Lula wins a fourth term in Brazil, and real futures drop 9%

What happened. On Sunday, 25 October, Brazil held its presidential runoff. Electoral court (TSE) data cited by Bloomberg Línea showed that at 21:38 Brasília time (00:38 UTC), with 99.9% of sections counted, Lula had 51.77% of valid votes, or 64,171,319. Senator Flávio Bolsonaro had 48.23%, or 59,790,152. The gap is more than 4.38 million votes. Reuters and DW, citing the electoral court, report that Lula won a fourth, non-consecutive term.

Why it is a surprise. In the first round on 4 October, Flávio was ahead with 47.03% against 45.16%. Bloomberg Línea calls the comeback unprecedented. The new term starts on 5 January 2027.

How the market reacted. The spot market is shut on Sunday, so futures gave the first reaction. On the CME in Chicago, the November real contract was down 9.14% at 21:06 Brasília time. That is about R$ 5.51 per dollar, against about R$ 5.01 at the contract's previous price. 51,064 contracts changed hands. Before the vote, Bloomberg Economics estimated that a Lula win could weaken the real by more than 3.5%. Weekend futures trade thinly, so Monday could change that number a lot.

Why the market is nervous. Reuters lists the main economic challenges of the new term. Public debt has risen more than 10 percentage points during Lula's current term, to over 82% of GDP. The central bank rate is 13.75%, while inflation is 4.6%, above the 1.5% to 4.5% tolerance range. Nearly 84 million Brazilians are behind on debt payments, according to credit bureau Serasa. Reuters says Flávio's party and its allies are set to control both chambers of Congress, so Lula's reforms will face a hard road.

One more knot. A new value-added tax takes effect in Brazil in January. The government has still not disclosed its rate, and independent analysts estimate it at around 28%, Reuters reports.

What it means for the world. Brazil is Latin America's largest economy and one of the most liquid emerging markets. A sharp move in the real can spill over to other currencies in that group. This is our view, not a fact from the sources. We give no price forecasts and no advice to buy or sell.

Confirmed facts

• Lula won Brazil's presidential runoff on 25 October 2026 and secures a fourth term, the electoral court said.^[1][3]
• At 21:38 Brasília time, with 99.9% of sections counted, Lula had 51.77% of valid votes (64,171,319) and Flávio Bolsonaro 48.23% (59,790,152), a gap of 4,381,167 votes, per TSE data.^[2]
• In the first round on 4 October, Flávio Bolsonaro got 47.03% of valid votes and Lula 45.16%.^[2]
• The new term starts on 5 January 2027.^[2]
• On the CME, the November real contract was down 9.14% at 21:06 Brasília time, about R$ 5.51 per dollar against about R$ 5.01 before; 51,064 contracts traded.^[2]
• Before the vote, Bloomberg Economics estimated that a Lula win could weaken the real by more than 3.5%.^[2]
• Brazil's public debt has risen more than 10 percentage points during Lula's current term, to over 82% of GDP.^[1]
• The central bank rate is 13.75% and annual inflation is 4.6%, above the 1.5% to 4.5% tolerance range.^[1]
• Nearly 84 million Brazilians and 9.3 million businesses are behind on debt payments, according to Serasa.^[1]
• Reuters says Flávio Bolsonaro's party and its allies are set to control both chambers of Congress.^[1]
• A new value-added tax starts in January; the government has not disclosed the rate, and independent analysts estimate around 28%.^[1]

Implications

• ConfirmedThe market's first reaction to the result was much stronger than Bloomberg Economics expected.
• ConfirmedLula will work with a Congress where his opponents hold the majority.
• Our readingMonday's rate may differ a lot from Sunday's futures, because weekend trading is thin.
• Our readingA weaker real makes imports dearer and may slow the central bank's rate cuts.

Still unknown

• Where the spot dollar and the Ibovespa index close on Monday.
• Whether Flávio Bolsonaro accepts the result and whether the extended voting hours lead to court fights.
• Which budget rules and which VAT rate Lula's team will announce.
• Whom Lula will name to key posts, including at the central bank.

Who it affects

Brazil, Latin America, Emerging markets. People who hold Brazilian assets, trade emerging-market currencies or send money to and from Brazil

Sources

1. Reuters: Five economic challenges facing Brazil's re-elected President Lula October 26, 2026 · media
2. Bloomberg Línea: Ao vivo: Lula é reeleito para quarto mandato com virada inédita October 26, 2026 · media
3. DW: Brazil elections: Lula wins another term, beating Bolsonaro October 26, 2026 · media