Brazil: Flavio loses elections

Lula’s victory in Brazil’s presidential election, securing him a fourth term, surprised me. I sympathise with him, and his political outlook is considerably closer to mine than Flávio Bolsonaro’s. Nevertheless, I expected Bolsonaro to win. My sympathies and my forecast pointed in different directions, and the result proved my forecast wrong.

I am also uncomfortable with one person returning to the presidency so many times. More than two terms already strikes me as abnormal; four makes the question of political renewal difficult to ignore. This concerns me especially in a presidential system, where substantial executive authority rests with one individual. Even when I sympathise with that individual, I would prefer to see a political movement capable of producing credible successors.

I follow Brazilian politics from a distance. It is not my country, and Brazilians live with consequences that I only observe. However, I watch Brazil and the United States closely because I consider them useful indicators for European politics. I expect the current far-right wave to be followed by disappointment and, eventually, a swing towards the left. These elections help me assess that expectation, although the timing and circumstances will differ between countries.

The financial reaction has been striking. At one point on Monday, the Ibovespa was down roughly 14%, trading was interrupted by circuit breakers, and EWZ, the US-listed Brazilian equity ETF, fell as much as 26% in pre-market trading. My interpretation is that part of this selling reflects the collapse of expectations for tax cuts, tariff relief and greater opportunities for American businesses under Bolsonaro, alongside concerns about public spending and debt. Investors had positioned themselves for a different political outcome and now have to revise those expectations.

My original scenario was a Flávio Bolsonaro victory, followed by substantial public disappointment within 12 to 24 months and a subsequent political reversal. I also expected a pardon for Jair Bolsonaro, which I would have regarded as a further entrenchment of corruption and political impunity. With Lula re-elected, I no longer expect that pardon under the incoming administration. Looking further ahead, however, I expect this to be Lula’s last term, and I see no convincing successor who could inherit his position and appeal. My revised forecast is therefore that the much younger Flávio Bolsonaro will win the next presidential election in 2030.

Ultimately, my sympathy for Lula does not make me satisfied with the choice Brazilian voters faced. From my position as an outside observer, Brazil deserves better candidates than these two. I regard both as poor options for the country’s long-term political health: one represents continued dependence on an ageing leader, while the other offers the continuation of a family whose approach to power I deeply distrust. Lula’s victory surprised me, but it has not resolved that underlying problem.