Brazil’s financial markets and currency faced a steep decline on Monday following leftist President Luiz Inácio Lula da Silva’s reelection. This drastic drop led to a temporary halt in trading across the South American nation.
Futures for the Brazilian stock index, Bovespa, plummeted nearly 15%, with the real, Brazil’s currency, sliding almost 12% that morning, per reports.
Lula’s victory in the election on Sunday was significant, especially after he narrowly lost to far-right candidate Flavio Bolsonaro in the first round earlier this month. Many anticipated a solid win for Bolsonaro, the son of jailed Trump ally Jair Bolsonaro, based on pre-election polls.
In the wake of the initial voting round, Brazilian markets had enjoyed a positive surge, noted to be one of their best days in years by Bloomberg, with stock prices seeing their most substantial increases since 2020 and the real gaining 5%. Investors viewed Bolsonaro as the more market-friendly option, leading to a rush for meetings with him.
The implications of Bolsonaro’s defeat extend beyond Brazil, a country already grappling with a debt crisis.
In premarket trading, shares of XP, a Brazilian investment firm in the U.S., fell by 50%. Meanwhile, a Brazilian beer company under Anheuser-Busch lost over 10% in early trading, as indicated by reports.
Lula, now 80, has a long history in Brazilian politics, having first assumed office in 2003 as the first leftist leader after the country’s dictatorship. He secured 51% of the votes on Sunday, marking his fourth non-consecutive term.
Public debt in Brazil has risen by over 10% during Lula’s current tenure, inflating borrowing costs. Although his disapproval ratings remain high, he managed to win over voters with promises to maintain low interest rates, preserve social programs, and increase wages, according to various sources.
At the beginning of Lula’s previous term, Brazil’s economy was thriving. However, his image took a hit due to involvement in corruption scandals. While he has been openly critical of the Trump administration, some believe he possesses enough practicality to collaborate with the U.S. president.
