Rightward shift in Brazil’s Congress raises hopes for fiscal reforms

Brazil’s first-round election brought large gains for right-wing and center-right parties in Congress.

The PL party increased its seats in both the lower house and the Senate, giving those political groups a larger share of each chamber.

Investors took the results as a sign that a government led by presidential candidate Flávio Bolsonaro could have more support for fiscal reforms.

Those expectations helped drive changes in the prices of Brazilian stocks, the currency and interest rates.

Analysts say a more conservative Congress could also limit the risk of government spending expanding too quickly, regardless of who wins the runoff.

But a shift in the balance of power does not guarantee reforms or a quick improvement in public finances.

Constitutional changes need a two-thirds majority, and centrist parties are expected to remain important in negotiations.

The next president will still have to build support in Congress to pass major changes.