Brazil Enacts Critical Minerals Law With M&A Screening and R$5 Billion Downstream Tax Credits

Highlights

• Brazil's PNMCE law pairs R$2B in guarantee funds and 20% tax credits on processing with government screening of foreign M&A and mineral-title transfers.
• The interministerial council CIMCE can approve, condition, or reject screened transactions on its own initiative, functioning as a mineral-specific strategic review body.
• Covered companies must allocate 0.3% of gross revenue to R&D and 0.2% to the FGAM guarantee fund, rising to 0.5% R&D after six years.
• Rare-earth M&A, joint ventures, and offtake agreements now require regulatory conditions precedent and longer closing timelines under the new regime.
• Brazil is leveraging its geology as sovereign bargaining power amid U.S., China, and European competition for secure critical mineral supply.

Brazil's Law No. 15,506/2026 creates (opens in a new tab) the National Policy for Critical and Strategic Minerals, or PNMCE, and a powerful interministerial council, CIMCE. The law pairs financing and tax incentives with government screening of corporate-control changes, foreign influence, mineral-title transfers, and certain international supply agreements. The message is clear: Brazil welcomes mining capital, but increasingly expects processing, technology, and value creation to remain in Brazil.

REEx Insight — Great Powers Era 2.0™ Reaches Brasília

REEx sees something bigger than mining policy. This is Great Powers Era 2.0™ written into law. Brazil is not simply choosing Washington over Beijing. It is trying to turn geology into sovereign bargaining power as the U.S., China, and Europe compete for secure mineral supply. Brazil's mining regulator explicitly recognizes all three as interested powers. PNMCE goes further: it connects minerals to Brazil's National Defense Strategy and permits future export rules requiring domestic value-add commitments plus disclosure of destination, ultimate beneficiary, and ownership chains.

Here lies the underappreciated investor risk per the Demarest (opens in a new tab) firm: Decree No. 13,118/2026 allows the National Council for the Industrialization of Critical and Strategic Minerals (CIMCE) Executive Committee to approve, condition, or reject screened transactions—and initiate reviews on its own. This is effectively a mineral-specific strategic transaction screen, though not identical to U.S. CFIUS.

The Carrot Comes With a Gatekeeper

The incentives are substantial. Brazil may contribute up to R$2 billion to the Mineral Activity Guarantee Fund (FGAM) guarantee fund. The Federal Program for the Processing and Transformation of Critical and Strategic Minerals (PFMCE) offers tax credits of up to 20% of qualifying domestic processing expenditures, capped at R$1 billion annually from 2030–2034. Permanent-magnet inputs specifically include oxides, chlorides, metals, and alloys.

But covered companies must initially direct 0.3% of relevant gross operating revenue, net of taxes, to R&D and 0.2% to FGAM; after six years, R&D rises to 0.5%. The new regime's mineral list and several operating rules still await CIMCE action.

What Investors Should Price

Rare-earth M&A, JVs, and offtakes now need regulatory conditions precedent, longer closing assumptions, and downside cases for domestic-processing obligations. Brazil wants to become more than the mine feeding someone else's factory. For investors, the geology may attract the capital; Great Powers Era 2.0 industrial policy will increasingly determine how that capital earns its return.