The Balance Between Environmental and Extractive Policies in Brazil's Presidential Election, Part 1

(RANE)

Editor's Note: In the coming year, RANE will analyze the geopolitics of natural resources and raw materials. This series will be published periodically throughout the remainder of 2026; you can find all parts here.

Brazilian President Luiz Inacio Lula da Silva has pursued a delicate balancing act between promoting green initiatives and expanding extractive industries that will persist if he is reelected, but the election of a right-wing president would shift priorities toward deregulation and alignment with the United States and away from environmental protection and geopolitical neutrality. After taking office for a third term at the start of 2023, Lula indicated a break from the environmental rollbacks of his predecessor, President Jair Bolsonaro. Among other things, Lula's leftist government restored deforestation monitoring, reactivated the Amazon Fund after a four-year freeze and appointed Marina Silva, one of Brazil's most recognized environmentalists, as head of the environment ministry. On the international stage, Brazil leveraged successive multilateral presidencies to position itself as a key partner in global climate governance at a moment when climate action was retreating under U.S. President Donald Trump's skepticism. But Brasilia's various policy decisions have contradicted its green rhetoric and, in many ways, its more symbolic actions. For instance, state-run oil company Petrobras moved forward with exploratory drilling on the Equatorial Margin, an environmentally sensitive area stretching along Brazil's northern coast near the mouth of the Amazon River. The government also advanced a critical minerals agenda that aims to shift Brazil's role from a sole exporter to a refining player but has drawn skepticism, especially from environmentalists and Indigenous communities. The result is a government that has built institutional progress on one track while accelerating resource development on another. The future of this dichotomy will largely depend on the result of Brazil's 2026 election and whether Lula is reelected or if a right-wing candidate, most likely Senator Flavio Bolsonaro, the eldest son of former President Jair Bolsonaro, wins the presidency in October.

The Lula administration has framed resource development as compatible with its environmentally friendly credentials and sees extractive activities as a requirement for maintaining energy sovereignty and securing future economic and social prosperity. Fiscal pressure provides an additional argument for prioritizing extractive activities as prospects of increased revenues are welcome at a time of rising debt service obligations, a structurally constrained budget and declining oil output as pre-salt fields mature.
Managed by the Brazilian Development Bank (BNDES), the Amazon Fund raises donations for investments to prevent, monitor and combat deforestation, primarily financing projects in sustainable forest management, ecological zoning and conservation within the Amazon.
The Lula government's National Mining Plan 2050 (PNM 2050) focuses on vertical integration, by discouraging the export of raw minerals and aiming to expand the country's refining capacity and ensure "mineral sovereignty;" streamlining licensing processes for lithium projects that do not use chemical products and only use recycled water; and imposing strategic export controls over niobium, given the country holds 95% of the world's reserves. Niobium is a key metal used to strengthen steel for pipelines and infrastructure, high-temperature aerospace superalloys and superconducting magnets.
Brazil will hold general elections on Oct. 4, 2026, with a run-off presidential vote on Oct. 25 if no candidate obtains more than 50% of the vote in the first round.

Under Lula, Brazil would remain at the forefront of global green initiatives, yet institutional constraints on enforcement and greater receptivity to extractive industries have highlighted tensions in policymaking. Amazon deforestation fell by roughly 50% during Lula's first two years back in office compared to a peak under the previous Bolsonaro administration, which helped restore Brazil's international green credentials and unlocked multilateral climate funding. Moreover, Brazil's electricity matrix remains one of the cleanest among major economies, with renewables accounting for more than 80% of power generation capacity, with a rapid expansion of wind and solar over the past decade. But illegal gold and copper mining continues to degrade Indigenous territories and contaminate river systems across the Amazon. Also, artisan miners often linked to organized criminal groups forcibly resist federal enforcement bodies that are underfunded relative to the scale of the problem and the area they need to oversee. In recent years, deforestation has also expanded in the savannah-like Cerrado and other transition biomes that receive less international attention and enjoy weaker legal protection. On the energy track, during its chairmanship of COP30 in 2025, Brazil championed a global transition away from fossil fuels and promoted the Tropical Forests Forever Facility as a model for developed economies to pay forest nations in the Global South to keep carbon in the ground. However, just three weeks before the climate summit last November, Brazil's environmental agency, the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), granted Petrobras a license to drill exploratory wells in the Equatorial Margin. The development of this new offshore frontier near the mouth of the Amazon would extend Brazil's oil production capacity by decades, a development the government views as a strategic necessity rather than a contradiction of its climate commitments. Meanwhile, Brasilia has been advancing mining plans to exploit its natural resource deposits. Niobium exploration is overwhelmingly concentrated in Minas Gerais state, but prospecting for new deposits is expanding toward the Amazon basin, where extraction would carry significantly higher environmental and social costs. At the same time, lithium development is advancing in Minas Gerais and Bahia, driven by both domestic industrial ambitions and external pressure from the United States and China to secure supply chains for battery technology. Both countries are also disputing access to rare earths, given their broad use in strategic high-tech, green energy, electric vehicle and defense sectors, which has involved Brazil's Serra Verde mining company.

In 2025, deforestation in the Amazon decreased by 50% from 2022 (Bolsonaro's last year in office), reaching its lowest level in 11 years. Data from the National Institute for Space Research indicates this is the fourth consecutive year of decline, following an eight-year period of increasing deforestation.
Despite the current government's rhetorical support for oversight bodies when compared to the previous Bolsonaro administration, agencies still operate with limited personnel and budget. In contrast, criminal networks have geographically expanded and diversified illegal activities to secure additional revenue streams, consolidating well-financed operations in illegal mining, especially in the Amazon.
In October 2025, Petrobras obtained an environmental license and began exploratory drilling at the Equatorial Margin. Activities were suspended in January 2026 after a fluid leak and resumed in March amid legal disputes.
Serra Verde is Brazil's only operating rare earths mining company. The company's Pela Ema mine in Goias is one of the only producers of heavy rare earths outside Asia and has already become a focal point in the geopolitical competition. The United States has used development financing to limit Chinese involvement in the project. In December 2025, Serra Verde shortened off-take agreements with Chinese buyers by nearly eight years as a condition to secure a $565 million loan from the U.S. International Development Finance Corporation. On April 20, USA Rare Earth announced it will buy Serra Verde for $2.8 billion; in January, the U.S. Commerce Department took a stake in USA Rare Earth.

A fourth Lula term would almost certainly preserve Brazil's environmental framework but would fail to shield oversight agencies from fiscal constraints or political pressures, leaving green efforts exposed to structural limitations. If he is reelected, Lula would maintain the existing environmental governance framework, with the Environment Ministry serving as a mediator between the administration's pro-environment commitments and other groups favoring increased extraction and streamlined permitting. Lula would also seek to maintain Brazil's active role in multilateral climate forums, pursuing green finance opportunities, especially through the Amazon Fund and the Tropical Forests Forever Facility, which would have domestic political backing to gradually become a credible mechanism. Even with gaps and concerns, general policy continuity would help the country retain some green credibility before the international community, which would likely forestall heightened scrutiny from jurisdictions with strict regulations, such as the European Union, over companies with sustainability commitments anchored to Brazilian supply chains, particularly in soy, beef and timber. But Lula's reelection would not address the enforcement deficit Brazil faces, leaving especially the Cerrado and other transition biomes underprotected, while agribusiness lobbying in Congress would remain strong and able to relax permitting and oversight rules. Regarding illegal mining, criminal networks would remain active, particularly in the Amazon region, often posing security threats to Indigenous communities, NGOs and occasionally businesses involved in preservation or reforestation efforts for carbon capture projects. Despite criminal groups' pervasive presence across the Amazon, urban centers in the region would primarily face indirect security risks from turf wars that drive violent crime rates higher than the national average, rather than any concerted effort to target private businesses.

The Amazon Fund, created in 2008, has received over $1 billion in pledges since its reactivation in 2023, with Norway and Germany as the largest contributors. Donations to the fund were halted during Bolsonaro's term due to his administration's lack of commitment to environmental protection.
Two-thirds of Brazil's 513 federal deputies are part of the agribusiness caucus, which starkly opposes stricter environmental licensing or permitting, Indigenous land demarcation and other pro-environment measures.
IBAMA has only about 750 field inspectors responsible for enforcing environmental law across the country, which is larger than the continental United States.

Lula would consolidate a new oil frontier at the Equatorial Margin and expand the critical minerals agenda to focus on growing supply chain capacity at the expense of strict environmental preservation while still adhering to minimum environmental guardrails. If reelected, Lula would prioritize the Equatorial Margin and likely pressure IBAMA for additional exploratory licenses, seeking to fast-track commercial viability, though ongoing legal challenges would fuel some political risk that could hamper the scale of oil and gas investment. Brazil would continue to use Petrobras as a policymaking tool as a way to maintain the state's role in the energy sector, subordinating the company's corporate interests to the government's strategic goals, including job generation, economic growth and development of less profitable activities, such as fertilizer production. Regulatory friction with oversight agencies would likely intensify as crude production increases in environmentally sensitive areas. Occasional permitting delays would occur, as regulatory bodies would maintain some independence despite ongoing political pressure while also remaining inefficient. On the mining front, the Lula administration would consistently fight illegal activities in the Amazon while accelerating critical minerals development under the banner of promoting environmental, social and governance (ESG) standards to secure funds and maintain access to European and North American markets, despite capacity constraints on enforcement. The government would also adopt more pro-business rhetoric, seeking to accelerate existing lithium development projects in Minas Gerais and Bahia states (though Brasilia would prioritize relatively environmentally friendly projects). Additionally, the Lula administration would deepen efforts to industrialize Brazil's mining sector, rather than simply boost its export capacity, by granting subsidized credit and other fiscal incentives. However, a lack of coordination with Congress, coupled with a unified right-wing opposition favoring the interests of the agricultural and extractive sectors, would slow regulatory changes. Companies would also continue to face structural bottlenecks, such as inadequate transport infrastructure and pushback from local communities, which would have the political backing of parts of the government. These domestic drivers — combined with potential global constraints, such as low global prices or changes in demand or supply chains — would curb lithium project development over the next four years. In turn, niobium prospecting in the Amazon basin would advance through a somewhat strict licensing framework. Although the government would present this framework as environmentally regulated, it would still face sustained legal and civil society challenges, including Indigenous protests on project sites and in Brasilia, as well as litigation risks.

In Brazil, the federal government constitutionally holds exclusive authority to own and legislate on all mineral resources, while the states exercise influence through environmental licensing and the implementation of regional mining inspection taxes.
Petrobras's 2026-2030 strategic plan includes $109 billion in projected investments. The Equatorial Margin is identified as a key part of the company's long-term production growth strategy, though at least four lawsuits challenge IBAMA's drilling license for the region.
Niobium mining in the Amazon is concentrated at the Pitinga Mine, operated by Mineracao Taboca and owned by China Nonferrous, a Chinese company. In January 2026, Mineracao Taboca launched a $100 million upgrade to increase annual tantalum and niobium smelting capacity by 10,000 tonnes.
The Nova Industria Brasil policy, launched in 2024, designates critical minerals processing as a strategic sector eligible for subsidized financing via the state development bank BNDES. The government's $200 million Strategic Minerals Investment Fund also aims to encourage ESG practices within its portfolio companies.
In late 2025, Congress overrode 52 of Lula's 63 vetoes to the General Environmental Licensing Law, which legislators had approved in July 2025. The law allows companies to self-license most projects, weakens consultations with local communities, fast-tracks permitting for projects deemed as strategic and shifts oversight of environmental licensing from the federal government to states.

Under Lula, Brazil would maintain its strategic ambiguity between the United States and China, using its critical minerals and energy assets as diplomatic leverage while resisting formal supply chain alignments, likely leaving companies in Brazil exposed to pressure from both sides. If Lula is reelected, Brazil would likely seek to maintain a geopolitical positioning that is equidistant from the United States and China to maximize its diplomatic leverage, rather than pursue a clear alignment with either. The Lula administration would likely continue to decline participation in major initiatives like China's Belt and Road Initiative or U.S. President Donald Trump's Shield of the Americas. Brasilia would likely also continue to resist Washington's growing pressure to formally exclude Chinese companies from sensitive sectors. To appease U.S. supply chain demands, it would instead make selective concessions on specific extractive projects, either by facilitating a larger role for American companies or by avoiding interference in critical mineral transactions. While this balancing act would help attract financing from both superpowers (as well as from European, Canadian and Australian companies), it would likely lead to occasional diplomatic friction and uncertainty around sensitive projects. Furthermore, U.S. and/or Chinese pressure could result in ad hoc regulatory changes or politically motivated oversight, increasing supply chain scrutiny and creating a complex operating environment for companies in Brazil's critical materials space, especially for those seeking foreign financing. Should China decide to push back against U.S. pressure on Brazil and other Latin American countries, its public banks and companies could start to structure their investments and partnerships in ways that are harder to unwind under U.S. pressure. In a more escalatory scenario, Beijing could leverage its companies' presence in Brazil's telecommunications, energy and logistics sectors or threaten trade retaliatory measures to pressure Brasilia to preserve Chinese interests in the country.

China is Brazil's largest trading partner, accounting for 28.6% of its exports in 2025, while the United States accounted for 10.9%.
The United States' Shield of the Americas initiative, launched in March 2025, explicitly seeks to limit Chinese participation in strategic infrastructure and supply chains across Latin America while establishing a Strategic Critical Minerals Reserve, designed to reduce reliance on foreign suppliers like China and secure materials for defense and technology.

In part two of this assessment, we will discuss how the election of a right-wing president in October would alter Brazil's critical raw materials agenda.