Brazil's President Luiz Inacio Lula da Silva

Brazil's Senate this week approved a landmark framework law on critical minerals, removing the biggest structural obstacle to the expansion of the world's only non-Asian ionic-clay rare-earth deposit. The legislation comes at a crucial moment, with China's one-year suspension of expanded rare-earth export controls set to expire on November 10, 2026.

The bill now goes to President Luiz Inácio Lula da Silva for his expected signature. It fills a regulatory vacuum that had made it difficult for domestic and foreign companies to plan large-scale, long-term rare-earth mining projects in a country with 21 million metric tons of reserves—the world's second-largest total after China. For technology companies, electric-vehicle makers and defense contractors that have spent the past 18 months seeking to reduce their exposure to China's supply-chain leverage, the law is more than a symbolic milestone. Without a legal framework, mines, processing facilities and supply agreements cannot be built on a firm foundation.

What Brazil's Senate passed

The legislation is built around three main pillars.

First, it establishes the National Policy on Critical and Strategic Minerals, creating the basic legal framework for exploration of rare earths and other critical minerals—an area in which Brazil has lacked clear rules. Without such a framework, companies planning investments lasting decades had no firm regulatory basis for committing capital.

Second, the bill creates the Mining Activity Guarantee Fund, or FGAM. The federal government will provide 2 billion reais, approximately $392 million at an exchange rate of 5.1046 reais to the dollar, to support financing for eligible mining projects.

Third, and most important for global technology supply chains, the law establishes a domestic processing program supported by 5 billion reais, or approximately $979 million, in tax credits over five years. The stated aim is to ensure that Brazil captures more value by refining and processing minerals domestically instead of exporting raw ore for processing in China.

A new National Council for the Industrialization of Critical and Strategic Minerals, known as CIMCE, will identify priority projects and screen certain types of foreign investment. This effectively gives the government veto power over transactions it considers contrary to the national interest, as Covington noted in an analysis of CIMCE's veto authority published in May 2026.

The screening power has already raised concerns. Jaques Paes, a business professor at the Getulio Vargas Foundation, warned that the mechanism could create legal uncertainty for investors. "It puts rare earths in a political realm rather than a technical one," he said. Mining companies had opposed an earlier version of the bill that would have required CIMCE's "prior approval" for every critical-mineral production project. That wording was softened, but the council's authority over changes in control of mining companies remains a source of regulatory ambiguity.

Why Serra Verde is different—and why heavy rare earths matter

The strategic importance of the law becomes clearer when considering a geological feature often overlooked in coverage of Brazil's rare-earth sector: the type of deposit at Serra Verde's Pela Ema mine in Goiás state.

Almost all rare-earth mines outside China produce light rare-earth elements, mainly neodymium and praseodymium. These elements are essential but are available from several sources, including the Mountain Pass mine in California and deposits in Australia. China's near-monopoly lies in heavy rare earths, particularly dysprosium and terbium.

Those two elements determine whether neodymium-iron-boron permanent magnets—the type used in electric-vehicle motors, wind-turbine generators and missile guidance systems—can retain their magnetic properties at high temperatures. Motors that run hot require dysprosium and terbium. A motor relying only on neodymium and praseodymium can lose its magnetism under operating conditions.

China's dominance in heavy rare earths is rooted in geology. Heavy rare earths are concentrated in a type of weathered granite known as an ionic-clay deposit, where rare-earth ions attach electrostatically to clay particles and can be extracted through a relatively simple ion-exchange process. This avoids the acid leaching and high-temperature processing generally required for hard-rock rare-earth mining. China's Jiangxi and Hunan provinces are particularly rich in this type of formation.

Serra Verde's Pela Ema deposit is an ionic-clay deposit. According to information on Serra Verde's commercial production announced in January 2024, it is the only operation outside Asia producing all four magnetic rare earths—neodymium, praseodymium, dysprosium and terbium—commercially and at scale. That is more than a marginal distinction. Serra Verde is not simply another rare-earth mine; it is the only non-Chinese source of the specific elements that cannot be readily substituted in high-performance motors and magnets. Brazil's new law provides a legal foundation for the mine's expansion, while SEC filings related to the acquisition confirm its distinctive production status.

The US bet on Serra Verde

The strategic rationale was already taking shape before the Senate vote. On April 20, 2026, an acquisition announcement filed with the SEC disclosed that USA Rare Earth Inc. (Nasdaq: USAR) had signed a definitive agreement to acquire 100 percent of Serra Verde Group for approximately $2.8 billion in cash and stock.

The structure of the transaction underscores its geopolitical significance. Serra Verde's existing offtake agreements with Chinese buyers are due to end in 2026 under the deal. They will be replaced by a 15-year offtake agreement with a special-purpose vehicle funded by several US government agencies. The agreement provides guaranteed price floors for all four magnetic rare earths—the first such price floors specifically offered for dysprosium and terbium.

The SPV has since been expanded. The US Department of War committed $750 million, a Tier 1 institutional bank provided a $500 million senior debt facility, and the department entered into a forward purchase contract for at least $300 million of rare-earth products over five years. An August 2026 filing reported that SPV capitalization had increased to $1.55 billion. The US International Development Finance Corporation had previously committed $565 million for operations at the Pela Ema mine.

Barbara Humpton, chief executive of USA Rare Earth, described the acquisition as "a transformative moment for USA Rare Earth and our industry" when the deal was announced, citing the combined company's capabilities in mining, processing, separation, metallization and magnet production.

The acquisition was expected to close in the third quarter of 2026, subject to regulatory and shareholder approvals. Serra Verde is targeting annual production of 4,000 to 5,000 tonnes of rare-earth oxide from Phase I operations, with an estimated mine life of about 25 years. Its electricity supply is entirely renewable.

China's supply-chain chokepoint and the November deadline

The timing of Brazil's law is best understood through a short chronology.

In April 2025, China imposed export controls on seven medium and heavy rare-earth elements and related products, including permanent magnets, in response to US tariffs. Exporters were required to obtain licenses from China's Ministry of Commerce, significantly delaying shipments and disrupting automotive, defense and electronics supply chains.

In October 2025, China expanded the controls to cover five additional rare-earth elements and introduced extraterritorial provisions extending the regulatory reach to products made anywhere in the world using Chinese-origin materials. In November 2025, as part of broader China-US trade diplomacy, China agreed to suspend the October measures for one year, through November 10, 2026. The original controls imposed in April 2025 remain in force.

The Center for Strategic and International Studies said in a May 2026 analysis that China's export controls had exposed "a critical choke point across defense, semiconductor, and automotive supply chains" and that material flows remained "highly volatile" even after the suspension.

In practical terms, China and its trading partners have until November 10, 2026, to advance alternative supply chains before Beijing could choose to reimpose the expanded controls. Brazil's Senate approved the law on September 3, 2026. The legislation and the deadline are therefore operating on the same timetable.

Lula's resource nationalism and multi-polar strategy

President Lula has sought to shape the terms of Brazil's mineral opportunity while avoiding an exclusive alignment with any one side.

After the Chamber of Deputies passed the bill in May 2026, Lula spoke to reporters in Washington following a meeting with US President Donald Trump. He framed the policy as a break with the region's colonial past: "We're not going to repeat what happened with silver and gold in Latin America. With rare earths, we're going to change our behavior. We want Brazil to be the big winner of these riches."

At the same time, Lula made clear that Brazilian minerals would not be reserved for Washington. "Brazil has the obligation to share with whoever wants to participate with us," he said, indicating that Germany, France, China and India are being courted alongside the United States. In February 2026, Brazil and India signed a nonbinding memorandum of understanding on cooperation in critical minerals. Both countries are BRICS+ members, and the memorandum covers reciprocal investment, exploration and artificial-intelligence applications.

This multi-polar approach to critical minerals echoes Lula's position on AI governance. Speaking at the AI Impact Summit in New Delhi in February 2026, he warned that "when few control the algorithms, we are not talking about innovation, but domination," and called for AI sovereignty rather than dependence on a single bloc. In August 2026, Brazil announced $444.2 million in AI infrastructure investment, divided between US companies and Chinese firms including Huawei and iFlytek for a supercomputing project. The minerals law follows a similar logic: CIMCE gives the government tools to prevent any single country, including the United States, from gaining exclusive control.

Leonardo Paz Neves, an international-relations professor at the Getulio Vargas Foundation, summarized the unresolved issue: "The big question here is whether the state will want to try to negotiate some kind of privileged agreement regarding that access."

Environmental concerns did not delay the vote

Not everyone sees the legislation as an unqualified step forward.

The Climate Observatory, Brazil's largest network of environmental organizations, representing more than 130 civil-society groups, criticized the bill before the Senate vote. It said the legislation increased regulatory flexibility without providing adequate economic, climate or socio-environmental safeguards.

"Critical and strategic minerals are necessary for the energy transition, but this cannot become a blank check for mining," said Suely Araújo, the Climate Observatory's public-policy coordinator. "It makes no sense to accelerate legislative proposals that do not guarantee the rights of affected communities and territories."

Environmental and Indigenous-rights organizations also said the bill bypassed full committee review when the Chamber of Deputies approved it through an urgent procedure. One concern is that the law's broad definition of "strategic" minerals could eventually cover commonly mined commodities such as iron ore and gold, enabling expedited environmental licensing for large mines in ecologically sensitive areas.

Robert Muggah, co-founder of the Igarapé Institute, described the wider tension: "Brazil's rare earths are significant not just because of the sheer size of the deposits, but because they sit at the intersection of resource nationalism, energy transition demand, Western supply-chain diversification, and competition with China's rare earth dominance."

What comes next

Once President Lula signs the law, implementation will begin. CIMCE must be established and made operational, the Guarantee Fund must be capitalized, and regulations covering environmental licensing, investment screening and exports must be drafted.

A Newsquawk analysis highlighted the difference between a framework law and commercial reality: "Passage of the main text historically shifts the direction of permitting and fiscal terms rather than near-term supply, since new mines take years to reach production regardless of the statute. What matters next is the amendments and vetoes stage, the presidential sanction, and any signals on whether foreign participation and export rules are liberalised or restricted."

For the Serra Verde-USA Rare Earth transaction, the acquisition was expected to close in the third quarter of 2026. It has not been publicly confirmed whether the closing took place before the Senate vote; the third quarter ended on September 1. Once completed, the transaction would give the combined company ownership of the only mine outside Asia commercially producing all four magnetic rare earths, supported by a US government-backed 15-year offtake agreement.

November 10 is not necessarily a cliff edge. China can decide whether and how to restore the expanded controls, while the April 2025 controls on seven rare-earth elements are already in effect. Nevertheless, the date is a concrete pressure point that gives Brazil's law immediate practical importance beyond its symbolic value. For electric-vehicle manufacturers, defense contractors and electronics producers seeking an alternative to China's processing chokepoint, Brazil has now put the legal foundation in place. Whether industrial policy delivers actual separation and refining capacity, whether environmental safeguards are maintained, and whether Brazil can shift from exporting raw ore to producing higher-value materials will shape one of the most consequential critical-minerals stories of the coming decade.

Frequently Asked Questions

Why does it matter that Serra Verde produces all four magnetic rare earths rather than only two?

Most rare-earth mines outside China produce light rare earths, mainly neodymium and praseodymium. These are important but available from multiple sources. The main supply-chain chokepoint is heavy rare earths, particularly dysprosium and terbium, which are essential for high-performance permanent magnets that can withstand heat. Without them, the neodymium magnets used in electric-vehicle motors and wind turbines can lose their magnetism at operating temperatures. Serra Verde's ionic-clay deposit produces all four magnetic rare earths at the same time, making it the only non-Asian source of elements that cannot be readily substituted in the most critical applications. Brazil's new law gives the deposit a legal foundation for expansion.

What are China's export-control measures, and when does the suspension end?

In April 2025, China imposed export controls on seven medium and heavy rare-earth elements, requiring exporters to obtain licenses. In October 2025, it expanded the controls to five additional elements and introduced extraterritorial provisions. Following China-US diplomacy, China agreed to suspend only the October measures for one year, through November 10, 2026. The original April controls remain in force. If China decides to restore or expand the measures after November 10, the suspension will have expired. Brazil's law was approved on September 4, 2026—67 days before the deadline.

Does Brazil's new law allow US companies to freely acquire Brazilian rare-earth mines?

No. CIMCE can screen changes in control of companies holding critical-mineral rights, effectively giving the Brazilian government veto power over deals it considers contrary to the national interest. President Lula has said Brazil is open to investment from the United States, China, Germany, France and India at the same time, rather than exclusively from one country. Investors should therefore expect the screening mechanism to play a significant role in deal structures, particularly in acquisitions that would give a single foreign government-backed entity control of major deposits.

What environmental risks do critics say the law fails to address?

The Climate Observatory and Indigenous-rights groups have raised several concerns. The bill passed the Chamber of Deputies through an urgent procedure that bypassed full committee review; its definition of "strategic minerals" is broad enough to potentially include commodities such as iron ore and gold; and expedited environmental licensing could apply to mines near ecologically sensitive areas, including the Amazon region. Critics say the law prioritizes attracting investment over the rights of affected communities and traditional territories. How the implementing regulations address these concerns will be the practical test of the law's environmental commitments.

Originally published on Tech Times