Brazilian President Luiz Inácio Lula da Silva’s election victory is set to reinforce government control over the country’s vast rare earth resources, raising the stakes for foreign miners and Washington’s efforts to reduce dependence on China.
Lula defeated far-right Senator Flávio Bolsonaro in Sunday’s closely contested runoff, securing a fourth nonconsecutive term if electoral authorities confirm the result. His next term begins Jan. 5, 2027, extending an industrial policy that seeks to keep more mineral processing and manufacturing in Brazil.
“This country will not accept being anyone’s backyard,” Lula said in his victory speech, signalling continued resistance to pressure from US President Donald Trump, whose administration has imposed higher tariffs on Brazilian goods.
The outcome reinforces Brazil’s recently established critical minerals strategy rather than signalling a major policy shift, according to Juan Ignacio Guzmán, CEO of GEM Mining Consulting.
“Lula’s win ultimately reinforces Brazil’s trajectory in recent years and, in particular, confirms the country’s critical minerals policy, which was launched in September of this year and is therefore still relatively new,” Guzmán told MINING.COM.
Brazil holds the world’s second-largest rare earth reserves, estimated at 21 million tonnes (Mt) by the US Geological Survey, trailing only China. That resource base makes the country an increasingly important target for Western governments seeking alternative supplies of materials used in electric vehicles, wind turbines and defence technologies.
Rare earth ambitions
Foreign investors are already positioning themselves to develop Brazil’s largely untapped rare earth potential, even as Lula’s government moves to strengthen oversight of strategic mineral assets.
Records from Brazil’s National Mining Agency through June show that foreign-owned companies filed 42% of the country’s 2,727 rare earth exploration applications, led by investors from Australia, the US and Canada.
More than 86% of the applications were submitted over the past three years, highlighting the rapid acceleration of interest in deposits that could help diversify supply chains dominated by China.
The country’s only commercial rare earth producer, Serra Verde, was acquired by USA Rare Earth (Nasdaq: USAR) in which the US government holds a stake, underscoring Washington’s growing financial interest in Brazilian mineral production.
Guzmán said Lula’s approach would likely emphasize greater integration between mining and downstream industrial activities, particularly refining.
“If new rare earth mining projects are developed, the goal would ideally be not only to produce raw minerals or concentrates but also to carry out refining activities within Brazil,” he said.
Brazil’s critical minerals policy establishes a framework for greater government scrutiny of strategic mineral assets, including changes in corporate control and international supply agreements that could affect national economic or geopolitical security.
The measures could complicate acquisitions and investment decisions, particularly where transactions involve substantial foreign influence.
At the same time, the government is offering incentives to encourage companies to establish processing and refining operations within Brazil.
Provisions include tax credits of up to 20% for eligible processing, transformation and urban-mining expenditures, capped at 1 billion reais ($192 million) annually from 2030 through 2034. Projects would require government approval to qualify.
“The government is working to create a favourable environment for the establishment and expansion of beneficiation, separation, processing, refining and advanced materials manufacturing in Brazil,” the Ministry of Mines and Energy told MINING.COM in a written statement.
The challenge will be attracting sufficient foreign financing and technical expertise without imposing regulatory conditions that undermine project economics.
Washington tensions
Lula’s victory leaves Latin America’s two most populous countries, Brazil and Mexico, under left-of-centre leadership, complicating Trump’s efforts to expand US influence across the region.
Brazil, Latin America’s largest economy with annual GDP of about $2.6 trillion, has resisted Washington’s demands despite increased US tariffs. Lula’s renewed mandate suggests that tensions over trade and national sovereignty could persist.
The outcome contrasts with the approach advocated by Flávio Bolsonaro, who favoured closer ties with the Trump administration, including strategic cooperation on critical minerals.
Guzmán, however, does not expect the political differences between Lula and Trump to significantly disrupt cooperation in the sector.
“Brazil is currently viewed as a strategic partner of the United States in the global race for critical minerals,” he said. “Therefore, I do not anticipate any major repercussions in this regard.”
Washington has already signalled a willingness to support Brazilian processing and refining as part of its efforts to diversify critical minerals supply chains.
US embassy sources told MINING.COM in September that American representatives had signalled a willingness to support domestic processing and refining, recognizing that agreements focused solely on raw-material exports may not satisfy Brazilian authorities.
Guzmán sees considerable scope for agreements combining US financing, technology transfers and long-term mineral supply contracts with Brazilian industrial development.
Such arrangements could help finance projects with tighter economics, provided domestic processing is technically and commercially viable.
The analyst cautioned that Brazil must also address regulatory uncertainty to attract the investment required.
“The Brazilian government should provide clearer and more stable regulatory frameworks regarding permitting, ownership rights, and supply commitments to the United States and other countries,” Guzmán said.
Lula’s political history suggests that industrial development and national sovereignty will remain prominent themes during what could be his final presidential term.
The veteran leader began his career as a union leader in the 1970s before helping establish the Workers’ Party. After three unsuccessful presidential campaigns, he won the presidency in 2002 and secured re-election in 2006.
He was succeeded in 2010 by former cabinet minister Dilma Rousseff, who won another term in 2014. Lula returned to power after defeating Jair Bolsonaro in 2022.
Sunday’s victory, coming shortly before his 81st birthday, may mark the final electoral triumph of a political career spanning five decades.
Mining companies will be looking at whether Lula can translate Brazil’s geological advantage into a competitive processing industry while maintaining the international partnerships needed to finance its development.
The potential for cooperation with Washington remains substantial, but its success will depend on how both governments balance strategic mineral security, commercial viability and Brazil’s ambitions to capture more value from its resources.
(Developing story. More to come…)
Source: https://www.mining.com/lulas-brazil-win-puts-rare-earths-in-trumps-crosshairs/
