Brazil’s currency suffered its worst daily fall this century and its benchmark stock index plummeted 14% as investors soured on the country’s economic prospects following President Luiz Inácio Lula da Silva’s reelection.
During his third term, Brazil’s budget deficit expanded to more than 8% of GDP as government spending soared and overall growth cooled, driving surging debt levels.
While the political challenge against Lula’s victory appears to have subsided for now — the party of opposition leader Flávio Bolsonaro, who said the vote was rigged, conceded the election and US President Donald Trump signaled he would not intervene — Brasília is nonetheless staring at a fiscal reckoning. “Attention now shifts to Lula’s economic team and fiscal plan,” an expert said.
