Business · Markets · 7 hrs ago
Lula’s election victory sends Brazilian markets sharply lower
Luiz Inácio Lula da Silva won Brazil’s presidential runoff against Flávio Bolsonaro, securing a fourth term.
The 81-year-old left-wing leader had trailed Bolsonaro in the first round before winning by nearly four percentage points.
Investors reacted by selling Brazilian assets: the real fell about 8% against the dollar and the Bovespa stock index dropped around 13% to 14%, according to the figures reported.
Markets are worried about government spending and debt, with Brazil’s budget deficit above 9% of economic output and borrowing costs already high.
Those concerns matter because more expensive borrowing can curb investment and growth, adding to pressure on public finances.
Lula’s government has expanded social programmes, and the added spending announced this year is expected to cost about 2% of GDP by the end of 2027.
Lula now needs to reassure investors, including by showing how he will control spending and stabilize the debt; without a change in course, Brazil risks prolonged near-stagnation rather than an immediate default.
Luiz Inácio Lula da Silva won Brazil’s 2026 presidential run-off, defeating Flávio Bolsonaro and securing a fourth presidential term.
The result prompted a sharp sell-off, with the real and the Bovespa stock index falling the following day.
Investors fear economic stagnation, rising public spending and worsening government debt.
Lula faces pressure to reassure investors about fiscal policy and take steps to stabilize public finances.
- Who
- Luiz Inácio Lula da Silva won the election, defeating Flávio Bolsonaro.
- What
- Lula’s victory was followed by a steep fall in Brazil’s currency and stock market.
- When
- Lula won the run-off on 25 October 2026. The markets fell the following day.
- Where
- Brazil.
- Why
- Investors fear stagnation, excessive government spending and rising public debt.
Lula and his supporters
Investors
Economic direction
Lula and his supporters
Lula won with promises including social spending, while saying the additional spending would not affect social programs.
Investors
Investors fear that continued spending will worsen the fiscal position and hinder growth.
Preferred election outcome
Lula and his supporters
Lula’s supporters celebrated his victory and his fourth presidential term.
Investors
Investors had largely favored Flávio Bolsonaro, whom they trusted more on economic policy.
Flávio Bolsonaro finished ahead of Lula in the first round of the presidential election.
Lula defeated Flávio Bolsonaro in the second round.
Brazil’s real and stock market fell sharply after the election result.
- Run-off date
- 25 October 2026
- Lula’s term
- Fourth presidential term
- Real’s fall
- 8% against the US dollar, according to Estadão
- Ibovespa’s fall
- 14%, according to Estadão
- Brazil’s budget deficit
- More than 9% of GDP, according to Estadão
6 sources
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What people are saying
Simple and solid fiscal rules, competent people to implement the program in the government and Congress, and proof that the budget targets can actually be met