Brazil's senate passed a bill creating the first structural policy for its growing critical minerals industry.
The senate passed the bill on the evening of 2 September by a symbolic vote, with the session's president proclaiming the outcome based on responses from lawmakers present, rather than through a recorded numerical tally of votes in favor or against.
The bill had passed in the lower house and was approved with only minor changes to its text, making the senate's approval final. The bill is now set to be sanctioned by President Luiz Inacio Lula da Silva.
The bill, which supports the local critical minerals industry, creates a fund — with R2bn ($406mn) in federal money — to "guarantee projects and activities linked to the production of critical and strategic minerals" including rare earths, nickel and lithium.
It also sets up a program with R5bn in tax credits over five years to encourage "processing and transformation" of such minerals. The bill also defines critical minerals as resources whose scarcity could affect the national economy, while strategic minerals are those structurally important to Brazil's sovereignty because of the size of its reserves.
Brazil holds one of the world's largest non-Chinese supplies of critical minerals. It has the largest niobium reserves globally, ranks second in rare earths and graphite, third in nickel, fourth in manganese, and also possesses large lithium reserves, according to government figures.
A controversial clause
The bill establishes a federal council, which can rule on transactions it considers relevant to national sovereignty, a provision opposed by market participants.
The council's structure allows the federal government to approve or veto transactions it deems relevant to national or public interests. Market participants and lobbyists tried to strip the council of its ruling powers, but to no success, multiple sources told Argus.
While the policy is broadly viewed as a positive development, the bill preserves the council's project approval powers without specifying its scope or review criteria.
"The bill establishes another oversight body without clearly defining its responsibilities or which projects will be subject to its approval," Marisa Cesar, president of Brazil's critical minerals association AMC and vice-president of corporate affairs at PLS Brasil told Argus. "That lack of predictability could affect Brazil's ability to attract and retain investment."
Cesar said the absence of clearly defined review criteria could create practical challenges, especially if the council's oversight extends to a large number of transactions. Without clear thresholds or project-selection criteria, companies could face an additional layer of regulatory scrutiny across thousands of annual mining-sector operations, she said.
Next steps
Still, much of the policy framework still needs to be built.
The government must appoint members to the new federal council, which will have 20 seats. Federal officials will fill 15 seats, while industry groups, research institutes and other civil society organizations will choose the remaining five.
Authorities must also structure the R2bn investment fund and establish the R5bn tax-credit framework.
Industry and government representatives also need to determine which minerals qualify as critical and which qualify as strategic. The legislation calls for a list that can evolve to reflect changing market conditions, technological developments and national priorities.
All policies should be in place within 90 days. Even though market participants and the chief of staff's office are in talks to implement all structures related to the bill, delays could happen.
By Pedro Consoli
