Rare Earths and the Americas: Why Latin America's Emerging Supply Chain Matters
- 4 hours ago
- 9 min read
By: Amanda Perez
Rare earth elements sit at the center of some of the most consequential technologies of the next decade. This small group of 17 chemically similar metals is essential to nearly every modern product from electric vehicle motors to wind turbine generators and even to precision-guided defense and aerospace systems. Despite their name, most of these elements are not geologically scarce; cerium, for example, is more abundant in the Earth's crust than copper. What is scarce is the concentration of supply: China currently accounts for roughly 60% of global mining, 91% of refining and separation capacity, and 94% of magnet manufacturing, a dominance built over decades of sustained investment rather than unique geology.
That concentration has become a live strategic concern. Export controls tightened through 2025 and 2026, price volatility for the most magnet-critical elements has been extreme, and governments across the Western Hemisphere have begun treating rare earth supply diversification as a genuine policy priority. Latin America, specifically Brazil and Chile, has emerged as part of that response. This piece looks at why, and at what remains unresolved.
Background: Rare Earth Elements
Rare earth elements are a group of 17 metals: the 15 lanthanides, plus scandium and yttrium, which share similar chemical properties despite differing atomic structures. They are typically split into two groups: light rare earths (including neodymium and praseodymium) and heavy rare earths (including dysprosium and terbium), with the heavy group generally scarcer and more valuable.
Their applications are dispersed across the modern economy, almost always in small quantities but without ready substitutes. Neodymium-iron-boron magnets, which rely on neodymium, praseodymium, dysprosium, and terbium, power electric vehicle traction motors, wind turbine generators, and precision robotics. Cerium and lanthanum are used in petroleum refining catalysts and automotive catalytic converters. Europium and terbium phosphors appear in display technology; yttrium-stabilized ceramics coat jet engine turbine blades; gadolinium is a standard component of MRI contrast agents. It is this breadth of use, combined with the absence of substitutes in most applications, that makes rare earth supply security a cross-industry concern rather than a niche one.
The Global Picture: Why This is a China Story
China's dominance in rare earths is not simply a function of where the deposits happen to be. At the mining stage, China holds roughly 60% of global output, a genuine geological advantage, anchored by the Bayan Obo deposit, the largest rare earth deposit ever discovered, and extensive ion-adsorption clay deposits in its southern provinces. But that lead widens sharply at each subsequent stage of the value chain. China controls an estimated 91% of global refining and separation capacity, and an estimated 94% of magnet manufacturing, a share that has risen from roughly 50% in 2005.
The reason separation capacity is so concentrated is technical, not just political. Because all 17 rare earths are chemically similar, isolating individual elements from a mixed concentrate requires 15 to 25 sequential solvent-extraction stages, each demanding specialized equipment that only a handful of countries manufacture at scale. China has spent decades refining this process; the accumulated operational know-how, not simply the physical equipment, is what makes the capability difficult to replicate quickly elsewhere. Magnet manufacturing reinforces the pattern: China is simultaneously the world's largest manufacturer of electric vehicles, wind turbines, and electronics, the primary consumers of rare earth magnets, creating a self-reinforcing cycle between domestic supply and domestic demand.
The International Energy Agency estimates that meeting projected 2035 demand outside China would require roughly doubling ex-China mining capacity, quadrupling refining capacity, and increasing magnet manufacturing capacity sixfold beyond currently planned projects. Mining, in other words, is not the primary bottleneck; the issue is separation.
This dynamic has played out visibly over the past 18 months. China tightened export licensing on several heavy rare earths in April 2025, then extended those controls to foreign-made products containing Chinese-origin rare earths that October, prompting a one-year trade truce between the two governments, reached in Busan in October 2025. That truce faced its first real test in May 2026, when President Trump traveled to Beijing for a summit with President Xi Jinping focused significantly on rare earth access; no breakthrough agreement was reached. The following month brought a narrower but concrete escalation. Days after G7 nations agreed at a June 2026 Paris summit to cap any single country's share of rare earth imports at under 60% by 2030, China added two of the largest U.S. rare earth producers, MP Materials and USA Rare Earth, to its export control list, restricting Chinese suppliers from providing them certain dual-use goods and technology. It extended a similar measure to a group of European companies the following month.
The broader Busan-truce pause on rare earth-specific export controls has reportedly remained formally in place throughout, still set to run through the same November 2026 date, but the intervening months illustrate how quickly targeted escalation can occur even during a nominal truce. Independent industry projections illustrate why the stakes are high: supply of dysprosium and terbium (two of the most magnet-critical heavy rare earths) outside of China is projected to meet less than a fifth of global demand by 2035, according to separate analyses from McKinsey, CRU Group, and Benchmark Mineral Intelligence. That November deadline remains the next major inflection point for global supply chains, including the pace of diversification efforts already underway in Latin America.
Latin America's Emerging Role
Brazil holds the world's second-largest rare earth reserve base with roughly 21 million tonnes of rare earth oxide (about 23% of global reserves), a position that, until recently, translated into almost no actual production. That gap between reserves and output is common globally, but Brazil's position is changing faster than most, and more broadly than a single company's story.
At least six distinct Brazilian projects are currently advancing, spanning three states and several ownership structures, though at markedly different stages of maturity. Only one is producing today: Serra Verde’s Pela Ema mine, in Goiás, has been in commercial production since 2024 and remains the only at-scale rare earth producer outside Asia capable of supplying all four primary magnet-relevant elements (neodymium, praseodymium, dysprosium, and terbium) from a single deposit. Just behind it, Aclara Resources’ Carina project, also in Goiás, has completed a feasibility study outlining a 170.8-million-tonne reserve and a construction cost of roughly $780 million, while a similarly advanced pair of projects in Minas Gerais’s Poços de Caldas volcanic complex, Meteoric Resources’ Caldeira and Viridis Mining and Minerals’ Colossus, are each reported among the largest ionic clay rare earth resources found anywhere outside China. All four share the same underlying advantage: ionic clay deposits. This deposit type contains rare earths loosely bound to weathered clay rather than locked inside hard rock, allowing recovery through a comparatively simple ion-exchange leaching process rather than conventional mining. Ionic clay deposits have historically been found almost exclusively in southern China, making Brazil’s and Chile’s examples notable exceptions.
Further behind, at a purely exploratory stage, two more Brazilian projects have generated some of the highest-grade rare earth drill results reported anywhere in the world, though neither yet has a formal resource estimate. St George Mining’s Araxá project, in Minas Gerais, sits adjacent to CBMM’s niobium mine (the single operation supplying roughly 80% of the world’s niobium), while Brazilian Rare Earths’ Monte Alto project, in Bahia state, has recorded individual assays as high as 35% total rare earth oxide. A sixth project, Energy Fuels’ Bahia Project, also in Bahia, follows an entirely different deposit type (heavy mineral sand rather than ionic clay) and is targeting first production in 2029.
Chile is the region's second mover with a single advanced project, Aclara Resources' Penco Module, developed alongside Chilean steelmaker Grupo CAP, targeting the same heavy rare earth niche (dysprosium and terbium) as Brazil's leading ionic clay projects. Peru, Argentina, Bolivia, and Venezuela all have documented rare earth geology, but none has yet advanced to a financed, investable project at a comparable scale. Venezuela's case has grown more complex since Nicolás Maduro's removal from power in January 2026: the country enacted a new Organic Mining Law in April 2026 that reopened its mining sector to private and foreign investment for the first time in decades, including a specific regime for critical minerals and rare earths, alongside new U.S. Treasury general licenses permitting some transactions involving Venezuelan-origin minerals. In practice, though, industry consultants describe the country's rare earth potential as still speculative given limited exploration and unresolved chain-of-custody concerns, leaving Venezuela less investable than regional peers today.
No project in Latin America, however, currently retains the full rare earth value chain within the region, an important qualification to the picture painted so far. Separation capacity is either planned for facilities in the United States or, in Pela Ema's case, currently located in China itself under an arrangement set to expire at the end of 2026. Mining is advancing in Latin America, but separation, the higher-value, technically harder step, has not yet kept pace.
Sources of Capital: Who are the Players?
The capital behind Latin America's rare earth buildout has come from an unusually concentrated set of sources so far. Government-linked development finance has been the largest single category: the U.S. International Development Finance Corporation has committed more than $565 million to Serra Verde alone, the largest announced transaction in the sector, alongside separate financing tied to USA Rare Earth's roughly $2.8 billion agreement to acquire Serra Verde outright. This is explicitly policy-driven capital, aimed at reducing dependence on Chinese supply chains, rather than conventional return-seeking investment.
Specialized private equity has played a meaningful supporting role in early-stage financing: Minería Activa, a Chilean private equity firm linked to LarraínVial, backed what is now Aclara Resources' Penco Module project years before Hochschild Mining acquired it outright in 2019. Strategic industrial investors with a direct commercial interest in the outcome have been equally important, including Chilean steelmaker Grupo CAP, Belgian chemical producer Solvay, and Brazilian refractory materials maker Togni S/A, all acting as investors rather than simply customers. Public capital markets have also been active: Meteoric Resources, Viridis Mining and Minerals, St George Mining, Brazilian Rare Earths, and Aclara Resources are all listed on international exchanges and have raised capital through public placements, sometimes subscribed to by their own existing strategic shareholders.
This sector's early stage shows up in its financing structure as much as anywhere else. Broad, syndicated commercial bank project debt has been largely absent so far, with senior capital deployed to date coming predominantly from development finance institutions rather than conventional bank lending syndicates. Even the aforementioned most advanced transaction in the space remains unfinished: the USA Rare Earth-Serra Verde deal is still subject to an ongoing antitrust review by Brazil's competition authority, a live and unresolved risk to its closing as currently structured.
What to Watch
Several open questions will shape how this sector develops over the next 12 to 18 months. The most immediate is geopolitical: a May 2026 summit between the two countries' leaders failed to produce a breakthrough on rare earth access, and the following month brought a targeted new escalation when China placed two major U.S. rare earth producers on its export control list. The broader one-year U.S.-China trade truce reached in Busan remains on track to expire in November 2026 as scheduled; whether it is extended, renegotiated, or allowed to lapse will materially affect pricing, export availability, and the urgency behind diversification efforts more broadly.
Closer to home, Brazilian and Chilean mining law differ meaningfully and should not be treated as interchangeable. Royalty structures, permitting timelines, and foreign ownership rules vary by jurisdiction, and both countries' regulatory environments continue to evolve. Chile's 2024 mining royalty framework, for instance, was designed primarily around large copper producers, and its precise application to rare-earth-specific operations remains untested.
The most consequential question may be the simplest: will separation capacity get built in the Americas, or will mining continue to outpace the more technical work of turning concentrate into usable oxides? Several announced facilities are still under construction rather than operating. Latin America's mining story is real and advancing. Whether it becomes a full value-chain story is still an open question, and likely the one worth watching most closely.
This analysis draws on data from the U.S. Geological Survey, the International Energy Agency, McKinsey, CRU Group, Benchmark Mineral Intelligence, and company disclosures from the issuers named herein. All figures are as of August 2026 unless otherwise noted. This post is published for informational purposes only and does not constitute investment advice or a solicitation to transact in any security or financial instrument.
This report has been prepared by Frontera Capital Advisors, LLC (“Frontera”) for general informational purposes only. The views expressed herein are those of the author(s) as of the date of publication and are subject to change without notice.
Information contained in this article has been obtained from sources believed to be reliable, but Frontera has not independently verified such information and makes no representation or warranty, express or implied, as to its accuracy, completeness, or reliability. Any forward-looking statements, projections, or opinions reflect the author’s judgment as of the date of publication and may prove to be incorrect.
Nothing in this article constitutes legal, tax, accounting, investment, or other professional advice, nor should it be construed as a recommendation, offer, or solicitation to buy or sell any security, engage in any transaction, or pursue any strategy. Readers should consult their own legal, tax, financial, and other advisors before making any decision based on the contents of this article.
