Strengthening Bilateral Ties: Saudi Arabia Expands Relations with Brazil and Chile

Saudi Arabia is set to embark on a significant economic mission as the Minister of Industry and Mineral Resources, His Excellency Bandar Ibrahim Alkhorayef, and Vice-Minister for Mining Affairs, His Excellency Khalid Saleh Al-Mudaifer, prepare to visit Brazil and Chile. This high-level visit aims to strengthen bilateral ties, attract investments into Saudi Arabia, and seek mutually beneficial investment opportunities in both mineral and industrial sectors.

From July 22-30, the Ministry’s delegation will visit major cities in Brazil, including São Paulo, Brasília, Rio de Janeiro, and Santiago in Chile. This visit aligns with Saudi Arabia’s Vision 2030 goals to diversify the economy and turn the Kingdom into an industrial and economic powerhouse.

The delegation will engage in strategic, high-level meetings with senior government officials from various ministries in Brazil and Chile. They will also meet with leading global companies in mining, food processing, Aviation, and other strategic industrial sectors. Key meetings in Brazil will include the Brazilian Mining Association (IBRAM), Vale, Minerva Foods, JBS and BRF SA (a major global producer of fresh and frozen protein foods), among other significant trade and industrial entities. In Chile, Alkhorayef will meet with his counterpart the Minister of Mining, and key leaders from The Federation of Chilean Industry (SOFOFA), mining giants Codelco, Antofagasta, and other ministries and companies.

Brazil and Chile are renowned for their vast mineral resources, with the former sharing a longstanding bilateral relationship spanning over 50 years with Saudi Arabia. Their ties are largely based on energy products, minerals, agricultural products, and fertilizers. Brazil’s diverse economy, with strong sectors in mining, agriculture, manufacturing, and services, presents numerous opportunities for strengthened trade ties. Saudi Arabia already holds several active FDI portfolios in Brazil, including a recent 10% stake in Vale Base Metals, secured through Manara Minerals, a joint venture between the Public Investment Fund (PIF) and Ma’aden.

Additionally, the Saudi Agricultural and Livestock Investment Co. (SALIC) has acquired 180 million equity shares in BRF, a global leader in the poultry sector. This acquisition represents 10.7% of BRF’s outstanding shares, valued at SAR 1.27 billion.

On the other hand, Chile’s global standing as the second-highest producer of lithium, which is a key mineral used in the manufacturing of electric vehicles (EVs), and this aligns with the Kingdom’s direction towards expanding the production of EVs. This visit presents an opportunity for the two countries to exchange knowledge and technical expertise in this field, as well as in the areas of solar and wind energy.

In the same vein, in June 2024, the CEO of Almar Water Solutions, which is part of the Saudi Abdul Latif Jameel Group, Carlos Cosín announced that the company is looking forward to establishing a partnership with the state-owned Chilean mining giant Codelco in its “Maricunga”, project to produce lithium. Cosín added, according to Reuters, that the company, which is based in Spain, focuses on water treatment solutions to produce renewable energy, and wants to leverage its technologies in extracting lithium used in the manufacture of batteries, a process that requires huge amounts of water.

Saudi Arabia’s rich geological endowment is a significant draw for investors, particularly in the mineral sector. The Kingdom offers 80 years of accessible geological data to aid informed investment decisions. Recent mapping of the Arabian Shield has increased the estimated value of Saudi Arabia’s mineral reserves from $1.3 trillion to $2.5 trillion.

Several initiatives have been put in place to attract investors. One notable effort is the revamped Mining Investment Law in 2019, developed through extensive global benchmarking. This overhaul has put the Kingdom on a global map, standing shoulder-to-shoulder with world leaders in mining and earning a reputation as an outstanding mining jurisdiction, as reinforced by Mining Journal World Risk Report 2023. The report highlighted Saudi Arabia as a standout, best-performing mining jurisdiction, regionally and globally. The Kingdom’s scores have risen sharply in terms of de-risking mining investments from 2018 to 2023 (five years) to become one of the top 10 countries with the least legal and financial risks—measuring an investor risk of losing the economic benefit of a mineral discovery, corporate taxation, and GDP growth. The report also ranked Saudi Arabia as the second-highest jurisdiction globally in the Permitting Index, indicating an efficient permitting process.

The refined law has heralded many competitive incentives in the mining and minerals sector, including 75% co-funding for CAPEX, a five-year royalty fee exemption, 30% discounts for local downstream processing up to 90%, a 20% corporate tax rate, and 100% foreign direct business ownership. In April 2024, the Ministry introduced the Exploration Enablement Program (EEP) with an allocation of $182 million to de-risk investments in exploration, accelerate greenfield exploration, identify new mineral potential, expand local talent, and advance key objectives within Saudi Arabia’s mineral and mining industry.

In addition, its youthful demography offers significant growth potential in emerging sectors. With two-thirds of the population under 35, the Kingdom boasts a vibrant workforce supported by substantial government investment in education. Combined with a strategic location, robust infrastructure, rich mineral resources, and attractive investment incentives, Saudi Arabia is a prime investment destination for Brazil and Chile.

The visit to Brazil and Chile is anticipated to culminate in the signing of key agreements that will enhance bilateral relations. These agreements will focus on fostering mutual growth through shared investments, sustainable development, and economic diversification, particularly in the mining and industrial sectors.