Brazil stocks plunge as Lula victory jolts investors

Brazil stocks plunge after Luiz Inácio Lula da Silva won a fourth term, and the vote caught investors off guard on Monday.

Lula won 51.8 percent of valid votes against 48.2 percent for Senator Flávio Bolsonaro, the Superior Electoral Court reported. He reversed his first-round loss, and Brazilian assets sold off.

How far Brazil stocks plunge on the result

By 10:30 a.m. ET, the iShares MSCI Brazil ETF had lost 25 percent. A circuit breaker then stopped trading on the Brazilian exchange.

U.S.-listed Brazilian companies also sold off. Petrobras fell 16 percent and Itaú Unibanco lost 20 percent. Ambev shed 10.3 percent, Vale fell 1.2 percent, and Embraer lost 5 percent.

Brazil’s currency, the real, slid 10.5 percent against the U.S. dollar and hit its weakest since December 2025, LSEG data showed.

Brazil’s Treasury cancelled bond auctions it had planned for October 27 and October 29. It said it would keep watching market conditions to ensure that the bond market works properly.

Why Brazil stocks plunge: fiscal worries

Investors had expected more market-friendly policy from Bolsonaro. The sell-off therefore unwound part of the rally that followed the first round three weeks earlier. That is why Brazil stocks plunge so sharply.

Citi analysts said investors worry about fiscal policy, state-owned companies and the wider reform agenda under Lula. They also warned that banks face the risk of higher interest rates for longer.

Lula’s record carries growing public debt, with double-digit interest rates, expensive debt service and rigid mandatory spending all adding to it. Chris Turner of ING called the budget “Brazil’s Achilles heel,” since a deficit of 7 to 8 percent and net debt near 70 percent of output leave the country exposed.

Lula has promised to extend the Bolsa Família welfare scheme and to shorten the working week without lowering pay. Turner said Brazilian assets will have to deal with those promises, instead of the fiscal consolidation that Bolsonaro offered.

Others sounded calmer. Alejo Czerwonko, an Atlantic Council fellow, expects Lula to stay with a gradual approach on debt. In his view, Lula will also protect public investment and social spending. Goldman Sachs analysts expect modest steps to contain spending, along with higher taxes, but no major reforms.

Political tension adds to market nerves

Investors also track how soon Bolsonaro will accept his defeat. He refused to concede overnight and said he would seek to annul the vote. He called the two-hour extension of voting, ordered by Supreme Court Justice Cristiano Zanin, “unacceptable.”

Lula’s side reported halted public transport in key areas. Bolsonaro’s side pointed to heavy rain that closed polling stations in the south. Allegations of voter suppression marred the process.

The outcome halted a move to the right across Latin America, which Donald Trump had supported. Trump called Bolsonaro’s first-round lead “a very, very big victory.”

In his fourth term, Lula will govern from 2027 to 2030. He will face a Congress where Bolsonaro’s Liberal Party holds its largest bench in decades, and he must stabilise a large public debt.

Leaders across Latin America congratulated him, including Peruvian President Keiko Fujimori and Uruguay’s Yamandú Orsi. For now, investors wait to see whether Brazil stocks plunge further or steady as the new term approaches.