Brazil remains far from processing critical minerals domestically despite President Luiz Inacio Lula da Silva's push for greater capabilities, market participants estimate.
Lula has championed critical mineral processing in Brazil since at least November. The debate gained prominence in recent months after his administration clashed with the US over this issue, as Lula has grown less flexible and making local processing a key condition to sign bilateral critical minerals agreements.
Brazil's lower house approved on 7 May a critical minerals bill that aims to grant incentives to miners who process and refine volumes domestically, further increasing the topic's importance.
Despite discussions on vertical integration, Brazil is far from processing at an scale, industry members said at a seminar on critical minerals hosted by national mining institute Ibram in the capital of Brasilia.
"We are still unable to produce at sufficient scale to even consider this subsequent stage," national mining secretary Ana Paula Bittencourt said, noting that the gap between reserves and production remains wide.
Brazil holds 24-25pc of global critical mineral reserves but produces less than 1pc, according to Brazil's economics ministry. Ibram says Brazil holds 10pc of global reserves of critical minerals, as the two groups have different definitions for critical minerals.
Bittencourt said Brazil needs to speed up bureaucracy and improve geological knowledge to strengthen the mining industry. This could attract elements necessary to scale up production, such as credit lines and capital.
Technical capacity
Even with higher output, Brazil would need to train its workforce in critical mineral processing and develop technology to handle different minerals.
Pedro Henrique Guerra, chief of staff at the vice-presidency, told the panel that each critical mineral has distinct market traits and price cycles.
"We need technology and research to qualify our workforce," Bittencourt said. "We are looking for credit and funding mechanisms to back the technology development necessary to advance in supply chains for each mineral."
Brazilian miners are skilled in extraction, but lack expertise in processing critical minerals, especially rare earths.
"It is extremely difficult to find engineers capable of working on industrial production of rare earth magnets," researcher Fernando Landgraf said on a separate panel, where speakers noted that China holds a firm monopoly on this front. Pablo Cesario, Ibram's acting president, said Brazil needs to develop the technology but cannot achieve this without international partnerships.
Legislative, operational bottlenecks
The minerals bill, aimed at bringing clarity to the sector, could face delays despite expedited approval in the lower house and its move to the senate.
Congressmen Jose Silva and Arnaldo Jardim, the bill's author and rapporteur, respectively, expressed confidence that it will pass the senate without major changes, ideally before October elections. But a senate official told Argus at the sidelines of an industry conference on 9 June that there is no timeline for a decision.
Several major policies are pending in the senate, with the critical minerals bill awaiting prioritization by senate president Davi Alcolumbre, the official said.
Brazilian will vote on 54 of 81 senate seats in October's election, alongside a large congressional reshuffle. Delaying a decision could present new roadblocks to the bill, which is urgently expected by stakeholders.
"We need to sort this out before the elections, otherwise we will need to restart the debate with the newly elected group," Ibram president Pablo Cesario said.
In addition to the legislative bottleneck, national mining agency ANM is about 60pc understaffed, with only four employees in its critical minerals division and 15,000 economic plans pending analysis agency-wide, according to its director-general. The ANM is responsible for managing and guaranteeing the safe usage of the country's mineral resources.
