Brazil moves to turn its critical mineral reserves into a domestic industrial chain

Brazil has taken a further step towards converting its large reserves of critical minerals into an industrial platform capable of supplying the energy, technology and defence sectors.

The Federal Senate approved legislation establishing a National Policy for Critical and Strategic Minerals, designed to attract investment, expand geological research and encourage processing and manufacturing within the country.

The bill, already approved by the Chamber of Deputies, now requires the signature of President Luiz Inácio Lula da Silva before becoming law. Its central objective is to prevent Brazil from remaining primarily an exporter of unprocessed raw materials while other countries capture most of the value through refining, component manufacturing and advanced technology.

Brazil holds the world’s second-largest rare earth reserves, behind China, as well as major deposits of niobium, graphite, nickel, lithium, manganese and copper. These materials are used in electric vehicles, batteries, wind turbines, solar panels, semiconductors, telecommunications equipment and military systems.

However, geological resources do not automatically translate into industrial capacity. Brazil still needs additional investment in exploration, transport infrastructure, energy supply, refining technology, skilled labour and environmental licensing before it can operate at the scale sought by the government.

Up to €1.17 billion in public support

The legislation creates a financial structure worth up to 7 billion reais, approximately €1.17 billion at current exchange rates.

The first component is the Mineral Activity Guarantee Fund, which would receive up to 2 billion reais, equivalent to around €336 million, from the federal government. The fund would provide guarantees for projects associated with the exploration, production and processing of minerals considered critical or strategic.

A further 5 billion reais, approximately €839 million, would be available through tax credits over five years to support projects that process and transform minerals in Brazil.

The incentives are intended to favour investments that add value domestically instead of limiting operations to extracting and exporting mineral concentrates. Priority areas include materials suitable for batteries, permanent magnets, electric motors, renewable energy equipment and fertilisers.

The final list of eligible minerals, the requirements for receiving support and the operational rules of the programmes will depend on regulations issued after the legislation enters into force.

The framework distinguishes critical minerals, whose supply may be vulnerable to restrictions or disruptions, from strategic minerals linked to priorities such as the energy transition, food security, national defence and technological development.

A new layer of oversight for foreign capital

The legislation also establishes a National Council for the Industrialisation of Critical and Strategic Minerals, linked to the Brazilian presidency.

The body will identify priority projects and coordinate public policies involving mining, technology, infrastructure and industrial development. It will also review certain forms of foreign investment or influence in companies holding rights over critical mineral deposits.

That authority could provide the federal government with an effective veto over transactions considered contrary to national interests.

Supporters argue that the mechanism will prevent strategic assets from being transferred without commitments to local investment, processing or technology development. Critics warn that broad screening powers could create uncertainty if the approval criteria are not clear, predictable and technically defined.

The tension is central to Brazil’s strategy. Developing mines and processing facilities will require foreign capital, technology and customers, but the government wants those partnerships to contribute to domestic industrial capacity.

President Lula has repeatedly stated that Brazil intends to work with multiple partners, including the European Union, the United States, China and India, while avoiding dependence on a single economic power.

International interest is accelerating

Competition for access to Brazil’s resources has intensified as Western economies seek alternatives to mineral supply chains dominated by China.

In April, US-based USA Rare Earth agreed to acquire Serra Verde, Brazil’s only commercial-scale rare earth producer, in a transaction valued at approximately €2.41 billion.

Serra Verde operates the Pela Ema mine and processing facility in the state of Goiás, producing rare earth concentrates containing elements used in permanent magnets. The transaction demonstrated both the commercial value of Brazilian deposits and the scale of foreign interest in controlling existing production.

The European Union is also seeking a larger role. European Commissioner Jozef Síkela visited rare earth projects in Minas Gerais in June as Brussels explored partnerships covering mineral production, processing technology and long-term supply.

One of the projects attracting European interest is being developed by Viridis Mining and Minerals, which plans to build a commercial facility capable of producing 15,000 tonnes of mixed rare earth carbonate annually by 2028. The company has held discussions with Belgian chemicals group Solvay over potential supply and technical cooperation.

For the EU, Brazil could help diversify access to minerals required for electrification, renewable energy and digital infrastructure. For Brazil, European participation offers a potential source of capital, industrial technology and customers prepared to sign long-term supply agreements.

The implementation of the EU–Mercosur trade agreement provides an additional framework for developing these relationships, although mineral partnerships will still depend on individual investments, environmental approvals and commercial contracts.

The challenge of capturing more value

Brazil’s ambition extends beyond increasing mining output. The government wants projects capable of producing refined materials, battery components and permanent magnets instead of exporting low-value concentrates.

China’s position in the market shows why that distinction matters. Its influence is based not only on access to mineral deposits but also on control of refining, separation and manufacturing capacity.

Rare earth elements, for example, must undergo complex processing before they can be used in electric motors, turbines or defence systems. Developing those stages requires specialised technology, stable energy supplies and customers willing to finance facilities before production begins.

Brazil therefore needs to connect mining policy with broader industrial measures involving research institutions, equipment suppliers, chemical companies and manufacturers.

The Brazilian Development Bank and innovation agency Finep have already evaluated investment plans covering aluminium, cobalt, copper, graphite, lithium, manganese, niobium, nickel, rare earths, silicon, titanium, tungsten, uranium, vanadium and zinc.

Public financing can reduce risk during the early stages of these projects, but the transition from exploration to commercial production may still take years.

Environmental safeguards remain under scrutiny

The proposed expansion has also generated concern among environmental organisations and communities located near potential mining areas.

Brazil’s Climate Observatory has warned that the need for minerals used in the energy transition should not become a justification for weakening environmental licensing or the rights of affected populations.

Mining and processing projects can require large volumes of water and energy while producing waste that must be managed over long periods. The location of some deposits near sensitive ecosystems increases the importance of environmental assessment, community consultation and monitoring.

The government faces the task of accelerating investment without creating a perception that strategic status allows projects to bypass existing protections. Failure to establish credible safeguards could delay licences, generate litigation and make Brazilian supply less attractive to international customers with sustainability requirements.

Reserves alone will not guarantee leadership

The legislation gives Brazil its most comprehensive framework to date for managing critical and strategic minerals. It combines public financing, industrial incentives, research objectives and greater oversight of foreign investment.

Its effectiveness will depend on the regulations that follow presidential approval. Investors will need clarity about which minerals qualify, how projects will be selected, when tax benefits will become available and which transactions require government authorisation.

Brazil’s geological position provides an advantage at a time when governments and companies are seeking to diversify supply chains. But the country’s role will ultimately be determined by its capacity to build processing plants, develop technology, complete infrastructure and bring projects into commercial operation.

The strategic objective is clear: Brazil wants to use global demand for critical minerals to create domestic industry rather than repeat a model based mainly on exporting raw materials.

Whether it succeeds will depend on balancing three objectives that do not always move together—attracting international capital, preserving national control and meeting environmental and social requirements.