Brazil Approves R$5 Billion Critical Minerals Policy with Guarantee Fund and Tax Credits

The Bottom Line

• Brazil's Chamber of Deputies approved a national policy for critical and strategic minerals, establishing a guarantee fund and R$5 billion in tax credits.
• The initiative aims to stimulate domestic processing and exploration of essential minerals like rare earths, lithium, cobalt, nickel, and graphite, vital for global energy transition and digitalization.
• The policy positions Brazil, holding significant reserves of niobium, graphite, and rare earths, to enhance its role in critical mineral supply chains, attracting investment and fostering industrial development.

Brazil Advances Critical Minerals Policy Amid Global Demand Surge

The Brazilian Chamber of Deputies on Wednesday, May 6, 2026, approved a legislative proposal establishing the National Policy for Critical and Strategic Minerals (PNMCE). This landmark legislation includes the creation of a guarantee fund to stimulate projects and R$5 billion in tax credits designed to incentivize the domestic processing of minerals. The move underscores Brazil's strategic intent to capitalize on its vast mineral resources amid escalating global demand for materials crucial to the energy transition and advanced technologies.

Policy Framework and Financial Incentives

The PNMCE introduces a comprehensive framework aimed at fostering the critical minerals sector. A key component is the authorization for the Union to establish a private guarantee fund, the Mineral Activity Guarantee Fund (FGAM), with the Union participating as a quotaholder up to R$2 billion. This fund, which will not carry public guarantees or endorsements, is designed to facilitate access to credit for companies in the mineral sector by providing necessary collateral for financing operations. The BNDES (Brazilian Development Bank) estimates that approximately R$5 billion is required to unlock critical mineral projects, aligning with the fund's potential capacity.

In addition to the guarantee fund, the policy includes R$5 billion in tax credits, specifically targeting the processing of minerals within Brazil. This measure is intended to shift the country's role from primarily exporting raw materials to developing a more sophisticated, value-added processing industry. The legislation also establishes the National Council for the Industrialization of Critical and Strategic Minerals (CIMCE), linked to the Presidency, which will be responsible for defining and periodically reviewing the list of critical and strategic minerals every four years.

Strategic Importance of Critical Minerals

Critical and strategic minerals are highly sought after by global industries and diplomatic circles due to their indispensable role in modern technologies. This category notably includes rare earth elements—a group of 17 chemical elements essential for a wide array of contemporary products. Among these are lithium, cobalt, nickel, and graphite, which are fundamental components for electric vehicle batteries, wind turbines, solar panels, and semiconductors. These minerals are vital for the global economy, underpinning the energy transition, low-carbon mobility, and the advancement of artificial intelligence and corporate digitalization.

Brazil possesses significant reserves of these critical resources. The country holds the world's largest niobium reserves, ranks second globally in graphite and rare earth reserves (estimated at 21 million tons), and is the third largest in nickel reserves. This rich endowment positions Brazil as a potentially pivotal player in the global supply chain for these strategic materials. Hugo Motta, President of the Chamber, emphasized the global interest in this sector, stating, "This is a matter of global interest, a matter for the future, just as oil was for the development of several important countries. There is no technology without the exploration of rare earths and critical minerals."

Debate and Future Outlook

The proposal garnered broad support from both the government and a segment of the opposition in the Chamber, although some parties, like PSOL/Rede and Novo, voted against it. Critics, such as PSOL leader Tarcísio Motta, argued that the project is "fragile and insufficient," potentially allowing for the export of minerals without adequate value aggregation in Brazil. Motta suggested that the state's role as merely an "inducer and facilitator" would perpetuate the export of raw ores rather than fostering a robust domestic processing industry, advocating for a state-controlled entity similar to "Terrabras" or a production-sharing system akin to the oil sector.

Despite these criticisms, the approved policy represents a significant step towards formalizing Brazil's strategy for critical minerals. The focus on a guarantee fund and tax incentives suggests a market-oriented approach to stimulate private sector investment and development. The long-term success of the PNMCE will depend on its implementation, the effectiveness of the FGAM in de-risking projects, and the ability of the tax credit system to genuinely foster value-added processing within Brazil. The policy's approval signals Brazil's commitment to leveraging its natural endowments to participate more strategically in the global economy's shift towards green technologies and digital innovation, potentially attracting substantial foreign direct investment into the sector and benefiting major players like $VALE and the broader Brazilian market represented by $EWZ.