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Lula—Take 2: Lula Victorious in Brazilian Presidential Election

04 November 2022   |  

Following a tightly contested race, Brazil’s presidential election on Sunday, October 30 resulted in victory for former President (2003-2011) Luiz Inácio Lula da Silva (or “Lula”) of the Workers’ Party and subsequent defeat for right-wing incumbent, Jair Bolsonaro. Lula amassed more than 60 million votes for the most in the country’s history to defeat Bolsonaro by less than 2% in Brazil’s tightest finish on record. As of Tuesday following the election, Bolsonaro had yet to formally concede the race, though muted market reaction suggested a lack of investor concern for any meaningful challenge to the democratic process. With the loss, he becomes the first sitting president in over 30 years to fail to secure re-election. A former president himself, Lula served two terms at the helm from 2003-2011 and left office with a 90% approval rating, attributed with making major headway on helping Brazil’s impoverished population via social welfare programs. Although his reputation took a hit following accusations of corruption and money laundering, these allegations were later thrown out in court and afforded him with a path to political rebirth.

Quelling uncertainty

Lula’s win came despite reports of attempted voter suppression in Lula-favored regions in the northern part of the country. In the hours following the declaration of a winner, trucks created road blockages in protest of the results of the election, causing more unease. That said, we view the “cleanish” results as favorable; the Brazilian real moved approximately 2% higher against the US dollar and Brazilian stocks were relatively flat through the large portion of Monday’s trading hours following Lula’s win. The new president is expected to provide more color on his economic cabinet appointments and fiscal policies in the coming weeks, which will reduce much of the uncertainty that has plagued the country in the months leading up to the election.

A way forward

Lula will now be tasked with reunifying the country and contending with a divided Congress after a combative election cycle. In the days leading up the election, Brazil’s central bank left interest rates unchanged at 13.75% given stubbornly high inflation. The monetary policy committee, otherwise known as Copom, will next meet in early December with less political noise and unknowns looming in the background. As an important constituent in the emerging market space, we will continue to monitor developments in the country’s transition of power and any resultant impacts on Brazil’s economic climate.  

  • EMsights Capital Group
  • Insights

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