Brazil approved a new framework for critical and strategic minerals on September 2, with the Senate passing Bill 2,780/2024, which creates the National Policy for Critical and Strategic Minerals (PNMCE) and the National Council for the Industrialization of Critical and Strategic Minerals (CIMCE), linked to the Presidency of the Republic.

The bill was approved by Brazilian Congress in May and now moves to presidential sanction before coming into force.

The legislative push comes at a critical time as the global race for rare earths and battery metals intensifies. With the U.S. and European markets actively seeking to diversify their supply chains away from Asia, Brazil’s move to regulate the sector also incentivizes domestic processing rather than pure extraction.

What the New Bill PL 2,780/2024 Creates

The core objective of the legislation is to shift Brazil from being merely a raw material exporter to a country that industrializes its resources domestically. In total, the bill introduces R$7 billion to be applied through fiscal incentives and the new Mineral Activity Guarantee Fund (FGAM).

The bill also introduces a new classification of critical and strategic minerals and establishes CIMCE, the National Council for the Industrialization of Critical and Strategic Minerals, which will be linked to the executive branch.

The council will have the authority to analyze and approve transactions relevant to national sovereignty and will coordinate, plan and monitor national policy related to strategic minerals such as lithium, nickel and rare earths, with a focus on encouraging the transformation and processing of minerals domestically rather than simply exporting raw ore.

The text rules over 4 major topics related to Critical and Strategic minerals:

  • Creates an official classification for minerals considered essential to technology and national security.
  • Establishes a new managing council, CIMCE (National Council for the Industrialization of Critical and Strategic Minerals), to set sector rules and prioritize research auctions.
  • Sets up a financial support structure by creating the Mineral Activity Guarantee Fund (FGAM) with R$2 billion to shield investments from risks.
  • Offers R$5 billion in tax incentives strictly designated for companies that process and technologically transform these minerals on Brazilian soil.

What the Approach to Critical Minerals Means for Operators

The approach reflects a broader regulatory debate over how Brazil can encourage domestic processing while remaining attractive to private and foreign investment.

Under Brazilian law, the Union holds ownership of mineral resources and grants permission to operators through concessions. Brasília could have taken a different approach, such as restricting exports, changing exploration rights or creating a state-owned company to manage these resources. Instead, the bill approved on Wednesday takes a different path, focusing on fiscal incentives and investment to promote refining and the creation of a rare earth supply chain in Brazil.

Ricardo Inglez de Souza, partner at IW Melcheds Advogados, told Brazilian Finance regarding the framework discuss in congress and senate:

“Requiring local processing through incentives is legally safer than prohibiting the export of raw material, which would face challenges both domestically, due to violations of free enterprise and proportionality, and internationally, within the multilateral trade framework…Local incentive mechanisms are safer than outright prohibitions or restrictions, even considering Brazil’s commitments to the WTO.”

But the new framework also introduces a new layer of regulatory oversight, raising questions about how the process will work in practice. At the center of that discussion is CIMCE, the National Council for the Industrialization of Critical and Strategic Minerals.

How CIMCE Will Oversee Critical Minerals

The most sensitive topic of the bill is the creation of CIMCE. Its responsibilities will include updating and reviewing the list of critical and strategic minerals covered by the legislation, as well as maintaining a national registry of projects for critical and stretegic minerals.

The council will also be responsible for enabling projects to access the FGAM and fiscal benefits, beeing the gateway for this incentives. With registry in the CIMCE as a must for access for this resources.

CIMCE will work together with the National Mining Agency (ANM), which will register and then approve projects. New projects that until now were subject only to registration by the ANM, now will under CIMCE aproval and could suffer changes.

These powers and rules can include:

  • Direct or indirect changes in corporate control of holders of mining rights;
  • Relevant participation or significant influence by foreign companies;
  • Access to geological information of strategic interest;
  • International supply contracts and partnerships that could affect the country’s economic security; and
  • The sale or encumbrance of titles belonging to the Union.

The rules and criteria for these decisions have yet to be established. Under the bill, this responsibility falls to the federal executive branch and the Presidency of the Republic.

The Presidency will be responsible for publishing a regulatory decree detailing the council’s operation, exact composition, procedures and the technical criteria it will use to approve these transactions.

The framework therefore establishes the structure, but much of its practical impact will depend on how these rules are implemented.

Sandro Americano Câmara, a lawyer, vice president of the Regulatory Law Committee of the OAB/ES and a master’s student in Law and Public Policy, commented that even though the bill creates a new regulatory framework, the level of risk perceived by operators will ultimately depend on the level of detail and the criteria established in the new rules.

“Clear criteria, predictability and a transition regime are essential to prevent it from becoming a source of litigation and uncertainty.”

Câmara also argues that these requirements are not unique to Brazil, with other jurisdictions following similar approaches. In his view, the bill seeks to balance these requirements with guarantees and fiscal incentives.

“Mining and refining investors operate on a ten- to twenty-year horizon, and what actually drives capital away is not the requirement to process locally or add value, but the unpredictability of the rules and the risk of litigation.”

These requirements are not unique to Brazil, with other countries following similar approaches. Câmara argues that the bill seeks to balance the new requirements and approval process by providing guarantees and fiscal incentives.

“Local content and beneficiation requirements exist in several jurisdictions and are generally priced in when accompanied by countermeasures such as tax credits, financing and guarantees. It is no coincidence that Bill 2780 combines restrictions with a robust package of incentives and a guarantee fund: it is this symmetry between requirements and support that underpins its attractiveness.”

However, Câmara also points to the risk of an unbalanced regulatory framework. If the regulatory framework implemented by CIMCE becomes too vague or exposed to political bias, it could discourage investment.

“On the other hand, if the regulation is perceived as case-by-case intervention, with open-ended criteria and discretionary approvals, the reaction is likely to be a higher risk premium, more expensive financing and postponed investment decisions, precisely at a time when the geopolitical competition for rare earths should be attracting capital to Brazil.”

International Context for the New Bill

The bill comes amid a new wave of international interest, particularly from the United States and Europe, in Brazil’s rare earth reserves.

The country, which holds an estimated 21 million tons of rare earth minerals and is the second largest in the world, accounts for only 1% of global production. International players are particularly looking for independence from Chinese supply chains, with China currently the world’s largest supplier and the U.S. Congress having classified this dependence as a “Chinese monopoly” in later discussions.

Brazil is increasingly viewed as a new reliable source of rare earth minerals outside the Chinese supply chain. Companies have recognized this opportunity in recent years, with investment accelerating more recently. Australian companies such as Viridis Mining are investing in projects in Poços de Caldas, Minas Gerais. Brazilian Rare Earths, also another australian company, has announced a new deposit in southern Bahia that it classified as “ultra-high-grade,” potentially turning Bahia into a new hub for rare earth exploration.

Established mining companies are also entering the sector. Vale, the world’s largest iron ore producer, for example, is considering investing in rare earths through a different approach, seeking to refine these minerals from pre-existing iron and other mineral mining operations through circular mining.

But the clearest example of this geopolitical shift is the heavy involvement of the U.S. government in the acquisition of Serra Verde by USA Rare Earth in a $2.8 billion deal.

Serra Verde, which holds the Pela Ema Mine as an operational asset, is classified as the only rare earth project that provides all Light Rare Earth Elements (LREE) and Heavy Rare Earth Elements (HREE), an exceptionally rare geological asset in the Western Hemisphere.

Later last month, the company announced a deal with private funds and the U.S. Department of War, formerly the Department of Defense, that brought all Phase 1 production under agreement for the next 15 years, with part of the production going directly to the U.S. armed forces.

In this context, Professor João Nygrey from PUCPR said the situation creates an opportunity to attract investment and potentially create a new industrial supply chain in Brazil but argues that the objetive should be focus on including brazil not only on the extraction part of rare earth supply chain but in high value stages of the chain.

“Brazil’s strategic objective should not be to prevent its rare earths from leaving the country, but to prevent the country from remaining only a supplier at the first stage of the chain. Today, including in relevant Brazilian projects, the problem can already be seen in the fact that initial beneficiation takes place in the country while higher-value technological stages remain abroad. The difference is fundamental. Economic sovereignty does not necessarily mean state ownership or closing the market to foreign capital; it means having the capacity to negotiate where the most valuable stages of the chain are located.”

The professor also argues that the geopolitical situation places Brazil in an unusual position to meet the growing need for rare earth minerals.

“Western dependence on the Chinese supply chain creates demand for alternative suppliers. Instead of selling only ore to China, the United States or Europe, Brazil can use this competition to attract capital, technology and industrial plants. Excessively restrictive regulation would waste this opportunity; an entirely laissez-faire policy could waste it in another way, consolidating Brazil as a raw material exporter. The most efficient policy lies between these two extremes: foreign capital, predictable rules and progressive requirements for technological value creation within Brazilian territory.”