Brazilian government considers creating state-owned company linked to rare earths

The Brazilian government has begun internal discussions to evaluate the creation of a state-owned company linked to rare earths, according to officials familiar with the talks consulted by BNamericas.

The discussions are at a preliminary stage and, even within the government, have generated divisions, with some factions more connected to the political area, such as the Chief of Staff’s Office, advocating the creation of a state-owned company in the segment, while other areas, such as the Ministry of Mines and Energy, show resistance to the idea.

The internal debate is taking place amid growing international interest in rare earths.

Brazil currently holds the second-largest volume of rare earth reserves, behind only China, and several countries, including the United States, India, and members of the European Union, have sought partnerships outside China to secure different sources of supply.

“The decision to create or not a state-owned company to operate in rare earths is not such a simple decision and is part of a political calculation. In general, the population tends to criticize the creation of yet another state-owned company, but rare earths is a very particular segment, since we are seeing governments of all countries talking about how important these elements are for sovereignty, so we have to consider that this has become a very relevant geopolitical issue”, said André Pereira César, political analyst at Hold Consultoria, to BNamericas.

Brazilian president Luiz Inácio Lula da Silva has repeatedly said that he sees rare earths as a matter of sovereignty and wants to avoid exclusive partnerships with countries.

The debate on rare earths in Brazil mixes international aspects and also domestic politics.

Lula, who has already said he will run for re-election in October this year, has seen his support deteriorate, according to the latest polls. The left-wing politician’s main opponent is right-wing senator Flávio Bolsonaro, son of former president Jair Bolsonaro, who appears as a strong candidate.

Furthermore, this week, another right-wing candidate, the then governor of the state of Goiás, Ronaldo Caiado, also announced his candidacy for the presidency.

Recently, Caiado himself announced a partnership with the United States government to develop rare earth research in the state. Goiás, alongside Minas Gerais, is among the states with the largest volume of these minerals in the country.

However, an exclusive partnership with the United States may have impacts at the polls.

Last year, the president of the United States, Donald Trump, imposed severe tariffs on Brazilian exports, justifying the measure, in part, with allegations of political persecution against former president Jair Bolsonaro, who was convicted and imprisoned for attempting a coup d’état after the 2022 elections, when he was defeated by Lula.

On that occasion, Lula adopted a strongly critical stance toward Trump, citing threats to Brazilian sovereignty, while right-wing leaders tried to get closer to the American president. At that moment, Lula’s approval ratings recovered, with independent and centrist voters showing a negative view of attempts at external influence in the Brazilian political process.

“The issue of national sovereignty will be an important part of this year’s election discussions. Candidates who appear too close to the United States may have difficulties attracting votes from undecided voters, who will be the ones to really decide the election”, said César.

Research indicates that this year’s election is likely to be highly polarized, with Lula and Flávio Bolsonaro competing vote by vote for voters closer to the center of the political spectrum, since both already have a strong support base on the left and right, respectively.