In recent years, the world has witnessed the intensification of a new race for metals. The growing need for materials such as lithium, copper, nickel and rare earth elements to produce precision weapons, technological devices and equipment for generating electricity has intensified disputes between the countries of the Global North and China.
Brazil is historically a global supplier of many of these minerals, with low added value in most cases. Some measures have been proposed to try to reverse this situation, but instead of confronting the sector’s structural weaknesses, the country is repeating old formulas by prioritizing initiatives to encourage extraction.
In the 2000s, when the last commodity boom occurred, new development policies, which were supposed to aim at industrialization, deepened the country’s new extractive character and the export of non-industrial goods.
Now, the repetition of such initiatives must lead to the transformation of the new industrialization, promised by the Ministry of Finance, into a new commodity, that is, the specialization in providing products that rely intensively on natural resources necessary for high-tech industries.
The increase in demand for minerals has been accompanied by the adoption of different classifications, sometimes called “critical” and sometimes “strategic.” As Erika Machasik, a researcher at the University of Vienna, says, these sects are not just a purely technical term. They are also political, as they are determined by the relations between consuming countries and reserve holders.
In Brazil, the term “strategic minerals” has a special use. Here this qualification is mainly used, under the vague promise of industrialization, to legitimize increased extraction and create exceptional circumstances in the form of greater flexibility in environmental licensing and new economic benefits.
Weakening environmental licenses
If we analyze the draft law defining the “National Policy on Critical and Strategic Minerals” (PL 2780/2024) and its eight annexes, we can see that six of them establish less stringent environmental licensing systems.
In a similar manner, the National Minerals Policy Council established a working group to define criteria that determine which projects may benefit from a special environmental license (LAE). These criteria are not yet clear, but if we take the 2021 Strategic Minerals Policy as a starting point, it must take into account the severity of environmental impacts, and therefore the difficulty of obtaining licenses through the usual procedures.
Environmental licensing for extractive projects is a complex process. Often, when identifying flaws in environmental impact studies (EIAs), environmental agencies need to request additional clarifications and in-depth analysis. Back and forth, licensing can take a few years. According to the General License Law, companies benefiting from the General License Law only have to submit clarifications once and the final decision must be issued within a maximum of 12 months, which greatly reduces the accuracy of the project evaluation.
More economic benefits
Another suggestion frequently made in PLs regarding “strategic minerals” relates to economic benefits. Of the total, it created four new tax breaks for the mineral sector and six proposed additional credit lines, adding to existing benefits.
Since the approval of the Kender Act in 1996, primary industrial and semi-finished products destined abroad have been exempted from paying ICMS duties. In addition, mining companies operating in the area of activity of the Amazon Development Control Authority (SUDAM), one of the country’s main mineral frontiers, are entitled to a reduction of up to 82.5% in income tax.
These benefits artificially increase the profitability of mining companies and discourage value addition. A study by the Ministry of Mines and Energy sought to determine how value added is distributed throughout the steel industry chain.
The results showed that Vale, which only extracts and exports the crude, kept 54% of this value in the form of profits, and transferred only 22% to governments. On the other hand, for Companhia Siderúrgica Nacional, which turns ore into steel in Brazil, these values were, respectively, 30% and 43%.
From a credit perspective, the National Bank for Economic Development has replicated the role of financier of the extractive sector that it played during the recent commodity boom. At the beginning of 2025, a public call was launched to distribute R$5 billion to 56 mineral conversion projects – an average of R$89 million per project.
On the other hand, within the framework of the Brazilian Program for Investment in Climate and Environmental Transition, the Bank granted US$1.2 billion (more than R$6 billion) to three mineral extraction projects alone. Hence, despite talk of encouraging manufacturing, it seems to be placed in the background in funding priorities.
Incorrect and ineffective manufacturing policies
In a recent report, consultancy PWC suggested, among possible measures, the establishment of a specific industrial policy for the minerals sector. Likewise, seven basic principles make some general references to incentives for innovation and industrialization.
In this regard, there is a challenging context, and the national experience has been, to say the least, disappointing. In the case of the minerals sector, initiatives taken in recent years have not been able to promote the development of new technological capabilities. Moreover, these policies adopt general manufacturing perspectives, which do not guarantee value addition.
For example, a 1997 decree stipulated the obligation of companies operating in the lithium chain to invest in technological development. The decree was canceled in 2022 by Jair Bolsonaro as part of his policy to encourage the mineral sector.
However, after 25 years of operation, there has been almost no verticalization of production, and according to the Ministry of Development, Industry and Trade, in the past three years, more than 95% of the source lithium has been sold in the form of concentrated ore, a product resulting from the simplest processing stages.
An important barrier to metal manufacturing is the low innovative capacity of the Brazilian metals sector. According to the latest edition of IBGE’s semi-annual innovation survey, while 49% of companies in the manufacturing sector innovated from a new product standpoint, this was only 18% for the metals sector. If we take into account new products for the national market, the number drops to 6%.
This limited innovative capacity must be interpreted in a context where China already dominates the technology and market. For example, in July, Serra Verde, the only mining company in Brazil that extracts rare earths, was forced to stop its ore concentration operations because its price was more than double the price it was exercising on the international market.
Complex international scenario
Given the domestic constraints, there are proposals focusing on a possible policy of technology transfer from consuming countries. However, due to the increasing use of these minerals for military purposes, such pathways are unlikely.
Metal processing technologies are increasingly considered an element of national security. An example of this is the establishment of a new system for exporting rare earths from China to the United States of America, which prevents their use for military purposes. On the other hand, the US government has made significant investments in developing its own metal fabrication technologies. This dynamic suggests that these countries are unlikely to share their technologies with Brazil.
What’s more, both countries seem to view Brazil as a mere exporter of raw materials. Since 2024, China has purchased the country’s copper, tin and nickel mines. At the same time, the United States, through the US International Development Finance Corporation, a federal government agency, has invested in nickel and rare earth mining projects.
Risk of new goods
Metal manufacturing in Brazil still faces several complex aspects. Technological difficulties and the sector’s low innovative capacity will pose challenges that are indeed difficult to overcome. Moreover, increasing institutional and economic incentives for extractive activities discourage companies from seeking to verticalize production and deplete resources that could be allocated to mineral transformation initiatives.
In this context, the chances of Brazil being able to develop greater value-added activities in global metal chains appear slim. On the contrary, the country is likely to remain limited to exporting products with a low level of manufacturing. In this way, they should join other natural resource-intensive products and services such as data processing, hydrogen and “sustainable” aviation fuel.
Bruno Milanes has already received funding from the State Research Support Foundation of Minas Gerais and the National Council for Scientific and Technological Development. He also had research projects funded by the Ford Foundation. He is part of the National Committee for the Defense of Lands Against Mining.