Bolsonaro pushes Lula to brink of defeat ahead of Brazil run-off

Flávio Bolsonaro surged to a surprise lead over Luiz Inácio Lula da Silva in the first round of Brazil’s presidential election, making him the overwhelming favourite to win the run-off and take Latin America’s biggest economy sharply to the right.

With conservative allies dominating across Brazil in Sunday’s voting, Bolsonaro capped the day by taking about 47 percent of the vote to the leftist Lula’s roughly 45 percent with counting nearly complete.

They will face off on October 25, but closing the gap is likely to prove difficult for the veteran president running what is likely his last race, given that most support for eliminated candidates is expected to fall behind Bolsonaro.

Brazilian assets are expected to surge when markets open Monday on signs that Bolsonaro is poised for victory. Investors have largely backed the eldest son of former president Jair Bolsonaro, seeing him as more likely to pursue policies to address Brazil’s deteriorating fiscal situation.

The race will now move into a frenetic three weeks of campaigning to determine control of Latin America’s largest economy, an outcome with relevance for US President Donald Trump’s attempts to exert US dominance over the Western Hemisphere. Lula has resisted the US administration’s efforts, while Bolsonaro wants to move closer to Trump’s orbit. 

The mood inside Bolsonaro’s campaign headquarters in Brasília was celebratory late Sunday, with a barbecue underway and music blasting, according to a person present, while Lula aides said his campaign was caught off guard by the scale of the challenger’s overperformance.

 

A confident Bolsonaro declared “the end of the Workers’ Party era” in his first remarks, proclaiming that he and his allies had dealt a final blow to the leftist movement Lula built from a plucky upstart into Brazil’s most dominant political force.

“We will be able to build a government inspired by my father’s, an administration even better than his,” Bolsonaro said in a closed-door speech, according to a video seen by Bloomberg News. 

Lula, by contrast, attempted to keep supporters on board, expressing confidence about his ability in run-off races and asserting that a new campaign begins Monday.

“The run-off is our chance to show the true picture of Brazil today, and the Brazil we want,” Lula said in São Paulo.

But to win, the 80-year-old president – who governed Brazil from 2003 to 2010, later went to prison on corruption convictions that were ultimately annulled, then returned to the top job again – will have to pull off another unprecedented comeback. Since Brazil returned to democracy in 1989, no candidate who trailed in the first round has won the run-off.

Even if he does, the initial results dealt a devastating blow to the Workers’ Party, which has won five of the last six presidential races but is now facing fresh evidence that its message no longer resonates with Brazilians as it once did.

Aside from Bolsonaro, the Brazilian right made substantial gains in the Senate and key governors races. That is likely to bolster the 45-year-old senator’s power to reshape Brazilian institutions – including the Supreme Court that convicted his father of plotting a coup after losing the 2022 election to Lula – should he prevail in the runoff.

The scale of the right’s success left Lula aides concluding that voters had expressed a broader rejection of the Workers’ Party that went beyond dissatisfaction with the president, according to two who spoke on condition of anonymity. 

And yet, the rebuke will also force the party to acknowledge its inability to build a bench of candidates capable of succeeding its ageing standard-bearer.

The party “will face a reckoning not only about Lula’s succession – and the lack of new leaders – but its disconnect with most voters on many social and economic priorities,” said Mario Braga, a geopolitical analyst at the consultancy RANE.

 

Trump ally

The implications of the election will rumble far beyond Brazil. A victory for Bolsonaro would accelerate Trump’s effort to reassert US primacy over the Americas after conservative allies won recent votes in Colombia, Chile and Peru. 

Brazil under Lula has been among the last holdouts to Trump’s so-called “Donroe Doctrine” for the Western Hemisphere, remaining a bellwether of the regional embrace of China the US leader is trying to reverse.

Trump has played an outsize role in the nation’s politics since last year, when he slapped tariffs on Brazil in an unsuccessful bid to help Jair Bolsonaro escape conviction.

He later reconciled with Lula and lifted the levies. But he reimposed tariffs in July, handing Lula an opportunity to argue that Trump was interfering in Brazilian affairs to boost Flávio Bolsonaro, who has pledged to move the country closer to the US. 

Brazil’s race, however, has largely focused on another object of voter concern: corruption, fuelled primarily by a probe into Banco Master SA, the failed lender at the centre of a US$10-billion fraud investigation that has repeatedly upended the race.

Bolsonaro sagged behind Lula earlier this year amid revelations that he’d sought money from Daniel Vorcaro, the bank’s jailed former owner, for a film about his father – links that are now subject to federal investigation. (Bolsonaro denies wrongdoing.)

But the scandal later dented Lula’s re-election bid after leaked messages deepened ties between Supreme Court Justice Alexandre de Moraes and Vorcaro. 

An ensuing institutional crisis inside the powerful top court fuelled a surge in momentum behind Bolsonaro, who used it to renew calls for Moraes’ impeachment while painting the judge who oversaw his father’s conviction as a close Lula ally.

 

Economy and markets

That’s largely distracted from economic issues, even as the candidates offer competing visions. Lula, who has long favoured a spend-to-grow approach with a focus on stimulating consumer demand, has overseen steady expansion and near-record low unemployment.

But growth has begun to slow amid high interest rates meant to bring inflation back to the central bank’s target, and borrowing costs that remain at 13.75 percent have weighed on major Brazilian companies and consumers alike.

The nominal fiscal deficit, meanwhile, has risen to nearly 10 percent of gross domestic product while public debt has soared above 80 percent, leaving investors scouring the race for plans to shore up accounts in a way that would make it easier for policymakers to reduce rates.

Lula and his advisers have alternated between pledges to tackle the debt and questioning the need to: “We need to stop this nonsense about running budget surpluses,” Lula said at one event in the race’s final stages. 

Bolsonaro, in a nod to the austerity drive led by Argentina's leader Javier Milei, has wielded scissors to promise a “big cut” in spending. He’s provided little detail about his plans, but it’s made him the preferred choice of investors who see him as more likely to pursue fiscal adjustments.

Lula has unleashed a rash of stimulus this year in a bid to help consumers access cheaper credit and ease debt pressures. In the race’s final weeks, he boosted social welfare benefits and unveiled a plan to use public funds to buy delinquent debts.

He also banned online gambling, which he’s blamed for plunging Brazilians into the red.

For decades, such policies worked: a former trade unionist, Lula became a global icon during his first presidency, when he guided Brazil through an explosive period of growth and lifted millions out of poverty. 

He surged back to office four years ago with a promise to restore the same prosperity. 

But while he remains revered by a large base of supporters, he’s struggled to convince many voters he’s capable of delivering on the demands of a Brazil much different from the one he previously governed. 

Lula appeared to nod to that reality Sunday night, telling supporters in São Paulo that his party and his campaign “need to rethink how we’re doing things.”