Brazil proposes forming state-run rare earths firm

Brazilian lawmakers have proposed bills to create a state-run company focused on rare earths and critical minerals in the latest push from the South American nation to localize refining and position itself as alternative to top producer China.

A proposal from Congressman Rodrigo Rollemberg would create Terras Raras Brasileiras SA, or Terrabras, and target minerals research, exploration and commercialization. The company would operate similarly to state-controlled oil producer Petrobras and would have a capital structure that could include private companies, development banks and sovereign funds, with the federal government keeping a minimum stake to ensure its control.

Brazil is home to the world’s largest rare earths reserves outside China. Western countries have been courting the Latin American nation with efforts to build a major critical minerals partnership as they seek to diversify partnerships to reduce reliance on the Asian supply.

Developing a rare earths industry is a high priority for President Luiz Inacio Lula da Silva, who is pushing to build a full local supply chain. Rollemberg, who is a former undersecretary of Lula’s cabinet, says “foreign intervention in Brazil’s mining sector is already underway,” citing in the bill a $565 million loan from the US International Development Finance Corporation to Serra Verde, Brazil’s only rare earths producer. The funding includes an option for the US to take a stake in the company.

The lawmaker also references a memorandum of understanding between the US and the state of Goias, led by former Governor Ronaldo Caiado. The conservative politician recently left the post to run against Lula in this year’s election, and the Goias plan is a source of discord between the US and Brazil’s government.

On Friday, Lula’s Workers’ Party representatives in the lower house also proposed a similar bill. Aside from creating a state-run company, it targets establishing a production-sharing regime for granting mining rights of critical minerals, with a minimum 50% allocated to Terrabras.

The bills need approval and will have to wind their way through the process depending on political agreements in a year with a tight calendar due to the October elections.

(By Mariana Durao)