Brazil tightens control over critical mineral deals

Brazil has the world's second largest total of rare earth reserves; the law will give the government more power over mineral rights.RIO DE JANEIRO (CN) — President Luiz Inácio Lula da Silva on Wednesday signed a law that allows the Brazilian government to review foreign acquisitions and international contracts involving strategic minerals while offering incentives to expand domestic processing.The law creates a national policy for critical and strategic minerals, along with a council housed within the presidency. The council will have the authority to approve transactions including changes in corporate control, transfers of mining rights and certain international contracts and partnerships. Without its approval, those transactions cannot move forward.Lula also signed a decree formally installing the council, and the government appointed its first members during the ceremony.“With the law enacted today, Brazil is proposing a new global agenda for the future of mining,” the president said.The law also allows the government to impose value-addition requirements on mineral exports, though it does not ban shipments of unprocessed ore. The details will be set in regulations.Critical minerals are vulnerable to supply disruptions and essential to key economic sectors. Strategic minerals are those for which Brazil holds significant reserves and that are important to the country’s trade balance, technological development or emissions reductions. The government will update the list every four years.Brazil has 21 million metric tons of rare earth reserves, the world’s second-largest total, according to the Study in Support of a National Rare Earths Strategy by the Brazilian Center for International Relations and consulting firm Vallya. Rare earths are a group of 17 elements used in electronics and military systems.Rafaela Guedes, a senior fellow at the center who worked on the study, said Brazil’s biggest challenge lies beyond extraction.“Brazil currently has virtually no capacity to separate or refine rare earths or manufacture magnets,” Guedes said.The law provides up to 5 billion reais (about $1 billion) in tax credits from 2030 through 2034 for mineral processing, manufacturing and recycling projects. Companies may claim credits covering up to 20% of eligible expenses, with higher rates for projects that move further up the value chain.It also authorizes a guaranteed fund with up to 2 billion reais in federal contributions to reduce financing risks. Priority projects may issue tax-advantaged bonds and receive priority review from government agencies.The study’s economic model found that price floors and guaranteed purchases could cut the payback period for a Brazilian rare earth separation plant from about 10 years to four. Guedes said foreign-backed agreements are already providing those protections to Brazilian projects.“The risk for Brazil is that the ore leaves with demand already locked in while the downstream value is captured abroad,” Guedes said.The law leaves mining, environmental and radiological licensing divided among separate agencies. It also provides no price floors or purchase guarantees.Warning against exporting raw materials, Lula invoked Brazil’s colonial gold boom.“Gold left Brazil with holes, Portugal with palaces and England with factories,” he said. “We will not repeat history.”The law comes less than two weeks after USA Rare Earth completed its roughly $2.8 billion acquisition of Serra Verde, Brazil’s only commercial producer of rare earths.The mine’s entire initial output is committed for 15 years to a buyer backed by U.S. government agencies and private investors. The agreement covers four rare earth elements used in permanent magnets and guarantees minimum prices.Courthouse News reporter Marília Marasciulo is based in Brazil.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads