RIO DE JANEIRO — Brazil’s Senate approved a bill to regulate the exploration of critical and strategic minerals on Wednesday night. The legislation creates a legal framework for rare earths and other critical minerals, establishing tax incentives and a national council to oversee foreign investment and domestic processing.

The lower house of Brazil's legislature voted in favor of the bill on May 6. The bill now proceeds to President Luiz Inácio Lula da Silva for signature.

The legislation provides tax incentives for domestic processing of critical minerals. It includes a program offering 5 billion reais in tax credits over five years to encourage domestic mineral processing.

The bill establishes the Mineral Activity Guarantee Fund with a contribution of 2 billion reais from the federal government. This fund is designed to provide credit to mining projects.

According to Valor International, the sponsors emphasized the importance of the bill in securing Brazil’s mineral supply chain. The National Council for the Industrialization of Critical and Strategic Minerals is tasked with defining and updating the list of critical and strategic minerals and identifying priority projects. The National Council will indicate priority projects to receive support from the fund.

Brazil holds the world’s second-largest reserves of rare earth elements. Rare earth elements are used in products including smartphones, electric vehicles, solar panels, and jet engines.

"We’re not going to repeat what happened with silver and gold in Latin America," Lula told journalists in Washington on May 7. "With rare earths, we’re going to change our behavior. We want Brazil to be the big winner of these riches." "Brazil has the obligation to share with whoever wants to participate with us, be that the U.S. China, Germany or France," he said.

Business Professor Jaques Paes said the bill places political considerations above technical ones. "It puts rare earths in a political realm rather than a technical one," Paes said.

Public Policy Coordinator Suely Araújo issued a statement on September 1 regarding community rights. "Critical and strategic minerals are necessary for the energy transition, but this cannot become a blank check for mining. It makes no sense (..) to accelerate legislative proposals that do not guarantee the rights of affected communities and territories, Araújo said."

International Relations Professor Leonardo Paz Neves commented on the nature of access agreements. Access already exists. The big question here is whether the state will want to try to negotiate some kind of privileged agreement regarding that access," Neves said."

Why It Matters

The legislation establishes a structured approach to managing Brazil's mineral resources, which are essential for global technology and energy sectors. By creating a legal framework and financial incentives, the government aims to retain more value from extraction and processing within the country. The establishment of the National Council introduces a mechanism for screening foreign investment, reflecting a shift toward greater state oversight in strategic sectors.

The debate surrounding the bill shows tensions between accelerating resource development for the energy transition and protecting local communities. Critics argue that the speed of the legislative process may overlook social safeguards, while proponents view the measures as necessary to prevent historical patterns of resource exploitation. The outcome will influence how Brazil engages with international partners seeking access to its critical mineral reserves.

Timeline

The lower house of Brazil's legislature voted in favor of the bill on May 6. On May 7, President Luiz Inácio Lula da Silva stated, "With rare earths, we’re going to change our behavior. We want Brazil to be the big winner of these riches." Also on May 7, Lula told journalists in Washington, "We’re not going to repeat what happened with silver and gold in Latin America." On September 1, Suely Araújo said, "Critical and strategic minerals are necessary for the energy transition, but this cannot become a blank check for mining. It makes no sense (..) to accelerate legislative proposals that do not guarantee the rights of affected communities and territories."

What's New

Additional reporting indicates that the sponsors emphasized the importance of the bill in securing Brazil’s mineral supply chain, with the National Council for the Industrialization of Critical and Strategic Minerals being tasked with defining and updating the list of critical and strategic minerals and identifying priority projects. Contextual information notes that Luiz Inácio Lula is president of Brazil from 2003 to 2011 and since 2023.