AI Brief
- Brazilian President Luiz Inacio Lula da Silva secured a historic fourth term, defeating Senator Flavio Bolsonaro by over 4 million votes in the runoff.
- Lula's victory comes amid a conservative-leaning Congress, posing challenges to his reform agenda and state-led economic policies.
- The election result triggered a sharp fall in Brazil's Bovespa index ETF and raised concerns over fiscal policy, public debt, and economic growth.
SAO PAULO: Brazilian President Luiz Inacio Lula da Silva won a historic fourth term on Sunday, the country's electoral court said, in a shock result that defied polls, precedent and global anti-incumbent sentiment to put the brakes on a wave of right-wing election victories across Latin America.
Lula, an icon of the global left and the most dominant force in Brazilian politics this century, defeated Senator Flavio Bolsonaro, the eldest son of former President Jair Bolsonaro.
The senator, who led the election's first round but lost in the runoff by over 4 million votes, said he would ask for the result to be annulled due to a Sunday Supreme Court ruling that extended voting for two hours.
Bolsonaro's refusal to concede defeat has echoes of his father's reaction after losing to Lula in 2022. Former President Jair Bolsonaro never accepted his loss and was later given a 27-year sentence for plotting a coup to remain in power.
The scale of Flavio Bolsonaro's loss to Lula — by more than twice his father's losing margin — and the fact his campaign also asked for an extension due to rains in the south, make any annulment unlikely, analysts said.
Mario Braga, a Latin America analyst at the risk consultancy RANE, said there could be right-wing protests in coming days, but "it's very improbable that it will lead to the reversal of the result."
COMEBACK KING
For Lula, his victory marks another comeback in a career full of them. The 80-year-old was jailed from 2018 to 2019 on corruption charges that were later overturned, paving the way for him to beat Jair Bolsonaro in the 2022 election.
"He is a statesman, a giant," leftist federal lawmaker Erika Hilton, who was with Lula in Sao Paulo during the vote count, told Reuters.
At times, Lula's reelection looked like a long shot, as voters soured on him and his Workers' Party after years of corruption scandals and rising prices, while sweeping social changes left the former metalworker and union leader looking out of touch with an increasingly app-based economy and its growing ranks of informal workers.
A Tokyo-listed exchange-traded fund tracking Brazil's Bovespa index 1325.T fell nearly 15% in Asia trade on news of Lula's victory.
Pollsters said better-than-expected turnout had powered Lula to victory. Leonardo Barreto, the co-founder of consultancy Think Policy, said voters had chosen Lula's familiar embrace over Bolsonaro's novelty.
"People today are choosing between change, with some apprehension, and a known path, which guarantees certain rights," he said.
During the campaign, Lula pointed to a track record of falling poverty and inequality, while unemployment, illiteracy and deforestation hit record lows during his third term.
He warned Bolsonaro would cut welfare spending, backslide on social advances and hand over Brazil's sovereignty to US President Donald Trump, whose State Department led a campaign to get the Bolsonaros back to power.
Lula's win deprives Trump of a major addition to what has been a growing bloc of friendly right-wing Latin American governments that have embraced Washington's agenda on security and migration.
Celso Amorim, a former Lula foreign minister, told Reuters the leftist "would be very important for establishing a point of balance in Latin America. Lula is that balance."
LATE-CAMPAIGN BOOST
Lula becomes the first candidate since Brazil's return to democracy in the 1980s to be elected after finishing second in the first round.
Previously president from 2003 to 2011, Lula campaigned this year on a potent mix of pragmatism and populism that has shaped his career in national politics for half a century, rolling out a slew of reforms aimed at improving the lives of workers and poor Brazilians.
These gained steam with late-campaign pledges that ranged from free nationwide weekend public transport, which has to be formally submitted to Congress, to a 15% increase in his trademark welfare program that is already being implemented.
Lula also championed a constitutional amendment that became Brazil's biggest labor reform in decades, which passed with wide support in Congress.
CHALLENGES AHEAD
Still, Lula's fourth term could be his most difficult yet, after Brazil elected its most conservative Congress since returning to democracy in the 1980s.
Combined, Bolsonaro's Liberal Party (PL) and allied parties could control over 280 seats in the lower house and up to 50 seats in the Senate, enough for comfortable opposition majorities in both chambers.
That may deepen recent trends of presidents ceding power to Congress on the budget, major legislation and key nominations.
Lula faces an economy that his government forecasts will grow a meager 2.3% next year, adding to fiscal concerns tied to high interest rates and public debt that has risen past 82% of GDP, the highest since the pandemic.
The president's critics blame spending, though borrowing costs have driven most of the increase in debt.
Goldman Sachs said it expects Lula to make modest progress at most to contain spending in a fourth term, as he stays committed to a state-led growth model.
Surging household debt also concerns economists. Trying to address the issue, Lula rolled out a provisional ban on online betting and unveiled a new debt relief program during the campaign.
The incoming right-wing Congress will try to pass structural reforms that favor businesses, experts say, prompting spending cuts that could trigger popular backlash.
