The re-election of leftist Luiz Inacio Lula da Silva as Brazil’s president will likely dash US President Donald Trump’s hopes of securing fast access to the world’s second-largest rare earth reserves.
A victory last month for Lula’s challenger Flavio Bolsonaro — whose family is close to Trump — could have sped up US investment in Brazil’s mineral wealth, helping Washington in its race with China for the raw materials key to modern manufacturing.
Instead, Lula’s government plans new regulations for the sector to be set out by the new National Council for the Industrialisation of Critical and Strategic Minerals (CIMCE), three council members told Reuters ahead of its first meeting on Thursday, attended by Lula.
US investment will still be welcome, but the council will prioritise processing rare earths within Brazil rather than exporting them as raw materials, they said.
New rules will govern investment incentives and classification of priority projects in rare earths, which are essential to the tech, auto and energy industries.
“What’s most important is to produce more in Brazil. To process, manufacture, add value and invest in knowledge, research and development,” said Marco Lage, a CIMCE member. “That’s what China has been doing for 30 years.”
Trump wanted preferential access to Brazil’s rare earths, a US State Department official with knowledge of discussions between the countries told Reuters earlier this year. After meeting Trump in May, Flavio Bolsonaro promised a “long-term strategic partnership” over the deposits.
In a statement to Reuters, the White House said diversifying the US minerals supply chain is in the best interest of the US and Brazil.
“Under President Trump, this administration is committed to pursuing new opportunities to strengthen our partnerships and deliver tangible results for the American people on this important issue,” said White House spokesperson Matthew Middleton.
Analysts expected Flavio Bolsonaro would scrap CIMCE if he became president, freeing firms from pressure to develop a downstream rare earths industry.
Now, Brazil wants foreign investors to engage in processing and refining locally and to share technology, said Eracy Lafuente, a CIMCE member and chief of staff to the governor of Bahia state, a Lula stronghold.
Both the US and China have a lot to contribute to Brazil’s aims, said Lage, who represents mining municipalities on CIMCE.
Even with a strong government push, there are limits to what can be done quickly in Brazil, said Ramon Barua, CEO of Aclara Resources, which is developing a rare earths mine in Brazil’s central Goias state. The company is also working on technology for the separation of rare earths in the US.
“Even if we wanted — or even if President Lula wanted — to have separation in Brazil today, I don’t think that’s possible,” Barua said. “We need to acquire the technology first.”
Lula signed into law Brazil’s National Policy for Critical and Strategic Minerals about two weeks before the first round of voting.
The move created CIMCE, kickstarting the regulatory framework overhaul, setting up investment incentives and risk-mitigation mechanisms for potential investors.
At its first meeting, the council, made up of government officials, outsiders such as Lage and Lafuente and industry representatives, decided 27 minerals fall under CIMCE’s purview, with rare earths among them and classed as a “high priority” to Brazil.