Brazil’s stock market is getting hammered, and the reason has plenty to do with politics. Investors rushed to sell Brazilian assets on Monday after President Luiz Inácio Lula da Silva secured
Brazil’s stock market is getting hammered, and the reason has plenty to do with politics. Investors rushed to sell Brazilian assets on Monday after President Luiz Inácio Lula da Silva secured another term in office.
Bovespa futures dropped close to 15%, while the Brazilian real fell by as much as 12%. Trading had to be stopped because of the intensity of the sell-off.
The trouble started with Sunday’s election results.
Lula defeated Senator Flávio Bolsonaro in the October 25 runoff, securing his fourth nonconsecutive presidential term.
That was not what financial markets had been expecting.
Lula had narrowly lost the first round earlier this month, and polls suggested Bolsonaro could comfortably win the final vote.
Investors liked that possibility because they considered him more supportive of business interests.
Following the opening round, Brazilian stocks enjoyed their biggest rally since 2020, while the real gained 5%.
Even the world’s largest meat producer was among businesses seeking meetings with Bolsonaro.
Companies needed access to somebody who would create a friendlier economic environment for them. Instead, Lula won the presidency.
This resulted in reassessing the situation by the traders, especially since Brazil was already having issues with its government debts.
The election has also brought Washington back into the picture.
Trump and Lula have been fighting over trade, and their disagreements could become another headache for Brazil’s economy.
Trump’s administration previously imposed heavy tariffs on Brazilian exports and sanctioned Supreme Federal Court Justice Alexandre de Moraes.
Now, Lula’s reelection has raised questions about whether Washington will increase economic pressure.
For one, Trump could impose more tariffs, enlarge current prohibitions, or implement sanctions. But a mere election result is not sufficient legal grounds for such actions.
Any new action must satisfy American legal requirements and applicable international obligations.
Brazil has already taken its tariff complaints to the World Trade Organization, launching two separate proceedings against Washington.
One case, filed in July 2026, challenges duties imposed under Section 301.
Another ruling by the Supreme Court in February 2026 also limited the powers of Trump to utilize emergency economic legislation to impose tariffs.
This is because the ruling has constrained the powers of the president, but not all the options.
Despite their political differences, the US and Brazilian governments have been engaged in talks.
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