, charging royalties of around 40 percent during the international price boom that took place during this period. Zimbabwe went from 2,000 tCLE to 117,000 tCLE between 2020 and 2024. 

   The results in terms of value added remain variable: while Chile’s use of quotas has not yet brought any meaningful investment, Zimbabwe has had more success in driving investment in processed products such as lithium sulfates as part of its industrial strategy. But regardless, these examples from abroad illustrate the extent to which Argentina is failing to lay the foundations for a new dynamic core of industrial and technological development. Milei’s anti-industrial outlook is also clear from his government’s underfunding of science and technology and its dismantling of institutional and industrial capacities. His abandonment of initiatives like YPF’s lithium and battery project, combined with his singular focus on attracting large investments in extractive industries, will have profound social and environmental implications.

   Reprimarization, deindustrialization

   The energy transition is reshaping production paradigms globally. Significant cost reductions and improvements in the efficiency of clean technologies suggest that, even in the context of the current climate denialism promoted by Trump and other reactionary leaders, the spread of transition technologies will accelerate over the coming years, particularly in renewable energies supported by stationary batteries and electromobility.8Over the last 15 years, renewable wind power generation costs have fallen by 65 percent (from USD 135/Mw to USD 50/Mw), while solar photovoltaic costs have fallen by 83 percent (from USD 359/Mw to USD 61/Mw). Although it is difficult to estimate due to product variability and the specificities of national markets, the International Energy Agency estimates that electric vehicle prices fell by up to 11 percent between 2023 and 2024, which, added to the drop of up to 30 percent in battery charging systems, is significantly reducing the total cost of ownership of an electric car. Batteries have played a key role in this trend, with prices falling by more than 90 percent over the last 15 years. In turn, the fall in the price of lithium and the shift towards LFP (lithium iron phosphate) batteries (which do not contain cobalt) have been the driving forces behind the decline in prices. These are mature technologies that reduce emissions in the most polluting sectors, such as transportation and electricity generation, which together account for more than 60 percent of global emissions. For many countries, the adoption of these technologies is a matter of vital energy security, because it limits dependence on fossil fuel imports. 

   Without active industrial policies, though, the possibility of participating in these sectors will fade from view. Without a means of structuring competition and production, states will merely reaffirm the existing global division of labor and diminish their industrial capacities. This will entail not only the primarization of Argentine exports, but also the deindustrialization of its entire productive structure. Amid the energy transition, national sectors such as automotive, metalworking, and capital goods are at risk, either because of their growing obsolescence and lack of alignment with global environmental standards, or because of their low level of local integration and a widening technological gap. How to avoid this fate is a question of increasing political urgency. 

   One point of agreement across the spectrum is that Argentina’s productive destiny is tied to its strategic energy and mineral resources. In 2024, exports from hydrocarbons and mining accounted for 20 percent of total exports; it is estimated that this will rise to 30 percent by 2030. The argument made by Milei’s supporters, that the best way to stimulate these sectors is simply to reduce the tax burden and offer other incentives, does not stand up to scrutiny given the international direction of travel. If current predictions are correct, demand for lithium will multiply by a factor of 1.6 over the next five years and 2.5 over the next decade, rising from the current 1.2 million tons of CLE to 3.8 million tons in 2035. This means that, despite the current phase of low lithium prices caused by excess supply, soon enough demand will once again exceed supply and the price will be above USD 20,000/ton.9 Cochilco, S&P Global, Benchmark Minerals Intelligence, among others.

   

   One possible effect of such global trends could be to improve the balance of power for countries like Argentina as they negotiate with companies and investors who are desperate to access such resources. Nations in the Global South could build new strategic capabilities by exploiting this aspect of the energy transition: securing better trade terms and using investment to their strategic advantage. A state like Argentina need not force battery production at source, but it can make consistent progress at successive links of the value chain.10 According to Benchmark Minerals Intelligence, as of July 2025, the price of LFP was around USD 4,900/ton, while that of lithium carbonate was around USD 9,000/ton. However, each ton of lithium carbonate can produce between 3 and 4 tons of LFP. This means that one ton of lithium carbonate transformed into LFP can increase the export value by between 1.8 and 2.4 times. The lithium chain includes various intermediate phases that would represent a quantitative leap in terms of value generation and offer significant opportunities for technological enhancement. In terms of the balance of payments, each ton of lithium exported in the form of LFP cathode material could represent twice as much foreign exchange.11This segment is where much of the product innovation and therefore technological learning is concentrated. For example, in July of this year, China implemented restrictions on LFP exports.

   And yet, the horizon of industrial development of lithium is now being eclipsed by the green extractivism of the RIGI. If Milei succeeds in reversing the tentative gains that Argentina has made in this arena, it is hard to see how the country will exercise its considerable bargaining power as the demand for lithium continues to grow. A new cycle of deindustrialization is looming. The time to avoid it is limited. 

2. Lithium Experiments

   December 4, 2025 9:20 pm Comments Off on Lithium Experiments

   Chile holds 190 million metric tons of copper reserves—roughly 19 percent of the world’s total—and 9.3 million metric tons of lithium reserves, approximately 31 percent of global supply.1 U.S. Geological Survey, “Copper,” (<)em(>)Mineral Commodity Summaries 2025(<)/em(>) (January 2025). (<)a href='https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-copper.pdf'(>)https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-copper.pdf(<)/a(>); U.S. Geological Survey, “Lithium,” (<)em(>)Mineral Commodity Summaries 2025(<)/em(>) (January 2025). (<)a href='https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-lithium.pdf'(>)https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-lithium.pdf(<)/a(>) It boasts world-class solar radiation in the Atacama Desert and strong coastal winds. Although Chile plays a peripheral role in international affairs, these natural endowments, along with its stable democratic regime and strong state capacity, position it to integrate into emerging green supply chains and acquire greater geopolitical relevance amid global fragmentation. Domestically, Chile has the capacity to increase green energy generation from 19 percent to 40 percent between 2019 and 2024.2EMBER, “Chile surpasses 40 percent wind and solar for the first time in December.” (January 2025). https://ember-energy.org/latest-updates/chile-surpasses-40-wind-and-solar-for-the-first-time-in-december/

   While the resource base and capacity exist, Santiago’s challenge lies in leveraging these advantages to reignite a stagnating economy through value-added production and export diversification. Since democratization in the 1990s, Chilean governments have increasingly broken with free market orthodoxy to increase value-added processing in lithium and copper, while making ambitious but increasingly uncertain bets on green hydrogen. Additionally, Chile  has begun to renegotiate investment terms with foreign firms to reconfigure relationships with major powers, seeking better positioning in the emerging multipolar order. 

   President Gabriel Boric (2022–2026) has been particularly assertive in embracing state-led development, mandating direct government participation throughout the lithium value chain and establishing joint ventures designed to capture greater rents from critical minerals. However, this strategy is not without its challenges. In May 2025, Chinese firms abandoned their lithium processing projects, while the Energy Ministry recently announced that Chile would downgrade its green hydrogen targets amid weakening global demand. These setbacks coincide with electoral uncertainty—the December election features two candidates across the spectrum questioning Mr. Boric’s strategy. Whether Chile’s industrial policies can survive remains an open question, one with implications for other resource-rich nations attempting similar transformations. The future of Chile’s state-led development model will be determined not solely by its domestic industrial policies, but also by the country’s ability to navigate strategic relations with the world’s great powers: the US and China. To succeed, Chile must both elevate its position in the global economic hierarchy and secure its role in the lithium value chain.   

   Industrial policy in Chile

   Chile’s political economy is perhaps most widely known for its role as the guinea pig of “shock therapy”—a policy of deregulation, austerity, and privatization that devastated its economy and society. Less known, perhaps, is the history of industrial policy experimentation that preceded the 1970s. In the aftermath of the Great Depression, Chile, like much of Latin America, embarked on large-scale industrialization through import substitution. After a series of authoritarian interruptions destabilized its nascent democracy, a coalition of bourgeois and Marxist parties won the presidency in 1938. Led by the Radical Party, the Popular Front coalition created Chile’s developmental strategy, centered on the Corporación de Fomento de la Producción (CORFO).

   CORFO directed investment into strategic sectors, including energy, steel, oil, and sugar refining, while providing technical and financial assistance to the private sector. The agency ranked among Latin America’s most autonomous and efficient development corporations, forming part of broader state-building efforts that incorporated and politically insulated engineers and technocrats within ministries, the comptroller’s office, and state-owned enterprises. This bureaucratic development had enduring effects, positioning Chile as a high-capacity state by regional standards—a legacy that differentiates Chile from most Latin American economies today. 

   Despite creating new industries and infrastructure, Chile’s developmental state yielded mixed economic results. Like much of the region, Chile implemented broad, indiscriminate protectionism rather than the selective approach advocated by the Economic Commission on Latin America and the Caribbean’s (ECLAC) Raúl Prebisch, who recommended replacing imports of consumer goods while maintaining imports of capital goods and strengthening the traditional export sector. Chile’s approach encountered challenges common across Latin America: persistent inflation, recurring balance of payments crises, widespread cronyism, insufficient domestic demand, and an inability to transition toward producing sophisticated goods.3Hirschman, Albert O. 1968. “The Political Economy of Import-Substituting Industrialization in Latin America.” (<)em(>)The Quarterly Journal of Economics(<)/em(>) 82(1): 1. doi:10.2307/1882243; O’Donnell, Guillermo. 1973. (<)em(>)Modernization and Bureaucratic-Authoritarianism: Studies in South American Politics(<)/em(>). Berkeley: Institute of International Studies, University of California.

   The contested legacy of Chile’s past industrialization efforts has made it difficult for politicians and civil society to mobilize support for new industrial policy initiatives. But since the 1990s, there has been an increased urgency of finding a new economic model. After democratization, the center-left Concertación coalition governed for twenty years, slowly implementing redistributive policies while maintaining the authoritarian-era economic framework. Rather than restructuring the export-oriented model, these governments channeled growth into targeted social programs, significantly reducing poverty and improving health and education outcomes. The strategy generated impressive results—7 percent average annual GDP growth in the 1990s and 5 percent in the 2000s, measured in per capita terms to control for demographic changes.4Ibid. By the 2000s, Chile’s political and economic elites proudly announced that it had become Latin America’s highest GDP per capita economy. Chile emerged as a market-oriented counterexample to the state-led development models of the Asian Tigers.

   Unlike East Asian economies, however, Chile’s economic growth in the early 2000s was largely driven by a commodity boom. Rapidly growing demand for copper from China and India drove a remarkable rise in Chile’s exports. Since the early 2010s, the fall of this boom has seen persistently declining growth rates.5Toni, Emiliano, Pablo Paniagua, and Patricio Órdenes. 2025. “Policy Changes and Growth Slowdown: Assessing Chile’s Lost Decade.” (<)em(>)Public Choice(<)/em(>). doi:10.1007/s11127-025-01318-w. Continued lackluster economic performance throughout the last decade and a half has brought forward a new pro-industrial policy coalition interested in reviving the legacy of the 1930s.

   Green industrial strategies

   For the first time since the 1960s, Chile’s government has begun to implement decisive sectoral policies. In 2024, President Gabriel Boric of the left-wing Frente Amplio launched the National Lithium Strategy, signaling the government’s intention to expand state involvement in economic development. His government aimed to climb the battery value chain by establishing domestic production of higher-value components, including cathode materials, anodes, and electrolytes. The lithium strategy mandates direct state participation throughout the entire lithium production cycle—from exploration and exploitation to manufacturing. Central to this plan was establishing a National Lithium Company designed to coordinate strategic joint ventures with private firms. 

   The strategy has sought to transform Chile’s traditionally extractive approach by developing upstream and downstream connections in the lithium value chain. On the upstream side, the government has sought to build expertise in advanced exploration and extraction technologies, hydrogeological modeling, renewable energy integration, and water treatment systems. Downstream initiatives focus on developing refinement processes for high-purity lithium compounds, manufacturing battery precursor materials, and potentially establishing early-stage battery production facilities. This integrated approach reflects the government’s determination to prevent lithium extraction from becoming an enclave economy—a persistent challenge that has limited economic benefits in many resource-rich nations.

   As part of the National Lithium Strategy, Sociedad Química y Minera de Chile (Chemical and Mining Society of Chile, SQM), a firm holding concessions for lithium extraction, and Codelco, Chile’s state-owned copper mining company, established a landmark joint venture to exploit lithium in the Atacama salt flat in 2023.6 Since the Pinochet era (1973-1990), CORFO has allocated its strategic lithium concessions to SQM, an originally state-owned enterprise privatized in the mid-1980s. This partnership extends SQM’s lithium extraction rights in the Atacama region until 2060 while securing Codelco’s substantial position within Chile’s lithium industry. Notably, the agreement structure gives Codelco an initial minority stake that will progressively increase to a controlling stake (50 percent plus one share), signaling Chile’s determination to assert greater state control over its critical mineral resources. SQM and Albemarle (an American corporation) conduct the primary exploitation of the Atacama salt flat, one of the world’s largest lithium reserves.

   The Codelco-SQM partnership operates through a phased joint venture structure in which SQM maintains general management control until 2030, after which Codelco assumes operational leadership through 2060. The arrangement, formalized through Codelco’s subsidiary Minera Tarar and SQM Salar, targets a cumulative additional production of 300,000 tons of lithium carbonate equivalent between 2025 and 2030, followed by a sustained annual output of 280,000 to 300,000 tons from 2031 onward.7 Codelco-SQM Partnership. (<)a href='https://acuerdocodelcosqm.cl/en/codelco-sqm-partnership/'(>)https://acuerdocodelcosqm.cl/en/codelco-sqm-partnership/(<)/a(>)  The venture commits to achieving these production increases through process efficiency improvements and new technologies rather than expanding brine extraction or inland water use, addressing environmental concerns that have plagued the Atacama operations. Implementation remains contingent on completing contractual, technical, and environmental legal requirements, including indigenous consultation processes with affected communities.

   Rather than pursuing aggressive value-chain upgrading, Chile’s copper policy focuses primarily on maintaining production levels and modest downstream integration. The government has supported investments in smelting and refining capacity to capture more value beyond raw ore exports. However, these efforts remain constrained by financial limitations and the global dominance of Chinese copper processing. Unlike lithium, where Chile seeks to build entirely new value chains, the copper strategy is more defensive—preserving existing capabilities and market position as copper demand grows for electrification and renewable energy infrastructure. 

   Chile’s third industrial strategy represents a higher-risk bet on green hydrogen production. While Chile possesses competitive advantages—including the world’s lowest potential production costs—the sector faces fundamental uncertainties about commercial demand and technological viability that distinguish it from the established roles of lithium and copper in the new global green economy. In 2020, the conservative Sebastián Piñera administration (2018–2022) unveiled an ambitious roadmap that positioned Chile as a potential global leader in green hydrogen. This plan established three concrete targets: becoming the world’s lowest-cost green hydrogen producer by 2030, ranking among the top three global exporters by 2040, and developing 5 GW of electrolysis capacity by 2025.8Government of Chile, Ministry of Energy, “National Green Hydrogen Strategy” (November 2020), (<)a href='https://energia.gob.cl/sites/default/files/national_green_hydrogen_strategy_-_chile.pdf'(>)https://energia.gob.cl/sites/default/files/national_green_hydrogen_strategy_-_chile.pdf(<)/a(>).

   Building on this foundation, in 2024, the Boric administration introduced a new action plan to guide investment in green hydrogen through 2030. The plan features a $1 billion package to incentivize private investment, expedited land allocation for development projects, corporate tax incentives for clean technologies, streamlined regulatory processes, and improved access to international certification systems. 

   These three strategies—lithium, copper, and green hydrogen—rely heavily on CORFO, which is  again positioned to play a pivotal role in the country’s developmental strategy, especially  in lithium extraction, where it operates under a distinct ownership regime. When the Pinochet regime privatized most state-owned firms, lithium remained under government control due to national security considerations. In 1979, Pinochet designated lithium a strategic asset because of its applications in nuclear technology, long before batteries drove global demand. 

   This security-based classification positioned CORFO as the overseer of lithium operations. Today, CORFO administers concessions in the Atacama salt flats, developing joint ventures with the private sector for both extraction and processing operations, coordinating upstream and downstream linkages, and implementing environmental and social impact mitigation programs in collaboration with local communities. Beyond lithium, CORFO has been designated a key role in the green hydrogen strategy, where it will provide financial incentives through targeted subsidies and tax credits while conducting rigorous technical analyses to assess project feasibility and maximize economic returns.

   Geostrategic practices

   Chile’s ambitions, however, have already encountered setbacks that expose the gap between announcements and implementation. The most emblematic failure involves downstream lithium processing: in 2018, the government celebrated agreements with Samsung and POSCO to build cathode materials plants for electric vehicle batteries, promising production by 2021 with guaranteed lithium supply from CORFO. These facilities never materialized, and subsequent attempts to attract battery manufacturers have similarly faltered—most recently in 2025 when Chinese companies BYD and Tsingshan abandoned plans for lithium processing plants.9 Reuters. South Korea’s POSCO drops plans for Chilean battery material plant. (<)a href='https://www.reuters.com/article/business/south-koreas-posco-drops-plans-for-chilean-battery-material-plant-idUSKCN1TM2LQ/'(>)https://www.reuters.com/article/business/south-koreas-posco-drops-plans-for-chilean-battery-material-plant-idUSKCN1TM2LQ/(<)/a(>); Reuters. China’s BYD, Tsingshan scrap plans for Chile lithium plants. (<)a href='https://www.reuters.com/markets/commodities/chinas-byd-tsingshan-scrap-plans-chile-lithium-plants-newspaper-reports-2025-05-07/'(>)https://www.reuters.com/markets/commodities/chinas-byd-tsingshan-scrap-plans-chile-lithium-plants-newspaper-reports-2025-05-07/(<)/a(>). The pattern reveals structural obstacles beyond policy frameworks: inadequate infrastructure, regulatory uncertainty, and insufficient coordination between lithium supply guarantees and downstream manufacturing requirements. 

   Green hydrogen faces different but equally concerning challenges. In October 2025, Energy Minister Diego Pardow announced that Chile would downgrade its ambitious production targets, citing declining global demand prospects. The statement acknowledges that external market conditions, not merely domestic policy, determine these sectors’ viability.10 El País. “Diego Pardow por el ajuste de los objetivos de hidrógeno verde en Chile: “Tendremos que hacer un chequeo de realidad.” https://elpais.com/chile/2025-10-06/diego-pardow-por-el-ajuste-de-los-objetivos-de-hidrogeno-verde-en-chile-tendremos-que-hacer-un-chequeo-de-realidad.html The adjustment, expected before the current administration concludes in March 2026, follows similar recalibrations by other nations and reflects broader difficulties in green hydrogen commercialization worldwide.11International Energy Agency. “Low-emissions hydrogen projects are set to grow strongly despite wave of cancellations and persistent challenges.” https://www.iea.org/news/low-emissions-hydrogen-projects-are-set-to-grow-strongly-despite-wave-of-cancellations-and-persistent-challenges

   These setbacks underscore a fundamental tension in Chile’s industrial policy experimentation: while the country possesses abundant natural resources and institutional capacity through CORFO, translating comparative advantages into functioning value chains requires not only state coordination but also sustained private investment, technological capabilities, and favorable global market conditions—elements that remain elusive despite policy ambitions.

   Precisely for this reason, Chile’s position in the changing global landscape is vital to the success of its industrial pursuits.  While the US historically maintained significant influence in Latin America, the past twenty-five years have witnessed China’s impressive growth in commerce and infrastructure development. China’s trade volume with Chile has increased tremendously: in 2024, Chilean exports to China reached $37.82 billion—more than double the $15.25 billion exported to the United States, with copper shipments to China alone totaling $5.56 billion.12Trading Economics, United Nations COMTRADE database, (<)a href='https://tradingeconomics.com/chile/exports/china'(>)https://tradingeconomics.com/chile/exports/china(<)/a(>). While Chile’s exports to China are mainly copper and lithium, its exports to the US are more diversified, including fresh fruits, wine, seafood, wood products, and minerals.13U.S. Department of Commerce, “Chile – Agricultural Sector,” International Trade Administration, (<)a href='https://www.trade.gov/country-commercial-guides/chile-agricultural-sector'(>)https://www.trade.gov/country-commercial-guides/chile-agricultural-sector(<)/a(>). These patterns reflect different structural demands of each relationship despite the free trade agreement in effect with Washington since 2004.

   In order to successfully reimagine its developmental path, Chile must revisit its relationships with great powers—moving from an agnostic stance toward a foreign policy that actively seeks to rebalance its interests amid China’s growing involvement in its lithium sector. The government has begun to do this by initiating joint ventures with foreign firms to exploit lithium and copper, aiming to increase value added and facilitate technology transfers. It is also seeking to curb Chinese firms’ influence in its lithium industry, particularly in SQM, Chile’s privately-owned lithium firm. 

   In 2018, Tianqi Lithium, a Chinese company primarily focused on lithium extraction and processing, acquired a 23 percent stake in SQM for $4 billion by purchasing shares previously held by Canadian fertilizer company Nutrien. Tianqi’s purchase triggered substantial opposition in Chile, prompting the country’s antitrust regulator to impose restrictions that limit Tianqi’s board representation and voting rights. These measures were designed to prevent Tianqi from accessing SQM’s sensitive information and maintain state influence over SQM. 

   In addition to enhancing the Chilean state’s ability to develop industrial policy, the SQM-Codelco partnership is also a geopolitical move designed to limit China’s expanding influence. The agreement was executed without Tianqi’s involvement or prior notification, despite the Chinese firm’s significant shareholding in the company. Tianqi’s principal objection to the arrangement centered on procedural grounds: the agreement should have gone through competitive procurement rather than direct negotiation. Furthermore, Tianqi maintained that such a decision warranted formal deliberation and a vote by SQM’s board of directors, where Tianqi holds three of the eight seats. 

   Although Tianqi escalated the dispute to Chile’s financial regulatory authority, the oversight body ultimately ruled in favor of the transaction. In September 2024, Chile’s Supreme Court rejected Tianqi’s final appeal. In April 2025, the national antitrust authority approved the joint venture, accompanied by mitigation measures designed to restrict information sharing between competitors. Yet as of late 2025, the partnership awaits critical approval from Chinese regulators—an uncertain prospect given Tianqi’s opposition and Beijing’s strategic interest in protecting its firms’ lithium investments. 

   From the 1990s until recently, US policy priorities in Latin America centered on Central America, the Caribbean, and Mexico, with limited high-level engagement in the Southern Cone. Albemarle represents an exception—the American company operates under a long-term contract in the Atacama and benefits from linkages through the US-Chile Free Trade Agreement. Yet this presence differs fundamentally from China’s more comprehensive engagement, which combines corporate investment with active diplomatic advocacy, state-backed financing, and public campaigns by ambassadors and officials promoting corporate interests. US engagement, by contrast, has remained confined to Albemarle’s commercial operations without the coordinated state support that characterizes Chinese firms.

   The Trump administration’s return in 2025, however, signals a potential shift toward greater hemispheric engagement. South America has featured prominently in US foreign policy: a military buildup in the Caribbean, threats to invade Venezuela, the termination of military collaboration with Colombia, and deliberate tensions with Brazil following former President Jair Bolsonaro’s sentencing for coup plotting. While the durability of this approach remains uncertain, the US is likely to seek a larger role in Chile’s mineral sector to counter Chinese influence and build resilient supply chains amid China’s dominance in rare earth processing and critical minerals. Whatever the new balance of power might look like, it will significantly shape the country’s industrial prospects.

   The path forward

   Great power competition may go so far as to subsume domestic challenges to the industrial policy agenda. Leading up to the December election,  Right-wing contender José Antonio Kast announced that, if elected President, he would revise the SQM-Codelco joint venture. The left-wing candidate Jeanette Jara initially championed more aggressive nationalization before moderating her position during the campaign.

   But changes in US trade policy under the Trump administration—including the expanded use of tariffs and industrial incentives—are reshaping global supply chains and altering patterns of geoeconomic competition. These developments, while outside of Chile’s direct control, will significantly influence the opportunities and constraints facing Chile’s green industrial strategy. In particular, disruptions to established supply chains could create openings for Chile to strengthen domestic manufacturing capabilities and deepen local value chains in lithium processing and hydrogen technologies.

   To navigate this evolving landscape, an active industrial policy at home must complement proactive diplomacy abroad. Chile will need to engage strategically with both the United States and China, advancing its interests while maintaining flexibility within an increasingly competitive international system. In February 2025, for example, Chile’s modernized free trade agreement with the European Union entered into force, featuring the EU’s first dedicated Energy and Raw Materials chapter designed to secure stable access to Chilean lithium and copper. Managing these external relationships will be as crucial as executing domestic initiatives to secure Chile’s place in the emerging global value chains.

3. Who Will the Green Transition Save?

   April 24, 2025 2:08 pm Comments Off on Who Will the Green Transition Save?

   The Camaçari Industrial Complex in Bahia attracted worldwide attention following BYD’s announcement in 2023 that it would be home to the electric vehicle company’s largest factory outside China. Inaugurated in 1978, the industrial hub was Brazil’s first planned petrochemical complex, forming the centerpiece of a national industrial development project that ran until the end of the 1980s. The complex has historically contributed to economic development in the region by generating employment and providing job training opportunities. From the 1990s onwards, however, amid the liberalization of trade and rise of foreign competition, the complex underwent significant structural changes. 

   Camaçari has always hosted industries that complement the petrochemical chain, but its twenty-first century expansion was sparked by the arrival of the automobile industry. American automaker Ford set up shop in the 2000s, but after two decades of operation, Ford closed its doors in 2021 and halted production of the low-margin light vehicles EcoSport, T4, and the Ford Ka. Today, the complex is undergoing yet another process of sectoral expansion, attracting investments from electric vehicle manufacturers and renewable energy companies, mostly of Chinese origin. Emblematically, the new BYD factory is being built on the former Ford site, with its address on Avenida Henry Ford.

   Over the years, the petrochemical center first emerged as an industrial center, and it is yet again poised to transform into a green industrial center. Alfredo Santos is the General Secretary of CUT-Bahia and press coordinator for the Chemical, Petrochemical, Plastics, Fertilizers and Chemical Terminals Workers’ Union (Sindiquímica). In the following interview, Santos speaks with Phenomenal World editor Maria Sikorski about Camaçari’s role in Brazil’s project of green reindustrialization from the perspective of the working class. The transcript has been edited for length and clarity.

   An interview with Alfredo Santos

   Maria Sikorski: Can you tell us about the history of the Camaçari complex and its relationship to Brazilian industrial policy?

   Alfredo santos: The Camaçari complex was built between the mid-1970s and the early 1980s. It emerged as a tripartite ownership model: the shareholder composition included national private capital, multinationals, and Brazilian state capital. A raw materials plant controlled by a public company, Copene, which was later privatized, promoted second-generation industries. The petrochemical plant supplied the basis of the production chain for naphtha, ethylene, propylene, etc. The tripartite ownership model is an example of how industrialization in Brazil has only occurred with strong state participation, either directly, as was the case with the Camaçari complex, or indirectly, through Brazilian Development Bank (BNDES) financing. Both when the complex was first set up and today, private companies—including Chinese companies that have recently set up shop—have received funding from the Bank. It is the Brazilian state that finances industrialization.

   Camaçari continued to grow throughout the 1980s and 1990s. However, since the opening up of trade under the Collor government (1990–1992) and more markedly during the government of Fernando Henrique Cardoso (1995–2002), the complex has faced a crisis of productivity and international competitiveness and as a result has suffered from reductions in investment and factory closures. At the beginning of the 1990s, the complex accounted for more than 30,000 direct jobs. By the end of the decade, the number had fallen to just over 10,000.

   From 2003 onwards, with the first Lula government (2003–2010), the Brazilian state once again invested in industrialization, but indirectly: Petrobras became an important investor in Brazil’s so-called “big players.” One outcome of this process is Braskem—Petrobras now holds 47 percent of the company’s shares. Some international competitiveness has been regained, but the production of central raw materials and the thermoplastic resin chain has been increasingly monopolized, resulting in the closure of several companies that were unable to compete with the big players.

   The Brazilian petrochemical sector today faces a massive crisis. The Camaçari complex is unable to compete internationally. The fertilizer sector is a case in point: 85 percent of the fertilizers used by Brazilian agribusiness are imported. The thermoplastic chain imports around half of the inputs it uses. This influx of imported products into the petrochemical chains happens for two reasons. The domestic cost of the chains has become very high compared to more modern chains that are gas-based instead of naphtha-based. The US, Arab, and Indian industries export a product at a lower price than our domestic production cost, both because of the lack of technological advancements in our plants and because of environmental factors: the US, for example, uses gas from fracking, which has a much lower production cost, but is extremely damaging to the environment. Brazil does not produce gas from fracking and even has environmental restrictions on its use. What’s more, the price of Brazilian natural gas is up to five times higher than the US price. This undermines the international competitiveness of our petrochemical industry. If the country doesn’t have an industrial policy aimed at preserving the domestic market, the tendency is for all these industries to go under.

   MS: Bahia has been identified nationally and internationally as an essential part of Brazil’s green reindustrialization project and the global energy transition. It is the state that produces the most renewable energy from solar and wind sources in the country and has attracted a lot of foreign investment, especially Chinese, in these production chains.

   With the promise of BYD’s electric car manufacturing and the installation of other Chinese companies in the renewable energy sector, some say that Camaçari could become a catalyst for the green reindustrialization of Brazil. When announcing the installation of the factory on the former Ford site, for example, BYD promised to bring high value-added stages of the electric vehicle production chain to the complex, including those related to research and development, as well as generating thousands of jobs. BYD’s CEO for the Americas, Stella Li, stated that the aim was to turn Camaçari into a “Brazilian Silicon Valley.”

   Amid a crisis in the petrochemical sector, does the entry of other supply chains represent a resumption of Camaçari’s role in national development?

   as: The Ford plant, inaugurated in 2001, represented the start of the automotive chain in the Camaçari complex. In 2021, after twenty years, Ford closed its operations and more recently Chinese companies such as BYD have started to invest in the auto supply chain. Other Chinese companies in the renewable energy sector, such as Sinoma and Goldwind, have also set up shop in the complex. The process of attracting BYD to Bahia involved a significant amount of state subsidies. The government of Bahia made electric cars exempt from the motor vehicle ownership tax (IPVA) from 2024, for example. BYD also received public incentives for utilizing the land that belonged to Ford, and the company also received funding from the BNDES. 

   Although the BYD plant is promised to actually function as a factory, right now, these companies are only operating as assemblers, practically maquiladoras. The higher value-added stages of the supply chain are not yet in Bahia. The petrochemical complex has great potential for battery production, but the batteries for these vehicles have yet to be produced here. There’s also a potential for lithium processing, as well as in the plastics industry for the production of parts. It is possible to produce the cars here, but so far BYD’s promise has not materialized.

   What can we demand from these companies to accompany the state subsidies? This is the role of the Brazilian state in the project of reindustrialization. If BYD only sets up mere assembly plants, what do we get out of it? Now, if the state demanded that, within a certain period of time, BYD process lithium in Brazil and manufacture batteries here, that it use local industries to manufacture parts, that it actually have parts of the production chain operating here, things would change.

   In the past, there was a similar debate in the petrochemical industry. The national content policy for the oil product stream—abandoned after the 2016 coup—required every industry that provided services to Petrobras to have a percentage of its machinery produced in Brazil. The country’s shipbuilding industry was reborn during that period and, when local content was no longer required, it broke down again.

   Brazilian industry can’t compete without some form of state incentive. There is no industrialization without state participation. If the industrialization project doesn’t require counterparts to foreign investment, be it American, Chinese or from anywhere else, Brazil will simply play a role in another country’s industrial policy. No company decides to expand its operations to another country altruistically. If it invests, it’s because it serves its own interests. And investment, from whatever source, is always good. The question is what we demand of investors in order to satisfy national interests as well.

   For many years, Brazilian industrialization was very dependent on the United States. If we simply replace US imperialism with Chinese imperialism, we’ll end up with the same result. We can’t simply cater to the interests of those who want to invest. Foreign investors want to make a profit. What does the country gain when it subsidizes their profit-making?

   MS: How does the Bahia trade union movement view the role of the New Industry Brazil (NIB) program in promoting the national interest in the country’s green reindustrialization project?

   as: So far, NIB is just a plan on paper. It’s difficult to analyze without observing the real impact through data, and the program hasn’t yet shown what it will become. But one thing that’s important to keep in mind when talking about green industrialization is: who pays the price?

   In the trade union movement, we jokingly say, “Well, alcohol is a cleaner fuel than gasoline, but I’d rather work at Petrobras than in the alcohol industry.” The green industry cannot be made economically viable by reducing the cost of the workforce. What we have seen is that the supposedly most sustainable sectors of the industry today are the ones with the most precarious jobs. If biodiesel has a higher production cost than diesel, how do you ensure that the green alternative reaches the pump at the same price? By making the workforce in the biodiesel production chain more precarious. That’s impossible!

   This contradiction exists not only in Brazil, but all over the world: the dirty industries, the oldest ones, are the ones that offer the best working conditions, including from the point of view of workers’ health. You only have to look at the working conditions in a sugar cane mill or in the aluminum recycling industry with can collectors. Someone might say that waste pickers aren’t part of the recycling industry, but the fact is that the recycling industry only exists in Brazil because of waste pickers. Brazil is the record holder in aluminum recycling, not because it has a great logistics project, but because there are a lot of impoverished people who need to collect cans to survive and who, in doing so, foster a production chain that is extremely profitable.

   Electric cars are another example: due to the technology used, the sector generates far fewer jobs than the combustion car industry. It’s much simpler engineering: the electric vehicle has a body, battery and engine, while the combustion car has oil, a belt, filter, head, piston, connecting rod. In short: several other factories are needed to supply products and parts for this industry.

   The trade union movement’s criticism of renewable energy chains follows the same line. Today, Bahia is the state that produces the most clean energy in Brazil and basically “exports wind” to the South and Southeast of the country without any compensation for the communities where the wind farms—which have a huge social and environmental impact—or the solar panels are installed. At the same time, the parts of the production chain that generate the most jobs, such as the manufacture of turbines, photovoltaic panels and maintenance parts, are not here. We are left with the worst part of the whole supply chain: the one with the greatest impact and lowest return. This is a localized reproduction of the same dynamic that can be observed between countries at the center and periphery. Will the role of the Northeast in Brazilian industrialization be reduced to generating energy and carbon credits to be consumed in the South and Southeast? The Northeast is the region in Brazil that produces the most solar energy, but it doesn’t have a photovoltaic panel factory.

   In the same vein, I believe that the NIB needs to include a geopolitical discussion about Brazil’s green industrialization objectives. Are we going to pay for the energy transition of the countries that have historically polluted the most? Will our role be to generate clean energy and carbon credits for the countries of the global North to consume? Once again, it’s the weaker that end paying for the energy transition. So far, it seems that the lowest value-added, least complex and least job-generating parts of the green production chains are those in Brazil or other peripheral countries. This is the persistent international division of labor. The most precarious jobs stay in the periphery and the most technologically-advanced and well-paid jobs stay in the center of capitalism. The NIB needs to engage in dialogue with the Chinese interest entering Brazil, for example, to demand counterparts to the state subsidy that would reverse our subordinate role in the international division of labor.

   Obviously, we are in favor of promoting green industry, but we argue that it should come with state funding. The state, not the worker, should pay for the transition. When the economic viability of biodiesel comes from the precariousness of the workforce, the state is making the worker pay for the energy transition. On the contrary, we advocate for a truly just energy transition.

   MS: So how would you summarize the trade union movement’s demand for Brazil’s green reindustrialization?

   as: The trade union movement’s demand is that green industrialization should not lose sight of the fact that workers are a fundamental part of this process. The quantity, quality, wage, and other conditions of these jobs generated through green industrialization must be equal to or better than what was observed in previous industrialization processes. Under no circumstances can we continue to use job insecurity as a mechanism to make green industry economically viable. The energy transition needs to happen, the planet can’t wait, but it needs to happen bearing in mind that workers are also part of the environment. If we sacrifice workers, who will the transition save?

4. The Unentitled Graces

   January 11, 2025 8:55 pm Comments Off on The Unentitled Graces

   ALGORITHMIC RENTAL PRICING

   This Tuesday, expanding upon an antitrust lawsuit filed in August against the company Realpage, the Department of Justice sued six of the largest landlords in the US, with ten states’ Attorney Generals acting as co-plaintiffs. Realpage offers its customers a rental price-setting algorithm for efficient property management, which has provoked allegations of cartel-like behavior among landlords. 

   A 2020 paper by EMILIO CALVANO, GIACOMO CALZOLARI, VINCENZO DENICOLÒ, and SERGIO PASTORELLO considers the potential consequences of algorithmic pricing on antitrust policy:

   “Today, the prevalent approach to tacit collusion is relatively lenient, in part because tacit collusion among human decision-makers is regarded as extremely difficult to achieve. While we have no direct comparative evidence for algorithms relative to humans, our results suggest that algorithmic collusion might not be that improbable. If this is so, then the advent of algorithmic pricing could well heighten the risk that tolerant antitrust policy will produce too many false negatives.

   On the other hand, algorithmic pricing may open the way to new forms of antitrust intervention. When they suspect collusive conduct, agencies and the courts can subpoena and test pricing algorithms in environments that closely replicate the particular industry under investigation. With humans this was not possible, so the risk of aggressive antitrust enforcement producing too many false positives may be reduced. Therefore, the advent of AI pricing could alter the balance between the two types of error, possibly calling for policy adjustment.”

   +  Martin Spann et al. provide an extensive review of algorithmic pricing literature. Link. And see Akil Vicks on San Francisco’s banning of revenue management software for rental housing and the housing crisis more broadly. Link.

   +  See Curbed’s coverage of algorithmic rental pricing from 2019 on. Link, link, link. And see Propublica’s investigations of Realpage. Link, link, link.

   +  “A non-software utilizing landlord will face higher demand when the software-utilizing landlords raise their rents, and find it optimal to raise their prices as well because demand is sufficiently concave (Calder-Wang and Kim, 2024).” From the White House’s CEA blog. Link. And see Sophie Calder-Wang and Gi Heung Kim on the impact of algorithmic pricing on multifamily rental markets. Link.

   NEW RESEARCHERS

   Teachers’ Unions

   MORGAN FOY is a PhD student in the Business and Public Policy group at UC-Berkeley, Haas School of Business. In his job market paper, he examines whether teachers’ unions affect student achievement in Wisconsin.

   From the paper:

   “I find limited evidence that decertification led to a significant change in the composition of the teaching workforce both on average and with respect to worker performance metrics. Teachers were not more likely to exit the district or the teaching profession. Instead, I find that teachers who stayed present across the pre- and post-decertification periods were more likely to improve in decertified districts relative to certified ones. This implies that the student achievement effects were due to a direct treatment effect of the union. Pinning down the precise mechanisms for these gains is challenging due to the limited range of outcomes in the administrative data. However, I find no evidence that there were changes to total district spending or that districts were more likely to implement pay-for-performance type schemes. Instead, the complementary survey evidence points to the idea that workers lost the ability to access union representation rights in issues with administration.”

   + + + 

   +  “Most IRA funds will flow to for-profit institutions equipped to take advantage of tax benefits, not publicly owned or non-profit entities. The mimosas may be bottomless but whether cooperative and public power will liberally imbibe is far from certain.” New on PW, Sandeep Vaheesan compares the New Deal’s electrification program with the Biden administration’s designs for financing the IRA. Link.

   +  Nicholas Bloom, Kyle Handley, André Kurmann, and Philip A. Luck revisit the reallocation of US jobs, geographically and in terms of job sector, due to the China shock. Link.

   +  “While enhancing American power, the petrodollar inflow also supercharged the financial sector. The inflow enabled the ‘financial sector to unleash itself,’ in the colorful phrase of one official.” By David Gibbs. Link.

   +  “Public-private fissuring—combined with labor-law doctrine—frustrates a central objective of labor law itself by depriving care workers of the ability to bargain with public entities that shape their wages and working conditions.” By Kyle Bigley. Link.

   +  Noah Gordon, Bentley Allan, Daniel Helmeci, and Jonas Goldman offer a supply chain resilience framework for US industrial strategy. Link.

   +  “The FTC found that the three largest PBMs—CVS Caremark, Cigna Group’s Express Scripts and UnitedHealth Group’s Optum Rx—now manage nearly 80 percent of prescriptions filled in the United States.” By  Mike Ludwig. Link.

   +  “While the spirit of black consciousness was rising, the ANC and its underground were increasing their propaganda activities. During August 1970 leaflets telling people about armed struggle were distributed in all the major cities. The campaigning was so extensive and effective that it made the headlines of every major newspaper in South Africa, as well as receiving attention abroad. “ANC Shows Its Teeth Again—Bombs in Five Large Cities—State Threatened in Leaflet” were the front page headlines in the Afrikaans Die Transvaler of August 14.” By Bernard Makhosezwe Magubane. Link.

5. The Urban Commonwealth

   October 25, 2018 12:00 am Comments Off on The Urban Commonwealth

   As the federal government continues to abdicate responsibility for urban investment, cities face a depressing modern calculus. Urban inequality has increased over the past decade, and many cities are struggling to make much-needed long-term investments (see the well-publicized summer meltdown of NYC’s subways). Raising taxes is politically challenging and skimming funding from current programs may detract from other critical policy goals. With no federal cavalry on the horizon, cities are under pressure to make the best of what they have.

   In this context, social wealth funds (SWFs) and urban wealth funds (UWFs), which have featured prominently in the public discourse recently, might seem like a policy panacea. SWFs promise to reduce inequality and build public wealth, while UWFs offer the tantalizing prospect of increasing revenues without raising taxes. Both scenarios seem desirable at face-value, but the consequences of wealth funds can vary greatly depending on their particulars. Digging deeper into these structures reveals why, though there is reason to be optimistic about applying elements of both types of institutions to urban contexts, there is also reason for caution.

   First, a note about terminology. Often used interchangeably or loosely, SWFs and UWFs refer to two qualitatively distinct types of wealth fund proposal. Both SWFs and UWFs are collectively-held, independently-managed investment vehicles that aim to preserve and grow public assets. SWFs generally aim to apply transparency and social goals to the sovereign wealth fund blueprint by engaging “new” liquid resources (e.g. natural resource dividends, progressive taxation) to initially capitalize a fund, which is then invested in a varied portfolio of financial assets. UWFs, on the other hand, compile existing public assets (e.g. public land, commercial enterprises, utilities) under a single entity, which actively manages the assets to maximize value. While proposals for SWFs often seek to earmark proceeds for cash transfers (this specific arrangement is called a Citizens’ Wealth Fund), UWFs aim to broadly pursue social investment, at least as conceptualized by Dag Detter and Stefan Fölster.

   Alphabet soup aside, the case for the first type of wealth fund, social wealth funds (SWFs), is theoretically and empirically compelling, but usually made at the national level. As capital’s share of national income growth swells and capital ownership concentrates increasingly in the hands of the few, wealth inequality has grown more pronounced. By recouping private wealth through measures like natural resource dividends or wealth taxation and investing this wealth in a collectively-owned financial fund, SWFs can redistribute gains from surging economic growth. Unlike traditional fiscal policy, SWFs build a store of public wealth, which pays off in the long-term; for instance, Norway’s sovereign wealth fund, the largest in the world, announced profits of over $131 billion in 2017, nearly one-third of the country’s GDP.

   In theory, there’s no reason why this SWF model could not be applied to municipalities. Cities face similar inequality trends and could certainly use the long-term public wealth, especially if it were put to redistributive use. The level of government shouldn’t matter: the Alaska Permanent Fund (APF), which provides every Alaskan with an annual cash transfer (that, by the way, has little effect on employment), offers a successful blueprint for how a municipal SWF could operate, albeit on a regional level.

   The problem lies in the lack of opportunities. Realistic circumstances for municipal SWF implementation are few and far between. Cities do not generally sit on untapped natural resources, and the margins for raising taxes (whether income, property, or otherwise) are slim. Barring the discovery of oil or a shift in the political realities of taxation, the prospects for immediate-term municipal SWFs are limited.

   Urban wealth funds (UWFs), on the other hand, avoid this problem. As proposed by Detter and Fölster, UWFs do not rely on new revenue streams, instead seeking to maximize the value of existing public assets through active, independent management. Their strategy involves three steps: (1) overhauling public accounting to create an accurate balance sheet of public assets, (2) consolidating assets into a single investment vehicle directed by professional fund managers for the purpose of value maximization, and (3) shifting proceeds to long-term social investment rather than immediate consumption.

   Several aspects of this model are compelling. It’s hard, for instance, to argue with improved public accounting. While an overhaul of municipal balance sheets would require significant investment and logistical coordination, the benefits of knowing assets’ market value would likely be worth the pain. Right now, most cities can’t effectively weigh the opportunity costs of shifting public assets (as Matt Klein notes, Boston couldn’t tell you if it makes financial sense to move Logan Airport to the outskirts). More transparent and comprehensive book-keeping could not only help cities better manage their resources, but also yield several positive externalities. In New York City, for example, the ongoing furor over vacant city-owned lots illustrates how public trust deteriorates when the municipality can’t offer concrete answers about the status of certain assets.

   Just as with municipal SWFs, the act of shifting revenues away from short-term consumption and towards long-term social investment seems valuable too. In The Public Wealth of Cities, Detter and Fölster credit Singapore’s successful development over the past 50 years to their UWF (Temesek) and its returns on long-term investment (e.g. Temesek provided shareholders with 15 percent returns for the year ending in March 2016). To illustrate this point, they compare Singapore to Jamaica, another former British colony that gained independence in the 1960s. The two countries’ population, life expectancy, and GDP/capita were roughly similar in the 1960s; but in 2014, Singapore’s GDP/capita was roughly ten times Jamaica’s and its life expectancy gains nearly twice Jamaica’s.

   Even though the qualitative evidence does suggest that Temesek and GIC (Singapore’s sovereign wealth fund) have contributed to Singapore’s success, it’s difficult to causally separate the UWF structure (particularly its political independence) from other Singaporean policy choices. This hints at a broader question. In the absence of quasi-natural experiments or other counterfactual analysis, it’s reasonable to interrogate the value-add of the independent UWF structure itself. In other words, would cities be equal or better off if they had used their excess resources, assets, and capacities according to another – perhaps more explicitly political – long-term structure? It’s hard to say without more robust empirical literature.

   But even if we accept that these structures produce benefits for places like Singapore, using existing public assets engenders further concerns. While the UWF revenue model alleviates the “key challenge” of SWFs (finding initial funding), many existing public assets have current and potential non-profit utility, some of which might matter just as much or more than value maximization. This seems particularly true when it comes to land, one of the most plentiful and valuable municipal assets.

   Central Park is an obvious example. While selling a portion of Central Park for condominium development might pay out a considerable sum (which could then be socially invested), the loss of public utility from using the public space, which is hard to measure in equivalent quantifiable terms, would almost certainly counteract the benefits of the additional revenue. Anticipating this, Detter and Fölster themselves suggest that certain public assets, like parks, be excluded from a UWF.

   But while Central Park may be black and white, other situations present tough decisions. Consider a public housing complex in a neighborhood with unaffordable housing. For simplicity’s sake, imagine a UWF fund manager has two options: sell the land or maintain the housing units. Public bookkeeping improvements would certainly help her make a more informed decision about market value, and thus financial opportunity costs. Let’s say, even, that the analysis demonstrates that the value-maximizing choice requires selling the complex. Should the city still sell the public housing complex, knowing that families will be forced from their homes? How should their utility factor into the decision-making?

   The point here is not necessarily to answer the questions, nor is it to exactly delineate which of a city’s total public assets should be managed according to non-profit goals. Instead, it is to draw attention to the fact that (a) such a decision requires a more expansive calculus than profit maximization and (b) it is highly questionable whether fund managers, whose added value explicitly derives from their ability to maximize returns, are equipped to make this decision. Though democratic whims can yield short-sighted outcomes – indeed, this is in many ways a key premise of Detter and Fölster’s argument for separating UWFs from short-term politics – the political process still exists to represent the will of the people in making these types of decisions. It seems optimistically technocratic (at best) and deeply problematic (at worst) to relinquish democratic control of public assets in instances where maximizing the revenue-generating power of the asset could come at the expense of maximizing public utility.

   In this regard, municipal SWFs have an advantage over UWFs. Because SWF are usually funded through “new”, liquid sources (e.g. oil dividends, wealth tax, etc.), the process of maximizing value does not generally interfere with other public objectives. This calculus suits the expertise of fund professionals and the model of independent management much better. While SWF objectives should still be clear and transparent, so that the public can weigh in on controversial investments (e.g. fossil fuels, tobacco), the risk of unwittingly sacrificing public utility in the name of profit is far more limited.

   Though neither option is perfect, cities should not throw the baby out with the bathwater. Several elements of these models could help cities in the short-term; in fact, some reforms, such as improved public accounting, could even add value without creating a municipal SWF or UWF. In this vein, American cities might consider two small-scale approaches, depending on context and circumstances.

   First, in cities where natural resources are available or taxes can be increased, policymakers could consider resisting the temptation to immediately spend new revenue in favor of creating a modest municipal SWF (similar to the APF). Though striking oil may be unrealistic, several cities are considering reforms around taxation – toying with congestion pricing and land value taxes, amongst others – and local policymakers could pair these reforms with a municipal SWF to shift revenues towards building public wealth. Over time, such a fund could slowly socialize wealth through new revenue streams, investment yields, and redistributive dividends (such as cash transfers).

   Second, where natural resources are unavailable or tax increases politically unviable, cities could consider experimentation with limited UWFs, which offer a safer option for protecting public interests than the comprehensive model of Detter and Fölster. Here, the specific public assets used are of critical importance. The experience of Copenhagen’s port UWF, which revitalized portions of the city without raising taxes, is instructive. Copenhagen’s UWF focused on underutilized industrial areas and neglected waterfront land, where there are fewer competing goals beyond redevelopment. The clear objectives and narrow scope reduced possibilities of interfering with other public goals, so the benefits of value maximization and independent governance were more readily realized. Another UWF variant, Hong Kong’s MTR Corporation, offers a different template. The HK MTR, which manages one of the world’s most successful public transportation systems by integrating rail infrastructure with value capture of the surrounding environs, demonstrates how a limiting a UWF to a specific sector can prove successful.

   Beyond the two frameworks considered here, cities might also be interested in a third wealth fund paradigm: UWFs with explicit non-profit objectives (such as providing affordable housing). This approach has been discussed less thoroughly in the wealth fund discourse, though a recent Friends Provident Foundation report suggests that creating an “Urban Land Fund” could help cities reduce the cost of social housing by buying and providing cheap land. Empirical examples do exist: Singapore’s Housing and Development Board (HDB) uses mass public land ownership to manage an affordable and stable housing market. It also, however, serves as a helpful reminder that such endeavors would require a radical reframing of the American municipal relationship with land, property-owning, and housing.

6. Visualization Test

   October 10, 2018 12:00 am Comments Off on Visualization Test

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