Brazil's Rejection of U.S. Critical Minerals Deal and the Implications of the U.S.-Brazil Conflict over Resource Sovereignty
Executive Summary
On September 21, President Lula immediately rejected and discarded a U.S. document proposing preferential rights to Brazil's critical minerals. This was a response to Washington extending its resource acquisition pattern—evident in its Venezuelan oil deal and the acquisition of Serra Verde—to Brazil. The U.S. is also attempting to confine the issue to a bilateral framework by excluding China from WTO dispute consultations. As this rejection is linked to a sovereignty narrative ahead of the October 4 presidential election, the resource sovereignty framework is likely to remain in place even if the government changes. South Korea must manage the risks of over-reliance on a single bloc by pursuing a dual-track approach: participating in U.S.-led supply chains while simultaneously fostering independent equity and technology partnerships with the Brazilian government and corporations.
I. Situational Analysis
U.S.-Brazil Head-On Collision Over Critical Minerals: A Situational Analysis
1. Background and Developments
The flashpoint for this conflict was President Lula's press conference with domestic media on September 21. Lula stated that he had “resolutely rejected on the spot” a document proposed by the United States concerning Brazil's critical minerals [3]. He said, “The conditions proposed by the U.S. administration are unacceptable” [3]. The Brazilian government announced it had treated the document as “discarded” [3]. President Lula clarified the reason: “It is unacceptable for any country to seek preferential rights over Brazil's mineral resources” [3].
This issue did not arise in a vacuum. The United States has a recent precedent for securing physical resources, having done so last month through an oil agreement with Venezuela. It gained access to approximately 20% of Venezuela's crude oil reserves via a de facto proxy government subordinate to the Maduro regime [1]. The Peterson Institute for International Economics (PIIE) pointed to the acquisition of leading Brazilian critical minerals producer Serra Verde by USA Rare Earth, a company partially owned by the U.S. government, as an early sign of this strategy being extended to Brazil [1]. USA Rare Earth is also a recipient of U.S. government funding programs [1].
U.S.-Brazil relations were already strained before the critical minerals issue surfaced. Ties between the two nations chilled rapidly after the United States canceled the Brazilian ambassador's visa, an act that the Brazilian government has characterized as foreign interference aimed at the October presidential election [2]. Therefore, the rejection of the U.S. proposal was not an isolated event but rather a flare-up along a pre-existing line of diplomatic tension.
2. Current Situation
The conflict is also playing out on the trade front. According to the Brazilian daily Valor Econômico, the Trump administration has rejected China's request to join WTO dispute consultations between the United States and Brazil [6]. These consultations are part of the WTO's dispute settlement process regarding new high tariffs imposed by the U.S. on Brazilian products [6]. The U.S.-Brazil meeting was scheduled for Friday through the WTO dispute mechanism [6]. Blocking China's participation indicates Washington's intent to manage the situation with Brazil within a bilateral framework, to the exclusion of Beijing.
President Lula brought the conflict to the public stage at the UN General Assembly. According to the South China Morning Post (SCMP), Lula used his opening address to indirectly criticize U.S. tariffs, military pressure, and demands for access to critical minerals [8]. He declared that Brazil is “no one's backyard” and insisted that any foreign access to its critical minerals must be conditioned on benefits returning to the country [8]. In the same speech, he also reaffirmed his support for the initiative to end the war in Ukraine, which he has pursued jointly with China [8].
Al Jazeera reported that President Lula warned of potential foreign interference ahead of the October 4 presidential election [9]. Lula declared, “We will not allow any force, domestic or foreign, to undermine Brazilian democracy” [9]. The Argentine outlet Ámbito Financiero also covered this remark, portraying it as a message of defending sovereignty and a vow to “not allow the will of the people to be undermined” [10]. According to the French-language outlet La Nouvelle Tribune, in an interview with CNN Brazil, Lula likened President Trump to an “emperor who seeks to impose his will on the entire world” [16]. Serbian media outlet N1 reported that Lula, given the opportunity to speak just before President Trump, stressed that “Brazilian democracy belongs to the Brazilian people” [12].
Domestically in Brazil, this conflict is intertwined with the ongoing presidential election. President Lula has declared his candidacy for reelection, seeking a fourth term [9]. The Swiss newspaper Neue Zürcher Zeitung (NZZ) described the October election as a watershed that will define the future of Brazil's foreign policy toward the United States [13]. The outcome of the race between President Lula and the candidate from the Bolsonaro camp is seen as decisive for how Brazil will respond to U.S. pressure over its resources [13].
3. Key Actors and Positions
The Lula Administrationis framing critical minerals sovereignty as a core issue of national autonomy just before the presidential election. President Lula’s logic is clear: granting preferential resource rights to any specific country constitutes an infringement of Brazilian sovereignty [3]. He has defined this demand as part of a broader pattern of U.S. actions, including tariffs, military pressure, and attempted election interference, and has publicly raised the issue at the multilateral venue of the UN [8][9]. At the same time, he continues to leverage his relationship with Beijing as a diplomatic asset against Washington by maintaining cooperation on the Ukraine peace initiative [8].
The Trump Administrationappears to be extending to Brazil the resource acquisition model it used in the Venezuelan oil deal [1]. The Serra Verde acquisition illustrates a path for accessing critical mineral production assets through private takeovers by companies with U.S. government ownership, bypassing the need for formal state-to-state agreements [1]. In trade, the administration's move to exclude China from WTO dispute consultations reveals a strategy to manage the issue with Brazil through bilateral pressure, rather than allowing it to become part of the wider U.S.-China competition [6].
Chinaattempted to join the WTO dispute consultations involving Brazil but was blocked by the United States [6]. This was an effort by Beijing to secure an official foothold in the unfolding U.S. trade and resource pressure campaign against Brazil. Given that President Lula has been jointly promoting a peace plan for Ukraine with China, it can be inferred that Beijing intends to expand its cooperation with Brazil from multilateral diplomatic agendas into the arena of trade disputes [8].
The Milei Administration in ArgentinaWhile not a direct party to the critical minerals dispute, the Milei administration in Argentina is a background actor. It has launched ideological attacks on the Lula government, contributing to a chill in Brazil-Argentina diplomatic relations that is separate from the U.S.-Brazil conflict [2]. However, Argentina has refrained from retaliation due to its economic dependence on Brazil, meaning the dynamics of the two conflicts are not the same [2].
4. Key Issues
The first key issue is the nature of the U.S. approach to resource access. It remains unclear whether Washington demanded a formal state-to-state agreement or sought indirect access through corporate equity acquisitions, as seen in the Serra Verde case [1]. The “discarded document” referred to by the Lula administration suggests the former, but the latter approach has already been put into practice [1].
The second issue is the connection between the WTO dispute and the resource conflict. It is not confirmed to what degree the exclusion of China from the WTO tariff proceedings is linked to the critical minerals negotiations [6]. However, with both conflicts unfolding at the same time, it appears as though the United States is pressuring Brazil simultaneously through multiple channels.
The third key issue is the outcome of the October 4 presidential election. If President Lula is reelected, his current hardline stance toward the United States is likely to persist. Conversely, a victory for the Bolsonaro camp could fundamentally alter Brazil's response to U.S. demands for resource access [13]. In the run-up to the election, the Lula administration is expected to attempt to turn U.S. pressure into a domestic political asset by framing it as foreign interference [9][10].
II. In-Depth Analysis
U.S.-Brazil Head-On Collision Over Critical Minerals: An In-Depth Analysis
1. Analysis of Root Causes
The immediate trigger for the conflict was the document proposed by the United States. The root cause, however, lies in the Trump administration's broader strategy for securing resources. Washington already demonstrated this approach last month with its oil deal in Venezuela, where it secured access to roughly 20% of the country's crude oil reserves via a de facto proxy government subordinate to the Maduro regime [1]. The PIIE characterized that deal as a “clear violation of Venezuelan sovereignty” [1]. The U.S. approach to Brazil should be seen as an extension of this strategy.
In the case of Brazil, the method was somewhat different. Instead of a government-to-government agreement, the U.S. took an indirect route via corporate acquisition. Serra Verde, a major Brazilian critical minerals producer, was acquired by USA Rare Earth, a company partially owned by the U.S. government and a recipient of its funding programs [1]. This suggests Washington is pursuing a dual-track strategy: when formal state-to-state agreements are difficult, it uses capital-led equity acquisitions to extend its de facto control. The document President Lula rejected represented the first track—a formal demand for preferential rights at the governmental level.
Brazil's immediate move to treat the proposal as a “discarded document” was driven by political calculations related to resource sovereignty [3]. Brazil possesses world-class deposits of minerals crucial for the energy transition, such as niobium, rare earths, and lithium. For President Lula, these are not simply export commodities; they are strategic assets linked to a national narrative of industrialization and technological independence. Granting preferential rights to a foreign country could be seen as locking Brazil into its historical role as a raw materials exporter. This is the context for President Lula’s declaration at the UN General Assembly that any foreign access to critical minerals “must be conditioned on benefits returning to the country” [8].
2. Structural Context
Political Structure: This conflict is taking place on the eve of Brazil's October 4 presidential election, with President Lula seeking a fourth term [9]. The United States had previously canceled the Brazilian ambassador's visa, an act Brazil framed as election interference [2]. Rejecting the U.S. minerals proposal is domestically advantageous for Lula in this context. In a CNN Brazil interview, he likened President Trump to an “emperor” who “seeks to impose his will on the entire world,” actively cultivating the image of a defender of national sovereignty during his campaign [16]. According to Al Jazeera, Lula declared he would “not allow any force, domestic or foreign, to undermine Brazilian democracy” [9], a strategy that weaves the minerals dispute and the alleged election interference into a single narrative of sovereignty.
Economic Structure: On the trade front, a WTO dispute settlement process is ongoing regarding high U.S. tariffs on Brazilian products [6]. According to Valor Econômico, the United States rejected China's request to participate in these consultations [6]. This is interpreted as a deliberate move by Washington to confine the issue to a bilateral framework. It suggests that the tariffs and the demand for critical minerals are not separate issues but components of a single pressure campaign. Brazil finds itself in a dual-pressure situation: its export channels are being constricted by tariffs while it faces demands for preferential access to its mineral resources.
Security Structure: The broader context of U.S.-China competition also looms over this issue. The United States was forced to retreat on tariffs against China in 2025 when Beijing leveraged its control over rare earth exports [7]. Even after the Busan Agreement, an asymmetric dynamic continues, with Beijing retaining control over the pace of implementation [7]. This experience has intensified Washington's drive to secure critical mineral supply chains outside of China, and Brazil is a key target in this strategy. Simultaneously, President Lula used his UN address to reaffirm his support for the Ukraine peace initiative he has pursued with China [8], signaling that Brazil is keeping multilateral channels with Beijing open as a counter to exclusive U.S. demands. Washington's exclusion of China from the WTO consultations can be interpreted as a preemptive move to shut down this multilateral avenue.
3. Historical Precedents and Comparative Cases
The most direct parallel is the case of Venezuela. In August, the United States signed an agreement with the Maduro regime securing access to 20% of the country's oil reserves [1]. The method—securing resources through a dependent government—is similar to what was proposed to Brazil. However, there is a critical difference: Venezuela's internationally isolated regime had little choice but to accept U.S. terms. Brazil, by contrast, is a regional power, a G20 member, and a founding member of BRICS, giving it significant independent negotiating leverage. This asymmetry in national power explains why President Lula was able to reject the proposal “on the spot” [3].
A comparison with the dynamics of U.S.-China rare earth negotiations is also instructive. During the 2025 tariff standoff, China successfully used its control over rare earth and magnet exports as leverage to compel Washington to roll back tariffs [7]. This case showed that a resource-holding nation can wield significant negotiating power if it controls bottlenecks in processing and refining. Brazil has abundant reserves of raw ore, but its refining and processing capacity is far inferior to China's. Thus, while President Lula's rejection is a symbolic victory, Brazil's actual leverage is limited and cannot replicate China's chokepoint strategy.
At the regional level, the situation should be viewed alongside the downgrading of diplomatic ties between Argentina and Brazil. Relations between the two countries were lowered from the ambassadorial level to that of chargé d'affaires following disparaging comments made by President Milei about President Lula [2]. Although this is separate from the U.S.-Brazil conflict, both disputes are concentrated around the period of Brazil's October election. While Washington and Buenos Aires are forming an ideologically aligned axis, the Lula administration must contend with both conflicts at once.
4. Key Variables Shaping Future Developments
The most significant variable is the result of Brazil's October 4 presidential election. If President Lula is reelected, his current hardline policy of rejection is likely to continue. Conversely, a victory for a Bolsonaro-aligned candidate would open the door to a potential reset in relations with the United States. The NZZ described the election as “a choice that will determine the direction of Brazil's foreign policy” [13], while also noting that the country's fundamental geopolitical position will remain constant regardless of the outcome [13].
The second variable is the outcome of the WTO dispute settlement process. The intensity of pressure in the critical minerals negotiations could vary depending on how the tariff issue is resolved in the U.S.-Brazil meetings, from which China has been excluded [6]. If the tariffs are not relaxed, Brazil will have a stronger incentive to maintain a hardline position on the minerals front.
A third variable is whether the indirect approach via corporate acquisition will proliferate. It remains to be seen whether the Serra Verde takeover was a one-time transaction or if it will be followed by similar attempts to acquire stakes in other Brazilian critical minerals firms [1]. With the government-level proposal rejected, Washington may well increase its reliance on this indirect, capital-driven strategy.
A fourth variable is the pace at which Brazil deepens its ties with BRICS and China. President Lula’s reaffirmation at the UN of his joint initiative with China on Ukraine [8] can serve as a counterweight to exclusive bilateral pressure from the United States. Washington's move to exclude China from the WTO consultations can be seen as a preemptive measure to curb the expansion of this multilateral channel [6].
III. Final Policy Recommendations
U.S.-Brazil Head-On Collision Over Critical Minerals: Comprehensive Policy Recommendations
1. Overall Assessment and Recommended Response
This is not a one-off trade dispute. It is part of a broader pattern of resource acquisition by Washington, extending from the Venezuelan oil deal to Brazilian critical minerals [1]. President Lula’s decision to treat the proposal as a “discarded document” was not a negotiating tactic but a political declaration, intertwined with a narrative of national sovereignty ahead of the October 4 election [9]. This dynamic is unlikely to be resolved easily, even after the election. The framework of resource sovereignty is a domestic political asset in Brazil that transcends partisan divisions, meaning it would likely persist even under a Bolsonaro-aligned government.
The implications for South Korean companies and the government are twofold. First, the U.S.-Brazil conflict will likely compel the Brazilian government to actively seek alternative partners. Although Brazil rejected the U.S. demand for preferential rights, it has no reason to halt the development of its mineral resources. This creates opportunities for third countries interested in participating in refining and processing. Second, the U.S. attempt to frame the issue as a bilateral matter at the WTO [6] signals that Washington may seek to exclude third-party involvement in similar critical mineral acquisition efforts in the future.
The recommended response is a dual-track approach: avoid taking sides and instead build direct channels with the Brazilian government. This is consistent with the principle previously outlined in EAI analysis: “securing dual access by participating in Brazil’s rare earth refining while also establishing separate bilateral channels with the resource-rich nation” [5]. South Korea should pursue participation in U.S.-led supply chain initiatives and, at the same time, develop independent equity and technology partnerships with the Brazilian government and corporations. Exclusive dependence on any single partner creates vulnerability to abrupt political changes, as this incident illustrates.
2. Short-, Medium-, and Long-Term Action Plan
Short-Term (1–3 months, around the presidential election): It would be prudent to postpone decisions on new large-scale investments until the results of Brazil’s presidential election are finalized. However, given the ongoing trend of U.S. capital preemptively acquiring stakes in local critical minerals firms, as exemplified by the Serra Verde acquisition,[1] South Korean companies must continuously monitor the ownership structures and divestment trends of Brazilian mining companies. At the government level, South Korea should use its embassy in Brasília to identify points of contact within Brazil’s Ministry of Mines and Energy and its National Bank for Economic and Social Development (BNDES), and to determine the specific terms of the U.S.-Brazil agreement through working-level channels.
Medium-Term (post-election to H1 2027): South Korea should present a tailored cooperation proposal timed to coincide with the finalization of the new Brazilian administration’s policy stance on critical minerals. It would be effective to prepare a model for localizing refining and processing activities, which would align with President Lula’s demand that benefits be returned to the domestic economy.[8] Proposing a joint venture structure—one that is predicated on creating domestic value in Brazil and is differentiated from U.S.-style demands for preferential access—could create a negotiating advantage. At the same time, South Korea must maintain dual access by participating in parallel in U.S. critical mineral supply chain initiatives, such as follow-up measures to the Inflation Reduction Act (IRA).
Long-Term (H2 2027 and beyond): As long as the U.S.-China hegemonic rivalry over rare earth elements persists, including through negotiations to renew the Busan Agreement,[7] Latin America’s importance as an alternative source of supply will continue to grow. South Korea must institutionalize long-term refining partnerships with resource-rich Latin American nations, including Brazil, on a separate track and establish independent supply lines for raw materials that are not subordinate to the supply chain realignments of either the United States or China.
3. Monitoring Indicators and Trigger Points
First, the results of Brazil’s October 4 presidential election and the president-elect’s policy stance toward the United States and China are key indicators. If Lula wins a fourth term, his current policy of resource sovereignty is likely to continue.[9] Even if a candidate aligned with Bolsonaro wins, the domestic political sensitivity of the minerals issue is expected to persist.
Second is the status of the WTO dispute settlement proceedings. How the U.S. action to block China’s participation in consultations[6] unfolds during the actual panel proceedings will serve as a basis for predicting Washington’s future patterns of excluding third countries.
Third are trends in acquisitions of stakes in Brazilian critical minerals companies by U.S. capital, similar to the Serra Verde case.[1] If additional acquisitions occur, this should be interpreted as a signal that Washington’s primary tactic has shifted to using capital bypass routes rather than pursuing intergovernmental agreements.
Fourth is the outcome of the summit-level U.S.-China rare earth negotiations, specifically whether the talks to renew the Busan Agreement succeed.[7] If the rare earth supply between the United States and China stabilizes, the intensity of Washington’s pressure on Brazil to secure resources could ease somewhat. Conversely, if the negotiations fail, pressure on the resources of third countries, including Brazil, is expected to intensify.
4. Summary and Conclusion
The U.S.-Brazil conflict over critical minerals rests on the same logical structure as the Venezuelan oil deal.[1] President Lula’s rejection is not a negotiating gesture but a declaration of sovereignty ahead of the presidential election.[Deleted Source][3][8] The United States is pursuing two parallel tracks—making demands at the intergovernmental level and acquiring stakes through capital investment—while adhering to a bilateral framework that excludes China at the WTO.[6] Within this structure, South Korea’s guiding principle should be to secure dual access without becoming subordinate to either side. It must calibrate the timing of its response by using the results of the Brazilian election, trends in capital acquisitions, and the status of U.S.-China rare earth negotiations as key triggers.
References
[4] [Atlantic Council - GeoEconomics Center] Trump Tariff Tracker
[6] [Valor Econômico] EUA barram China em consulta com Brasil na OMC
[9] [Al Jazeera] Lula warns against foreign interference in Brazil election at UN
[12] [N1 (RS)] Lula da Silva pozvao na reformu Saveta bezbednosti UN
[14] [Exame] Lula volta a prometer que vai acabar com as bets: 'pessoas estão se endividando'
[15] [Nikkei Asia] Trump-Xi summit live: What to expect in the coming hours
[17] [Buenos Aires Times] Milei’s US trade deal is under threat as Argentina demands better terms
[18] [O Globo] Relatório da Abin enviado a governo e TSE aponta risco de interferência dos EUA
[22] [Foreign Policy] What the BRICS Summit Meant for Brazil
*This text is an AI translation of an original written in Korean. Some translations or nuances may be inaccurate.
This report is an in-depth analysis planned by an EAI researcher, grounded in sophisticated AI-assisted research, and finalized by the EAI researcher.
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