Brazil becomes main target in global dispute: United States and China are locked in battle for rare earths and critical minerals found in abundance on Brazilian soil

Imagine Brazil taking on a crucial role in the global supply chain for critical minerals. The American government is about to unveil a strategic partnership with Brazil that could transform the country into a preferred supplier of these vital resources.

However, to guarantee this position, Brasília requires robust guarantees of investments in the production chain and favorable conditions that are far from simple.

According to the newspaper FSP, the government of United States is preparing a significant announcement for the G20 summit, scheduled for November.

The proposal revolves around an energy transition agreement that would place Brazil as a preferred supplier of critical minerals, such as graphite, lithium, manganese, rare earths and nickel.

These minerals are essential for the manufacture of high-tech and green energy products, including electric vehicle batteries, screens, wind turbines and solar panels.

The US, seeking to reduce its dependence on Chinese supply chains, sees Brazil as a strategic opportunity to diversify its sources of critical minerals. However, the Brazilian government is demanding significant guarantees to move forward with this agreement.

Investments and guarantees are the center of negotiation

Brazil is focused on ensuring that, in exchange for preferential access to its mineral resources, there is a serious commitment from the US to invest in the energy transition technology production chain.

Members of the Brazilian government are skeptical about the White House's ability to implement such investments and finance concrete projects. Furthermore, there is a fear that, with a possible victory for Donald Trump in the presidential election, the future of energy transition projects in Brazil could be uncertain.

Search for additional benefits

To advance negotiations, Brazil is interested in accessing benefits from the US Inflation Reduction Act (IRA), which offers billions in subsidies and tax incentives for energy transition projects.

If the IRA subsidized a battery factory in American territory, a Brazilian plant supplying inputs could benefit from these incentives. However, currently, only countries with trade agreements with the US can take advantage of some of these benefits, in addition to Japan, which has received specific permission.

The United Kingdom and the European Union are seeking similar authorization. American officials admitted that Congress approving permissions for other countries is challenging, but there are other provisions of the IRA that could be beneficial to Brazil.

Financing alternatives and global partnerships

According to the newspaper cited, Washington is also exploring financing alternatives, such as the American development bank Development Finance Corporation (DFC). This bank has prioritized the diversification of the critical minerals supply chain and has already injected US$30 million into a nickel and cobalt mining project in Piauí.

Furthermore, the US wants Brazil to join the Global Partnership for Investment and Infrastructure (PGII), a response to China's Belt and Road Initiative project, which aims to finance infrastructure works globally.

However, Brazil is considering joining the Belt and Road Initiative China route, with Xi Jinping's state visit scheduled for November 20, right after the G20. The decision on this accession could influence negotiations with the USA.

Chinese Investments and the Global Status of Critical Minerals

The American offensive is part of the “friendshoring” strategy – transferring the supply of critical minerals to allied countries. China currently dominates 60% of global production and 90% of rare earth exports, in addition to controlling the production of graphite, refined magnesium, gallium, titanium and tungsten.

The Democratic Republic of Congo is responsible for 70% of cobalt production, with the majority of operations being carried out by Chinese companies.

The United States is particularly focused on reducing its dependence on critical minerals from China. In response to US sanctions that have limited China's access to advanced chips, Beijing has restricted the export of rare earths and banned the sale of processing technology for these inputs since December 2023.

Brazil's strategic role

Brazil plays a crucial role in the global production of critical minerals, possessing 90% of niobium reserves and 22,5% of graphite reserves. Furthermore, the country holds 16% of rare earth and nickel reserves. According to the Center for Strategic and International Studies, the United States needs to reduce its dependence on foreign adversaries to ensure its leadership in national security and energy.

How will negotiations between the US and Brazil evolve? Will Brazil be able to secure the necessary investments and a central role in the global supply chain for critical minerals? Or could China's influence and political instability thwart American plans? Follow the updates and share your opinion in the comments!