Lula Tells U.S. and China: Brazil Keeps Sovereignty Over Rare Earths

Brazil · Critical Minerals

President Lula declared Monday that Brazil will not surrender sovereignty over rare earth minerals and critical metals, framing the country as a critical-minerals destination open to international partners but unwilling to accept dependency. Speaking at the Sirius particle accelerator in Campinas, the president positioned Brazil’s second-largest global rare earth reserves as a strategic national asset. The statement comes after Brazil rejected a US cooperation proposal earlier in 2026 that the government concluded would compromise sovereignty principles. The Chamber of Deputies approved a critical-minerals law in May creating a R$5 billion guarantee fund and 20% tax credits for qualified projects. The convergence of Lula’s sovereignty rhetoric, the legislative framework, and the strategic value of Brazilian reserves positions critical minerals as one of the central themes of Brazil’s 2026 economic and foreign policy.

What did Lula actually say?

The Rio Times, the Latin American financial news outlet, reports that President Luiz Inácio Lula da Silva spoke at the Sirius particle accelerator inauguration in Campinas, São Paulo on Monday May 18. The president framed rare earth exploration as a Brazilian sovereignty issue. His exact language: “We have no veto, no preference for anyone. Chinese, German, French, Japanese, American can come — whoever wants to come, as long as they understand that Brazil does not give up its sovereignty. The critical minerals are ours, the rare earths are ours, and we want to explore them here inside.” Lula also referenced the Trump-Xi geopolitical dispute directly, expressing the hope that the US president would “stop fighting with Xi Jinping and come associate with us so we can explore here.” The statement positions Brazil as a critical-minerals destination but emphasizes that any partnership must respect Brazilian control over the resources and processing chain.

Why did Brazil reject the US proposal?

The Trump administration presented Brazil with a critical-minerals cooperation proposal earlier in 2026 that the Brazilian government concluded would compromise national sovereignty principles. The exact details of the proposal have not been fully disclosed, but Brazilian officials have characterized it as a model where the US would secure preferential access to Brazilian rare earth and critical mineral production. The Brazilian government’s rejection was explicit and public. Lula has subsequently positioned the country’s approach: cooperation is welcomed but must be on Brazilian terms, with mineral extraction and processing occurring within Brazilian borders rather than as raw exports. The position aligns with the broader Brazilian industrial policy agenda emphasizing domestic value addition rather than commodity exports. The rejection of the US proposal is a signal that Brazil will negotiate as a strategic peer rather than as a supplier.

What does the critical-minerals law actually do?

The Chamber of Deputies approved a critical-minerals law in May 2026 that creates the legislative infrastructure for Brazilian rare earth and strategic mineral development. The law has four key elements. First, it limits exports of raw unprocessed minerals, requiring domestic processing or value addition before international sale. Second, it creates a system of progressive fiscal incentives — tax credits of up to 20% of project costs apply between 2030 and 2034, with an annual cap of R$1 billion (about $200 million) for qualified projects. Third, it establishes a guarantee fund with capacity up to R$5 billion (about $1 billion) to back mining-sector activities. Fourth, it creates the institutional framework for ongoing critical-minerals policy. The law passes to the Senate for review. The combination of regulatory clarity, fiscal incentives, and financial guarantees is designed to attract qualified investment while maintaining Brazilian control over the supply chain.

Why is the second-largest reserve position strategic?

Brazil holds the second-largest rare earth reserves globally — only China has more. The strategic importance has grown sharply as US-China tensions have made critical minerals a geopolitical asset rather than a pure commodity. Rare earths are essential for advanced technology applications: lithium-ion batteries, semiconductors, wind turbines, electric vehicles, military systems, satellites, and high-tech manufacturing. China currently dominates the global rare earth supply chain through both raw extraction and processing. Diversification of supply sources has become a strategic priority for Western economies. Brazil’s position as the second-largest reserve holder makes it the natural diversification target. The Brazilian government’s position is that this strategic value should be captured through domestic processing and value addition rather than raw-material export. The Sirius particle accelerator inauguration where Lula spoke is part of the broader scientific infrastructure to support that strategy.

What does this mean for investors?

For mining and critical-minerals investors, the Brazilian framework creates both opportunity and constraint. The opportunity: substantial fiscal incentives (20% tax credits), regulatory clarity, financial guarantees through the R$5 billion fund, and access to one of the world’s largest rare earth reserves. The constraint: mandatory domestic processing, sovereignty-based negotiation framework, and political risk from changing government priorities. Major Brazilian mining companies — Vale, CSN Mineração, Mineração Caraíba — and international entrants face a competitive landscape with significant policy support. The international partners that will likely benefit most are those willing to accept domestic processing requirements and partnership structures that involve Brazilian capital and labor. The framework favors long-duration strategic investors over short-term commodity-extraction approaches.

What should investors and analysts watch next?

• The critical-minerals law’s Senate review and final approval: the legislation must pass the Senate before becoming operational. Modifications could occur during the Senate process.
• Major mining company project announcements: Vale, CSN Mineração and international players’ announcements of new investment commitments will signal the market response to the framework.
• US-Brazil bilateral dynamics: the rejected US proposal could be revised. The Trump administration’s response to the Brazilian framework will affect the diplomatic and commercial trajectory.
• China-Brazil cooperation announcements: Chinese mining companies including major state-owned enterprises may move to establish partnerships under the Brazilian framework before US competitors.
• October 2026 Brazilian presidential election: the regular four-year cycle puts Lula facing potential opposition. The election outcome could shift the critical-minerals framework toward different parameters.

Frequently Asked Questions

What are rare earths?

Rare earths are a group of 17 chemical elements with unique magnetic, luminescent and electrochemical properties. Despite the name, they are not particularly rare in the Earth’s crust — what makes them strategic is the complexity and cost of extraction and processing. The category includes neodymium, lanthanum, cerium, dysprosium, europium and others. They are essential for advanced technology applications: rechargeable batteries (especially electric vehicle batteries), permanent magnets in wind turbines and motors, fiber optics, laser systems, semiconductor manufacturing, and military systems including missile guidance and night vision.

Why is China dominant in the supply chain?

China currently controls approximately 60-70% of global rare earth mining and over 85% of refining capacity. The dominance results from three decades of strategic industrial policy: substantial state investment, lower environmental standards that reduced production costs, and aggressive market-share strategy that priced foreign competitors out. The result is a structural Chinese advantage that Western economies are now trying to address through supply-chain diversification, friendshoring initiatives, and direct investment in alternative producers including Australia, the United States, and now Brazil.

What is the Sirius accelerator?

The Sirius is a fourth-generation synchrotron light source located at the Centro Nacional de Pesquisa em Energia e Materiais (CNPEM) in Campinas, São Paulo. It is one of the most advanced particle accelerators in the world and serves as a “super-microscope” capable of analyzing structures at the atomic scale. Brazilian researchers use Sirius for research in pharmaceuticals, semiconductors, batteries, and critical minerals including rare earths. Between 85% and 90% of the equipment was produced or developed in Brazil. The four new research lines inaugurated Monday — Tatu, Sapucaia, Quati and the fourth line — expand capacity in areas including telecommunications, medicines, petrochemicals, and strategic materials.

How does this affect Vale?

Vale, Brazil’s largest mining company, has substantial rare earth and critical-minerals exposure. The new framework creates both opportunity through fiscal incentives and constraint through mandatory domestic processing requirements. Vale has been positioning itself for the critical-minerals transition for years, with growing nickel, cobalt and copper production alongside iron ore. The company is likely to benefit from the new framework’s investment incentives. Vale’s stock has been positively responsive to broader Brazilian mining policy clarity, with the company’s positioning consistent with the sovereignty-based framework.

What about Trump-Lula dynamics?

Lula’s reference to wanting Trump to “stop fighting with Xi Jinping and come associate with us” reflects the broader Brazilian diplomatic positioning. Brazil seeks to position itself as a strategic partner to both the US and China rather than choosing between them. The recent Trump-Lula meeting at the White House signaled willingness to engage on critical-minerals cooperation, though under terms that respect Brazilian sovereignty. The diplomatic dynamic will shape how the framework evolves in practice over the next 12-18 months.

Connected Coverage

The broader Brazilian growth context is in our IBC-Br Q1 readout. The Brazilian Treasury SPE rate-cycle defense relevant to the broader fiscal framework is in our SPE rate readout. The Brazilian Focus Selic forecast affecting mining investment costs is in our Focus readout. The Family Office capital allocation to critical-mineral sectors is in our family-office readout.

Reported by Sofia Gabriela Martinez for The Rio Times — Latin American financial news. Filed May 19, 2026 — 19:00 BRT.