Brazil's Senate has passed a landmark bill to regulate the exploration of critical and strategic minerals, a move that could significantly boost the exploitation of the South American nation's vast rare earth reserves. The bill, which already passed the lower house with overwhelming support, now heads to President Luiz Inácio Lula da Silva for his expected signature into law.
The legislation establishes a legal framework for critical minerals, including rare earths, and creates a fund to provide credit for mining projects. It also includes provisions for tax incentives aimed at promoting domestic processing of these valuable resources.
Brazil holds the world's second-largest reserves of rare earth elements, which are essential components in a wide array of modern products such as smartphones, electric vehicles, solar panels, and jet engines. With China currently dominating global supply chains for these minerals, Brazil is positioning itself as a potential alternative supplier for countries seeking to diversify their sources and reduce reliance on China.
This development follows a trend of increased investment in Brazil's mineral sector. Following China's restrictions on rare earth exports last year in response to U.S. tariffs, a U.S. government-backed firm acquired Serra Verde, Brazil's sole commercial rare earth producer. In April, USA Rare Earth announced its agreement to pay approximately $2.8 billion for Serra Verde, which owns the Pela Ema rare earth mine and processing plant in Goiás state.
President Lula has expressed his intention for Brazil to capitalize on the global interest in these minerals to develop a domestic industry, rather than merely exporting raw materials. "With rare earths, we're going to change our behavior. We want Brazil to be the big winner of these riches," Lula stated in May.
The bill allocates 2 billion reais (approximately $391 million) from the federal government to establish the Mineral Activity Guarantee Fund, intended to support projects and activities related to the production of critical and strategic minerals. Furthermore, it includes a program offering 5 billion reais ($978 million) in tax credits over five years to encourage the processing and transformation of these minerals within Brazil.
A National Council for the Industrialization of Critical and Strategic Minerals will also be created to identify priority projects eligible for support from the fund.
However, the bill has drawn criticism from environmental groups. The Climate Observatory, a network of Brazilian environmental organizations, has raised concerns that the legislation increases regulatory flexibility without adequate environmental, climate, or socioenvironmental safeguards. "Critical and strategic minerals are necessary for the energy transition, but this cannot become a blank check for mining," stated Suely Araújo, Public Policy Coordinator at the Climate Observatory, emphasizing the need to protect the rights of affected communities and territories.
Experts suggest that Brazil should engage in public discourse regarding the exploration and production of its mineral resources. Leonardo Paz Neves, an international relations professor, noted that access to Brazilian resources already exists, citing the recent acquisition by USA Rare Earth, and raised the question of whether the state will seek preferential agreements for this access.
Brazil has indicated its willingness to collaborate with various international partners, with President Lula stating that Brazil has an obligation to share with any country willing to participate, including the U.S., China, Germany, and France. In February, Brazil and India signed a nonbinding memorandum of understanding to enhance cooperation on critical minerals and rare earths.