There are two salt deserts in Bolivia: the Salar de Coipasa and the Salar de Uyuni — both of which could be destroyed in the mining of lithium. Photo: Jessie Reeder (flickr)

Does Bolivia have a resource as valuable as Saudi Arabian oil?

The auto industry has historically relied on oil to power cars, but is now turning to new sources of energy. Consequently, raw materials like the lithium in electric car batteries are now in demand.

Ford and GM have invested in the research and production of electric cars, while Toyota has announced plans to build a hybrid electric and start selling an all-electric car by 2012.

So where does Bolivia come into the picture? The introduction of the lithium-ion battery allows cars to go farther on a single charge, making them more convenient and economically viable. But there is a catch: The lithium needed for these batteries is a limited resource, and according to this BBC video report, half of the world’s supply is under Bolivia’s salt flats.

Bolivia, the poorest country in South America, could benefit enormously from mining and processing lithium. But extraction industries have always been controversial. Political tensions over exporting natural gas have ended two presidencies and led to calls for regional autonomy. These tensions have damaged Bolivia's tourism industry, which makes up 6.1 percent of Bolivia's economy.

Mining lithium poses a potential economic Catch-22. Most tourists are drawn by Bolivia’s unspoiled landscape, with the salt flats being a particular point of interest. Mining for lithium could destroy the salt flats, while processing could lead to environmental degradation.

Although electric cars have often been hailed as the future of an environmentally conscious auto industry, lithium has the same Achilles heel as oil: it is a scarce resource. In addition, it is unclear whether the auto industry will even have access to the amount of lithium they would need to launch these ambitious plans. Bolivia’s president Evo Morales is famously cautious about allowing foreigners to mine, and he's considered a fierce environmental protectionist. The decision to mine the salt flats is Bolivia's. Ultimately, the country will have to weigh the benefits of economic development against environmental protection, tourism and foreign influence.

In a daily analysis from last week, Council on Foreign Relations senior fellow Benn Still suggested that the United States is “exporting inflation worldwide.” The latest action by the US Federal Reserve may have staved off inflationary disaster domestically but only to the detriment of other nations who peg their currency to the dollar.

Venezuela struggled with inflation rates over 20 percent in 2007 (Bloomberg). Argentina and Bolivia face similar concerns. Official data puts Russian inflation for 2007 at nearly 12 percent (Forbes). Several Gulf Arab states also find themselves with inflation over or near 10 percent. In China, rates near 7 percent registered in December 2007 represent the highest inflation in over a decade. China’s Prime Minister Wen Jiabao recently announced Beijing would freeze short-term energy prices in an attempt to curb consumer price increases (NYT).

Lucy Conger's story "The Big-Country Enigma" examines why micro-credit has flourished in smaller countries like Peru and Bolivia while remaining somewhat small in scale in countries such as Brazil.

Does both over and under government regulation stand in the way to microfinance?