Lula’s Reelection Complicates Trump’s Push for Access to Brazil’s Rare Earth Reserves

Brazil's reelection of leftist President Luiz Inacio Lula da Silva is set to complicate US President Donald Trump's efforts to secure preferential access to the country's vast rare earth reserves, as Brasília prepares regulations that will prioritize domestic processing, technology transfer and higher-value manufacturing.

A victory last month for Lula's challenger, Flavio Bolsonaro, whose family has close ties to Trump, could have accelerated US investment in Brazil's mineral resources and strengthened Washington's efforts to reduce its dependence on China for materials used in advanced manufacturing.

Instead, Lula's government plans to introduce a new regulatory framework through the National Council for the Industrialization of Critical and Strategic Minerals (CIMCE). Three council members told Reuters ahead of its first meeting on Thursday, which Lula attended, that foreign investment would remain welcome, but projects would be expected to support the development of Brazil's domestic processing industry.

The proposed rules will cover investment incentives and the classification of priority projects in rare earths, which are essential to the technology, automotive and energy industries.

The policy marks a shift from a model centered primarily on extracting and exporting mineral resources towards building more of the supply chain inside Brazil. It also introduces a potential complication for US companies seeking rapid access to the country's deposits as Washington competes with Beijing for reliable supplies.

"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."

Lula has previously warned against what he describes as a colonial-style scramble by foreign powers for Brazil's natural resources, arguing that the country must secure greater economic benefits from its mineral wealth.

Brazil Seeks Processing and Technology Transfer

The change in political direction could affect the approach to US investment that Flavio Bolsonaro had outlined during his campaign. After meeting Trump in May, Bolsonaro promised a "long-term strategic partnership" involving Brazil's rare earth deposits.

A US State Department official familiar with discussions between the two countries told Reuters earlier this year that Trump wanted preferential access to Brazil's rare earths.

Trump has also used tariffs and sanctions in an unsuccessful attempt to pressure Brazil to abandon the prosecution of former president Jair Bolsonaro, Flavio's father. Jair Bolsonaro is serving a 27-year sentence for attempting to remain in power after losing the 2022 election.

After losing last month's election, Flavio Bolsonaro left Brazil despite a Supreme Court order requiring him to surrender his passports. The United States offered him safe harbor. He said he had left because he was the target of a "politically motivated witch hunt" and would have been imprisoned had he remained in the country.

The White House said in a statement to Reuters that diversifying the US minerals supply chain would benefit both countries.

"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," White House spokesperson Matthew Middleton said.

However, analysts had expected Flavio Bolsonaro to dismantle CIMCE if elected, potentially removing pressure on mining companies to develop downstream processing operations in Brazil.

Lula's government is instead seeking commitments from foreign investors to process and refine minerals locally and share technology, said Eracy Lafuente, a CIMCE member and chief of staff to the governor of Bahia state, a Lula stronghold.

The United States would remain an important partner in the sector, he said, adding that Washington "will not be sidelined."

The policy does not exclude American companies or investment. Rather, it seeks to make access to Brazil's resources conditional on a broader contribution to the country's industrial development.

Brazil's Technology Gap Limits Supply Chain

Brazil's ambitions come as the United States and China compete to secure alternative sources of critical minerals. China controls the world's largest rare earth reserves and dominates important stages of the global processing and refining industry, making supply-chain diversification a priority for Washington.

Lage said both countries had capabilities that could support Brazil's objectives.

However, developing a domestic processing industry will require technology, investment and time. Ramon Barua, chief executive of Aclara Resources, which is developing a rare earth mine in Brazil's central state of Goiás and working on separation technology in the United States, said the country could not immediately establish the required processing capacity.

"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."

The gap between Brazil's mineral potential and its existing industrial capacity is significant. Despite its large reserves, the country has only one commercially operating rare earth mine, the US government-backed Serra Verde operation.

USA Rare Earth acquired Serra Verde in September. The mine has faced technical challenges, and the company does not expect it to reach full capacity until the end of next year.

That limited operating base highlights the difficulty of translating resource ownership into a competitive position across the rare earth supply chain. Mining is only one stage. Separation, refining and the production of specialized materials require additional technical expertise and industrial investment.

Barua welcomed Brazil's new policy, arguing that its purpose should be to encourage investment in later stages of the supply chain rather than compel companies to undertake activities they cannot support commercially.

"I think the interest of the law isn't to force anybody to invest in the later stages of the supply chain," he said. "It's to incentivize investment in those stages of the technology."

Mining Companies Await Regulatory Clarity

Lula signed Brazil's National Policy for Critical and Strategic Minerals into law about two weeks before the first round of voting. The legislation established CIMCE and set the process in motion for a regulatory overhaul, including investment incentives and mechanisms to reduce risks for potential investors.

At its first meeting, the council identified 27 minerals under its authority, including rare earths, which were classified as a high priority for Brazil.

CIMCE will also have powers to ratify changes in corporate control at companies holding mining rights for critical and strategic minerals. It can approve international contracts, agreements and partnerships involving supplies of these materials to safeguard what the government describes as economic or geopolitical security.

The council's authority gives the government a more direct role in determining how foreign investment and mineral supply agreements align with national priorities.

Lafuente said the government intended to move quickly on the regulations, with the aim of presenting them within the first few months of 2027. The Brazilian president's Chief of Staff Office, which will preside over CIMCE, confirmed that work on the rules was underway.

For companies operating in the sector, uncertainty over the final requirements remains a concern. Gabriela Salazar, a partner at Azevedo Sette Advogados, said the rare earth companies advised by her firm did not oppose CIMCE or the new law. Their priority was obtaining clear rules to guide investment decisions.

The regulatory framework will therefore be important in determining whether Brazil can attract the capital and technology needed to develop domestic processing without discouraging foreign investors.

Washington's challenge is that access to Brazil's rare earth reserves may increasingly rely on supporting an industrial strategy designed in Brasília. The United States remains welcome as an investment partner, but the Lula government is signaling that securing raw materials alone will not be enough. It wants foreign capital to help build the technology and manufacturing capacity that could give Brazil a larger role in the global minerals market.