Brazil’s New Critical Minerals Framework Targets Processing at Home as Global Race for Rare Earths Intensifies
By Shahnoor Saqib | SCN NEWS
RIO DE JANEIRO — Brazil is moving to turn its vast reserves of rare earths and other critical minerals into domestic industrial power rather than another raw-material export boom, after the Senate approved legislation offering billions of reais in incentives while expanding government oversight of a sector increasingly contested by the United States, China and other major economies.
The Senate approved Bill 2,780/2024 on September 2, establishing a National Policy for Critical and Strategic Minerals and sending the measure to President Luiz Inácio Lula da Silva for sanction. The legislation focuses not only on exploration and mining but also on processing, transformation, traceability, technological development and greater state oversight of resources considered essential to energy security, advanced manufacturing and national sovereignty.
At the center of the framework is an attempt to solve a problem confronting many mineral-rich countries: possessing strategically important deposits does not necessarily mean capturing most of their economic value. The legislation provides for a Mineral Activity Guarantee Fund with up to 2 billion reais ($391 million) in federal participation and another 5 billion reais, about $978 million, in tax incentives over five years to encourage processing and transformation inside Brazil.
That distinction has become increasingly important as governments compete to secure minerals needed for electric vehicles, renewable-energy systems, smartphones, advanced electronics and defense equipment. Brazil holds the world's second-largest rare-earth reserves, according to figures cited by the Associated Press, giving the country the geological potential to emerge as a major alternative source as governments and manufacturers seek to diversify supply chains heavily dependent on China.
Brazil, however, is signaling that simply replacing one supplier with another is not its objective. Lula has repeatedly argued that the country should use international demand for critical minerals to build its own industrial capacity rather than export resources in minimally processed form, invoking Latin America's history of exporting valuable commodities while much of the downstream economic benefit was captured elsewhere.
The new policy consequently prioritizes projects that add value inside Brazil. Senate information says the framework promotes domestic processing alongside research, extraction, innovation and traceability, while defining critical minerals around supply vulnerability and their importance to sectors including the energy transition, food security and national sovereignty.
But Brazil's attempt to move further down the mineral value chain comes as international competition for its deposits is already accelerating. In April, USA Rare Earth agreed to acquire Serra Verde, owner of Brazil's Pela Ema mine and processing operation in Goiás, in a transaction valued at approximately $2.8 billion. Serra Verde is Brazil's only commercial-scale producer of rare earths, making the acquisition a significant example of growing U.S. interest in securing supply outside China.
The legislation introduces another important dimension to that investment race. It creates a National Council for the Industrialization of Critical and Strategic Minerals that would identify priority projects and scrutinize certain changes involving ownership, mineral rights and foreign influence. Analysts cited by AP said those powers could effectively give the government substantial influence over some foreign investment decisions, potentially increasing political oversight of transactions in strategic mineral assets.
That combination makes Brazil's emerging model notable for the wider global mining industry. The government is simultaneously offering financial incentives intended to accelerate projects and asserting greater control over who participates in strategically important assets. For international miners and investors, access to Brazil's mineral resources could therefore increasingly come with expectations involving local processing, industrial development and government scrutiny.
Brazil is also avoiding an exclusively U.S.-aligned mineral strategy. Lula has said the country is prepared to work with partners including the United States, China, Germany and France, while Brazil and India signed a nonbinding memorandum on critical minerals and rare earths in February. The approach positions Brazil to negotiate with competing economic powers rather than attach its mineral strategy entirely to one geopolitical bloc.
There is also a significant environmental and community dimension. Some potential mineral development could occur near environmentally sensitive areas, including the Amazon region, and Brazil's Climate Observatory has warned that accelerating critical-mineral development should not weaken protections for affected communities and territories. The group argues that minerals required for the energy transition cannot become justification for lowering socio-environmental safeguards.
That tension is likely to become more significant as exploration expands. Minerals needed to decarbonize transportation and electricity systems still require mines, processing facilities, infrastructure and land, creating a challenge for governments seeking simultaneously to accelerate the energy transition, attract investment and maintain environmental and community protections.
Brazil's legislation therefore represents more than another government effort to stimulate mining. It reflects an emerging strategic question across mineral-producing countries: whether the next critical-minerals boom will reproduce a traditional model in which raw materials leave producing nations for processing elsewhere, or whether governments can use geological resources to build domestic industries around refining, batteries, magnets and advanced manufacturing.
For Brazil, the answer is increasingly explicit. The country wants international capital to help unlock its mineral resources, but it also wants more of the processing, technology and economic value generated by those resources to remain at home.
As competition for secure mineral supplies intensifies, that approach could make Brazil not simply an alternative source of rare earths to China, but a test of whether resource-rich countries can rewrite the economic terms of the global critical-minerals race.