Rare Earths and Raw Materials: Investing from Paraguay in 2026
In just three years, rare earth elements and strategic raw materials have gone from being an investor's curiosity to a foreign policy issue. These seventeen elements with unfamiliar names – neodymium, dysprosium, terbium, yttrium – are essential for manufacturing the permanent magnets found in electric motors, wind turbine generators, hard drives, and defense systems. Without them, there can be no energy transition.
For a Paraguayan tax resident, these assets offer a dual benefit: they diversify a portfolio otherwise concentrated on stocks and bonds, and capital gains from foreign sources are not taxed locally. However, one must understand the risks involved, as these are also narrow, volatile, and politically exposed markets.
This guide describes the landscape, access routes from Paraguay, and tax treatment. It does not recommend any specific product and does not constitute investment advice.
What are rare earths, and why do they matter?
The group consists of seventeen elements: the fifteen lanthanides, plus scandium and yttrium. Contrary to what the name suggests, they are not rare in the Earth's crust; cerium, for example, is about as abundant as copper. What is rare is finding them in concentrated deposits, and especially knowing how to separate them: the chemistry of separation is complex, costly, and polluting. This is where the true dependence lies.
| Element | Key Use | Demand Outlook |
|---|---|---|
| Neodymium and Praseodymium | Neodymium-iron-boron permanent magnets, the most powerful industrially produced. Found in every electric vehicle motor and, in much larger quantities, in wind turbine generators. | Strong growth, driven by vehicle electrification and wind power. These are so-called light rare earths, less constrained than heavy ones. |
| Dysprosium and Terbium | Additives that allow magnets to retain their magnetism at high temperatures, an essential condition in a motor or turbine. A few weight percent is sufficient, but they are irreplaceable. | These are the critical elements of the file. Heavy rare earths, structurally insufficient supply, and primary targets for export restrictions. |
| Cerium and Lanthanum | Automotive and refining catalysis, glass and semiconductor polishing, optical glass, older generation batteries. | Modest growth. Cerium is the most abundant and cheapest in the group, and some of its applications are declining with electrification. |
Geopolitics, now the primary price driver
China accounts for approximately 60 to 70% of global extraction and nearly 90% of separation and refining. This position is the result of three decades of industrial policy, during which Western producers closed due to inability to compete on costs.
What has changed recently, and what most French-language articles have not integrated, is that this leverage is now actively being used.
In April 2025, Beijing introduced an export licensing regime for seven medium and heavy rare earths, including dysprosium, terbium, and yttrium, covering ores, compounds, metals, and finished magnets. This regime remains fully in effect. Licenses are granted on a case-by-case basis and refused for users linked to the defense sector.
A second wave, announced in October 2025, extended the system to five additional elements and provided for extraterritorial scope targeting products manufactured outside China using Chinese inputs, even in very small proportions. This second wave has been suspended for one year, until November 2026, as part of a trade agreement. Suspended, not canceled: the regulatory infrastructure remains, and the deadline is approaching.
The effects are measurable. Chinese exports of dysprosium, terbium, and yttrium are significantly below their previous levels, and the number of recipient countries has decreased. Japan, involved in a separate dispute with Beijing, experienced entire months without receiving some of these elements.
A Western response is being put in place, with substantial public funding, refining projects in the United States, Australia, and Europe, and a G7 commitment to ensure that no single supplier accounts for more than 60% of a member country's imports by 2030. But projections converge: non-Chinese production will not cover global demand for dysprosium and terbium for several years, and a significant overall deficit is still expected by 2030 despite a sharp increase in non-Chinese capacity.
Investing in this theme therefore means betting on the persistence of an imbalance. It's a documented bet, but a bet nonetheless.
Other families of raw materials
| Family | Content | Price Drivers |
|---|---|---|
| Precious Metals | Gold, silver, platinum, palladium | Real rates, inflation, safe-haven demand, and for silver and platinum a strong industrial component. This topic is covered in our physical gold guide from Paraguay. |
| Industrial Metals | Copper, aluminum, nickel, zinc | Global growth, construction, and especially electrification. Copper is the metal whose structural demand is growing most mechanically, across networks, vehicles, and data centers. |
| Transition Metals | Lithium, cobalt, nickel, silicon, uranium | Public policies, pace of electric vehicle adoption, technological developments in batteries, nuclear revival. |
| Energy | Oil, natural gas, coal, uranium | Producer country decisions, geopolitical tensions, economic cycle. |
| Agricultural | Soy, corn, wheat, sugar, coffee, cocoa | Climate, demographics, trade policies, input costs. Paraguay is among the world's leading exporters of soy and beef. |
Exposure from Paraguay: four options
Producer equity index funds
This is the most practical route. There are theme-specific listed funds for rare earths and strategic metals, lithium, uranium, copper, or more broadly mining and metals, grouping twenty to two hundred companies, with annual fees ranging from 0.4% to 0.8%.
The nuance to understand: you are not buying the metal, you are buying companies that extract it. This adds operational risk, country risk, and correlation to equity markets to the price risk. A mining stock can fall even if the metal rises.
On the rare earths theme in particular, available funds include a significant proportion of Chinese companies, sometimes close to half, which is logical since the largest producers are Chinese. One therefore finds oneself partially exposed to what one sought to protect oneself from.
Commodity-backed funds
Some products hold physical metal, mainly gold and silver, with very low fees and direct price exposure. Others replicate a price via futures contracts, which introduces a serious difficulty discussed below.
Key takeaway: there are no products backed by physical rare earths. The market is too narrow and specialized. Exposure necessarily comes through equities.
Individual stocks
A few Western producers structure the sector outside China, with mines in Australia and the United States and refining projects supported by public funding and long-term contracts with industry and defense.
The profile is one of a demanding investment: annual volatility frequently exceeding 40%, often negative results during the industrial ramp-up phase, and dependence on refining projects whose schedules regularly slip. This requires understanding geology, operating costs, and political risks. It is not an investment that one buys and forgets.
Futures contracts, to be avoided
They offer the most direct exposure, with leverage of seven to twenty times depending on the required deposit. This is precisely the problem. Losses can exceed the initial investment, the market operates almost continuously, and a margin call can be triggered during your night. These are professional trading instruments, with no place in a long-term asset allocation.
The trap of contango, to know before buying
A product that replicates the price of a raw material via futures contracts must, at each expiry, sell the expiring contract and buy the next one. When the next contract trades higher than the current one, a common situation called contango, each rollover results in a loss.
The effect is far from anecdotal: it can reduce returns by two to five points per year. A product indexed to oil or gas can thus lose value even if the spot price increases. Products backed by physical metal are not subject to this, as there is nothing to roll over, and neither are mining equity funds.
Before buying such a product, always check whether it holds the commodity or replicates a futures contract index, and according to what rollover method.
Taxation for a Paraguayan resident
| Support | Treatment |
|---|---|
| Listed funds and index products purchased abroad | Capital gains and distributions from foreign sources: 0% in Paraguay. Be careful, however, about the withholding tax levied upstream: a fund domiciled in the United States is subject to a 30% withholding tax on its distributions for a non-resident, as there is no convention linking Paraguay to the United States. A fund domiciled in Ireland or Luxembourg is generally more efficient. Products backed by physical metal do not distribute anything, so the question does not arise for them. |
| Shares of mining companies | Capital gains: 0%. Dividends: 0% in Paraguay, but withholding tax from the company's country, which varies widely. It reaches 30% for Australian and American companies, 25% for Canadian companies, and is reduced to zero for British companies. This withholding tax is not recoverable, as there is no Paraguayan tax against which to offset it. For the same dividend amount, the country of listing therefore changes the net return. |
| Futures contracts | Capital gains: 0%, without withholding tax. |
| Commodity-related activity in Paraguay | Local source, therefore taxable: 10% corporate income tax for a company, or 8% personal income tax depending on the nature of the income. A Paraguayan agricultural operation remains a Paraguayan source even if its production is exported. |
Its place in a portfolio
The following orders of magnitude correspond to common management practices, and not to a recommendation adapted to your specific situation.
Commodities are a diversification complement, representing between 5 and 15% of a portfolio depending on risk tolerance, very rarely more. They produce no income by themselves—a metal pays neither coupons nor dividends—and their return depends entirely on price movements.
Within this allocation, the usual hierarchy places precious metals as a foundation for their protective function, followed by a more modest thematic exposure to transition metals. An allocation of just a few percent to a theme as narrow and volatile as rare earths is already significant: over ten years, these funds have underperformed broad equity indices, with much higher volatility.
The core of a portfolio remains diversified and liquid assets. Commodities are an addition; they do not replace them.
Five mistakes to avoid
- Overweighting. One-third of a portfolio in commodities means introducing volatility into the entire portfolio that can reach 40% to 60% per year for a given metal.
- Buying physical rare earths. Online sellers offer neodymium oxide ingots or dysprosium powder. Absolutely avoid this. Storage poses real technical problems, some compounds oxidize in the air, buyers are industrial companies that deal in tons and will never buy your sample, there is no public reference price, and the premiums charged are considerable. The loss is mathematically incurred from the moment of purchase.
- Using futures contracts. Leverage and continuous market operation make them a professional instrument. The absence of Paraguayan tax does not offset any loss.
- Ignoring contango. A futures product held for several years on a commodity in contango loses return each year, regardless of the price.
- Confusing rare earths and lithium. Lithium is an alkaline metal used in batteries; rare earths are used for motor magnets. An electric vehicle needs both, but the markets, producers, and price cycles have nothing in common. Lithium has, in fact, seen a spectacular cycle, increasing tenfold then falling by three or four times in a few years.
A commodity-based country
There is a certain coherence in discussing this topic from Asunción. The Paraguayan economy relies on agro-industry and almost entirely on hydroelectricity. Living here means already being exposed to the commodity cycle: a poor soybean harvest impacts the economy, and therefore the currency, and thus your local purchasing power.
This is a diversification argument rarely made. Holding industrial or precious metals, whose cycles do not follow those of grains, reduces your exposure to the macroeconomic risk of the country where you live.
As for Paraguay's mining potential, it remains largely untapped. The subsoil contains iron, manganese, limestone, and exploration work has been carried out on rare earth indicators. The mining legal framework provides investment incentives. However, no commercial rare earth operation exists to date, and the horizon for potential development is measured in decades.
Conclusion
Rare earths have become a tool of foreign policy. China's licensing regime from April 2025 is still active, its partial suspension expires in November 2026, and no serious analysis predicts that Western capacities will close the deficit for several years. The structural tension is real, and it constitutes the investment thesis.
However, the market is narrow, volatile, and the vehicles accessible to individuals primarily expose them to mining stocks, a significant portion of which are Chinese companies in this specific area. There is no serious way to hold physical rare earths, and proposals to do so are, at best, amateurish. For a Paraguayan resident, the absence of local taxation on foreign capital gains makes the exercise fiscally neutral, with the only friction coming from withholding taxes, which depend on the country where the investment vehicle is domiciled. The right approach is to check this domicile before buying, as it is often more decisive than the management fee difference.
Finally, a 5% to 15% allocation is sufficient to achieve the desired diversification effect. Beyond that, one is no longer diversifying but concentrating.
Are you preparing your tax residency in Paraguay? Contact us: Paraguayan tax residency from €1,400, or €1,800 for the Express formula which is finalized in a single 2-day trip on-site, bank account opening for €250, US LLC creation and DNIT accounting for €30 per month. Write to us on WhatsApp at +595 971 362 302: quick response, in French.