Argentina's center-left government has been making a conscious and strategic push towards lithium.

Last year it lowered taxes on all mining exports to 8% from 12% and in April eased capital controls on firms taking foreign currency out of the country for projects with investments of over $100 million. It has backed the state energy firm YPF to create a lithium battery plant and is pushing a bill to lower taxes on electric cars.

"We will focus on areas and fuels of the future, that generate zero polluting emissions, which are basically hydrogen and lithium batteries," Production Minister Matias Kulfas said in a recent meeting with reporters in Buenos Aires.

A source at the central bank, which is keen to rebuild battered foreign currency reserves, said that the country had seen growing investor interest in mining, including in lithium.

Australia's Orocobre Ltd and U.S. miner Livent Corp , which have supply tie-ups with Toyota Corp and BMW respectively, operate the two producing lithium projects in Argentina out of a total of over 60 proposed projects in various stages of development.

Others in the country include Australia's Argosy Minerals , Lake Resources and Greenwing Resources , as well as South Korea's Posco and Neo Lithium Corp, backed by China's CATL.

China's Ganfeng Lithium Co Ltd is in a bidding war to buy Argentina-focused Millennial Lithium Corp after an unnamed battery maker made a rival bid to its $280 million offer.

Ganfeng and Lithium Americas are aiming to produce some 40,000 tonnes of lithium carbonate equivalent from the Cauchari-Olaroz mine, with production set to start in 2022.

'UNSTABLE MACROECONOMY'

Doubts, however, remain about whether Argentina can rev up its lithium output in the way it has promised. Half a decade ago, under a business-friendly government, the country expressed ambitions to overtake larger producer Chile but failed to do so.

"Argentina has the resources, but in order to transform them into reserves and making projects... a series of clear and stable rules is needed," said Buenos Aires-based Natacha Izquierdo, an analyst at consultancy Abeceb.

Alejandro Moro, general manager of Rincon Lithium, an Australian firm that owns a concession on the Rincon salt flats in Salta, agreed there remained hurdles to attracting capital.

"This a country with a quite unstable macroeconomy, with a high degree of taxes that are imposed on the capital that comes to invest," he said.

The firm is running a pilot plant on the flats, almost 4,000 meters (13,100 ft) above sea level. It pumps brine through pipes 30 meters below the ground, which is then refined to produce lithium carbonate. Rincon hopes to extract 50,000 tonnes a year by 2025.

Despite his reservations, however, Moro said he had become more optimistic about Argentina's support for mining investments after meeting with senior officials a few weeks earlier.

Argentina, an agricultural powerhouse with abundant oilseeds, has for years focused energy subsidies on biofuels, but officials are now signaling a shift in priorities towards electric vehicles - and lithium.

"Definitely, lithium is going to replace biofuels," Moro said.