Exploring Brazil's Geopolitical Opportunity in Critical Minerals with Tom Moerenhout and Victoria Prado

As the energy transition accelerates, Brazil has a unique opportunity to emerge as a key supplier of clean energy resources and technologies. Home to vast reserves of minerals like nickel, lithium, graphite, rare earths, and more, the country has a considerable capacity to play an essential role in the global supply chain for clean energy. As countries strive to reduce their dependence on China for these resources, Brazil's position as a key supplier becomes increasingly significant. This presents Brazil with a substantial opportunity to forge a strategic partnership with the United States, aligning both nations' interests in securing a stable supply of clean energy resources and enhancing national security. 

In a recent commentary published by the Center on Global Energy Policy (CGEP) at the Columbia School of International and Public Affairs (SIPA), co-authors Tom Moerenhout, Critical Materials Lead at CGEP and Professor at SIPA, and Victoria Prado, Research Associate at CGEP, examine Brazil's strategic importance in the global critical minerals landscape. The scholars also explore the opportunities and challenges in terms of infrastructure, environmental regulation, the diversification of its trading partners, and other issues Brazil needs to address to fulfill its possibilities.

Below is a Q&A session with Prado and Moerenhout, offering further insights into these issues and their thoughts:

1. How do you assess Brazil's current infrastructure concerning the extraction and export of these minerals?

Tom Moerenhout: Some areas are difficult to reach, but that is normal. The most important part is to have a well-outlined plan to improve road infrastructure in the most sustainable and least environmentally impactful way when projects want to be developed. Investing in green technologies and innovations related to mining and resource processing will also further reduce environmental impacts and align Brazil with global sustainability goals. This means more electrification of mines (since Brazil relies on a low carbon grid), reductions in water consumption through circularity, and the best-in-class waste practices that avoid tailing dams.

2. What types of policies or regulations do you believe are essential to ensure that mining in Brazil is done sustainably?

Victoria Prado: Navigating the balance between preservation and ensuring we have access to the minerals needed to fuel the transition will be a tough challenge and one that needs to be treated carefully. The country has been expanding its geological mapping system (SGB), which previously covered only around 27% of the country's land mass. This reduces the need for exploratory drilling and supports more efficient and strategic mining, allowing it to prioritize strategic mining areas, find communities interested in engaging in mining activities, and improving the identification of mineral deposits. There will also be the need to ensure rigorous environmental standards and monitoring, as well as the efficient management of waste and water resources. The country is building an environmental, social, and governance taxonomy for the mining and mineral processing sector according to best national and international practices, which will guide the investment criteria and indicators on sustainable mining practices. This serves as a starting point to level the playing field, but more needs to be done to ensure robust standards are put in place which guarantees environmental integrity. In this sense, a strong regulatory agency (ANM) is necessary here to ensure compliance with strict environmental regulations, while also ensuring that this does not necessarily become a licensing bottleneck. Community engagement is also paramount and should be accompanied by policies that ensure jobs with high safety standards and adequate capacity building.

3. How could the expansion of critical mineral mining impact the economic and social development of the regions involved in Brazil?

Victoria Prado: Mining is currently responsible for around 4% of the Brazilian GDP. Brazil has a wide availability of resources in many of the critical minerals needed for the transition, but currently, its production levels do not reflect its resource shares. This means that there is significant room for expansion in production, which could potentially bring further resources for economic and social development in the country. However, treading this new environment will be tricky and should be done with a strong adhesion of robust environmental and social standards, ensuring dialogue with local communities and respect for Indigenous rights. 

4. As you mention in the commentary, Latin America has a strong history of alternating between nationalization and privatization of resources, depending on who is in power, which can create uncertainty. In Brazil, specifically, there are two opposing political forces today that have little dialogue and often diverge on this topic. What are the possible ways to overcome this challenge, keeping in mind the goal of net zero by 2050?

Tom Moerenhout: The first lesson to be drawn from successful countries that have extractive industries with higher ESG standards is to enforce fiscal and regulatory discipline across alternating political forces. This can be done by establishing independent regulatory bodies and fostering dialogue between opposing political groups to maintain consistency in policies regardless of political shifts. Chile and copper is a good example where this has happened. Emphasizing ESG standards and enhancing transparency in the mining sector would definitely build trust with both international investors and local communities. Similarly, diversifying export markets and forming strategic alliances with countries committed to sustainable resource management can also buffer Brazil against political and economic pressures from any single trading partner, and the repercussions that their choice of environmental and social standards might have on local ecosystems and populations.

5. In what ways can Brazil leverage its mineral wealth to enhance its geopolitical standing, both within Latin America and in global trade relations with the U.S. and other Western countries?

Tom Moerenhout: Brazil has a huge opportunity to leverage its mineral wealth to boost its geopolitical standing, not just within Latin America but on the global stage too. Brazil has what the US, Europe, and China need—huge reserves of graphite, nickel, lithium, rare earths, and more. This puts Brazil in a powerful position to be a key supplier and partner for energy transition tech, but also for national security. To really maximize its geopolitical standing, Brazil needs to diversify its investor base and export markets. While China is a major player and a key investor in Brazil’s mining sector, it’s risky to lean too heavily on just one partner. Engaging with China makes sense economically, but Brazil must also actively court investments from the U.S., Europe, and other Western countries to avoid becoming overly dependent on one market. A diversified investor base not only spreads the risk but also strengthens Brazil’s negotiating power. To court the US and Europe, Brazil should strategically position itself as a reliable and sustainable source of responsibly mined critical minerals. This means implementing strong environmental, social, and governance standards and ensuring transparency in its mining practices. Western nations, particularly the U.S., are looking for partners that align with their values on sustainability and responsible mining. If Brazil can demonstrate its commitment to these standards, it can secure long-term partnerships and investments from a wider range of countries. When the country does that and has the right external public relations, the rest will follow. A third point relates to the fact that Brazil can use its mineral resources to foster stronger regional ties within Latin America to position itself as a regional leader in mining and processing.

6. How do you evaluate Brazil's role in trade relations with the US in the context of critical mineral mining today, and what can be projected for the next 20 years?

Tom Moerenhout: Currently, Brazil exports significantly more minerals to China than to the U.S., with China buying around $23 billion worth of minerals, including critical ones like lithium and nickel, while U.S. imports stand at around $13 billion. This makes sense because China is the biggest consumer of minerals and metals. That being said, the U.S. also needs these strategic minerals as it looks to secure supply chains and reduce reliance on China. Take lithium, most of Brazil’s lithium is now exported to China for processing (about 300 million annually) rather than to the US (about 1 million annually). Looking forward, I expect more trade between Brazil and the U.S., particularly if Brazil can negotiate deals that improve market access for its minerals under favorable conditions that align with U.S. trade policies such as compliance with the Inflation Reduction Act. A critical minerals agreement between the U.S. and Brazil could be a game-changer, but for this Brazil will need to show that the projects that would benefit from IRA access are the best-in-class ones with respect to price, quality, and ESG standards.

Victoria Prado: I echo Tom's words above, and would like to note the recent Joint Statement on Brazil Fazenda – U.S. Treasury Climate Partnership, which specifically mentions collaboration on clean energy supply chains, of which critical minerals play an integral role. The two countries have also reignited their Critical Mineral Dialogue in Sept. 2024. While far from a critical minerals agreement, both of these show an active effort to expand collaboration on that front and makes me curious to see what it could be further expanded to, given Brazil is able to deliver on the points made above by Tom.

7. What policy recommendations would you make to both the U.S. and Brazilian governments to ensure a successful and sustainable partnership in critical minerals development?

Tom Moerenhout: The US should consider discussing the conditions under which a limited Critical Minerals Agreement with Brazil would be possible. It should also offer technical and financial assistance for sustainable mining, support transparent supply chains, and encourage private investment through incentives, including the use of its Development Finance Corporation which currently is not well designed to help facilitate US investment in overseas responsible minerals projects. Brazil should focus on diversifying its export markets and investors to reduce dependence on any single country, streamline regulatory processes to attract foreign investment, and absolutely elevate its ESG standards to appeal to Western markets and investors. The government could also do a deep investigation on what is the best way to capture more benefits from extractive projects so that those mineral resources are not merely extracted and exported.