Brazil benefits from the race for critical minerals, says The Economist.

247 - Brazil's advance in the global rare earth market is beginning to reposition the country on one of the most sensitive geopolitical chessboards today. In an industrial complex in the interior of Bahia, a new mineral separation plant promises to expand the supply of essential elements for the manufacture of technologies ranging from missiles to household appliances, at a time when the West is seeking to reduce its dependence on China.

According to a report published by the magazine The Economist,The project is located in a research park in the state of Bahia and is operated by the company Brazilian Rare Earths (BRE). The initiative arises amid growing concern from Western countries about Chinese dominance in the sector: China accounts for about 70% of global rare earth mining and approximately 90% of the processing of these strategic minerals.

International interest intensified after Beijing imposed restrictions on the export of metals, industrial components, and even specialized engineers. The impact was immediate on production chains in the United States and Europe, forcing factories to reduce operations. The shortage of supermagnets particularly affected sectors such as automotive, green technologies, and the defense industry. "Companies are scrambling to find alternative suppliers," said Bernardo da Veiga, director of BRE.

Brazil appears as a natural candidate to occupy this space. The country holds almost a quarter of the world's known rare earth reserves, second only to China. In addition to its favorable geology, it has a consolidated extractive industry, relatively cheap energy, and experienced professionals. "These factors are major competitive advantages," assessed José Augusto Palma of Aclara Resources, a Chilean mining company operating in the region.

The exploitation of these minerals is nothing new in the country. In the 1950s, the Brazilian company Orquima became the world's largest producer, extracting rare earth elements from monazite sands. This leading role, however, was interrupted when concerns about the material's radioactivity led the state to tighten regulations and nationalize the company, opening the way for Chinese growth in the sector.

Now, the government of President Luiz Inácio Lula da Silva seeks to regain this leading role. In January, the development of a national strategy for rare earth elements began, following a decree published in November that classified these minerals as a matter of national security. The measure facilitates access to special financing, expands possibilities for public procurement, and simplifies import procedures.

The strategy has two main aspects. The first is technological. Although the global rare earth market moves only a few billion dollars a year—a modest amount compared to Brazilian iron ore exports—the greatest gain lies in the use of these inputs as a basis for high-tech industries. “The real value is in the production chain,” explained André Pimenta, from CIT Senai ITR, a manufacturer of rare earth magnets in Minas Gerais.

The second front is diplomatic. Several economies face critical mineral deficits, from copper to scandium. The United States is showing particular interest. In July, US President Donald Trump imposed 50% tariffs on most Brazilian imports, amid political pressure related to the trial of former President Jair Bolsonaro. During the same period, however, the US ambassador to Brazil held private meetings with mining companies to discuss future purchases of domestic production.

Initially, Lula stated that Brazilian minerals "were not for sale," but later hinted at the possibility of an agreement on rare earth elements in exchange for reduced tariffs. If Washington does not move forward, countries such as members of the European Union, Japan, or South Korea appear as natural alternative partners.

Despite the potential, the challenges are significant. Currently, Brazil has only one mine in operation, inaugurated in 2024 by the company Serra Verde. The company intends to double the global supply of heavy rare earth elements outside of China, but faces technical difficulties in extracting ionic clays. Nearly US$500 million in funding from a US development agency should help overcome these obstacles.

Other projects are still awaiting environmental licensing and are not expected to begin production before 2028. Furthermore, few companies have shown interest in carrying out the complete processing in Brazil, a more complex and capital-intensive stage.

There are also political tensions. In a recent speech, Lula stated: “Either we take advantage of these riches that God has given us and transform them into wealth for our people, or we will see the same old countries digging holes here and taking our minerals.” For Julio Nery, from the Brazilian Mining Institute (Ibram), this view is problematic. He acknowledges the importance of advancing the value chain, but points out that the rare earth sector has structural limitations.

The predominance of foreign capital in mining companies reflects the need for large investments. "It's a very capital-intensive business for the Brazilian market," explained Rafael Moreno of Viridis, an Australian company. The lack of local expertise also weighs against domestic processing, although these obstacles can be overcome with time and resources.

The international scenario, in turn, tends to favor new producers. China maintained artificially low prices for years to ward off competitors, offsetting losses with sales of magnets and electric vehicles. This model began to be questioned when Donald Trump signed an agreement in July with the American company MP Materials, guaranteeing a minimum price of US$110 per kilogram of neodymium-praseodymium oxide, about double the price practiced by China.

According to industry analysts like John Prineas of St. George Mining, these price distortions are likely to become commonplace, attracting new players and leading to inevitable consolidation. In this process, countries with large natural reserves, such as Brazil, gain a rare opportunity to transform geological resources into a long-term strategic asset.